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UNIVERSITY 

OF  CALIFORNIA 

LOS  ANGELES 


SCHOOL  OF  LAW 
LIBRARY 


Digitized  by  tine  Internet  Arciiive 

in  2007  witii  funding  from 

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littp://www.arcliive.org/details/businesslawforbuOOblediala 


BUSINESS   LAW 

FOR 

BUSINESS  MEN 
STATE    OF    CALIFORNIA 

A  Reference  Book  Showing  the  Laws  of  California  for 
Daily  Use  in  Business  Affairs 


NINTH  EDITION 


Bevlsed  and  Enlarged 


By  A.  J.  BLEDSOE 


Member  of  Legislature  of   California    from   Humboldt   County,    Sessions   of 
1891,    1893,    1895 

AUTHOR    OF 

"Business  Law  for  Business  Men,  State  of  Oregon." 

"Business  Law  for  Business  Men,  State  of  "Washington." 

"Business  Law  for  Business  Men,  State  of  New  York." 


PUBLISHED    BY 

BUSINESS  LAW  PUBLISHING  COMPANY 
Metropolis  Bank  Building 
SAN   FRANCISCO,   CALIFORNIA 

1913 
PRICE  -         -         -         $4.75 


CiOPYEIGHT,    1912 
BY 

A.  J.  BLEDSOE 


r 

1913 


PREFACE  TO  NINTH   EDITION. 

The  ninth  edition  of  my  business  law  book  is  now  offered 
to  the  public.  The  work  is  enlarged  from  675  to  1021  pages; 
several  new  and  important  subjects  are  added,  including 
"Trust  Deeds,"  "Taxes  and  Tax  Titles,"  "Guaranty  of 
Accounts,"  "Powers  of  Attorney,"  and  "Automobile  Law  of 
California." 

The  new  matter  added  to  the  book  is  all  of  great  import- 
ance, and  the  old  subjects  have  been  revised  to  date. 

The  success  of  the  preceding  eight  editions  of  this  work 
has  been  phenomenal,  so  much  so  that  I  may  claim  "Busi- 
ness Law  for  Business  Men"  is  now  a  standard  work,  and 
worthy  of  a  prominent  place  in  any  library.  The  work  of 
keeping  the  book  up  to  date  by  printed  slips  will  be  con- 
tinued in  the  future,  for  the  same  yearly  charge  of  one 
dollar,  and  these  slips  can  be  used  for  the  ninth  edition  by 
old  subscribers   who  purchase  the  new   book. 

There  is  every  reason  to  believe  that  the  new  edition  will 
meet  with  equal  favor  with  those  of  the  past,  for  which 
favorable  reception  by  the  public  I  wish  to  express  my  con- 
tinued and  sincere  appreciation. 

My  experience  and  observation  during  a  busy  life  in  the 
practice  of  law  have  served  to  demonstrate  to  me  that  much 
vexatious  and  expensive  controversy,  arising  from  a  lack 
of  knowledge  of  the  laws  of  the  State  on  matters  of  every- 
day business,  might  be  avoided,  if  business  men  had  the 
means  of  ascertaining  at  the  moment  what  their  rights  and 
liabilities   would   be. 

Men  usually  go  to  a  lawyer  after  a  controversy  has 
occurred,  and  seek  a  lawyer's  advice,  not  to  keep  out  of 
trouble,  but  to  be  extricated  from  it.  The  plan  of  this 
work  is  to  so  arrange  and  illustrate  the  laws  of  California 
pertaining  to  ordinary  business  affairs,  and  rights  and  obli- 
gations in  many  relations  of  life,  that  a  busy  man  can  turn 
immediately  to  the  page  and  section  and  find  the  informa- 
tion he  needs,  before  assuming  a  liability  himself  or 
attempting   to   enforce   a   right   against    others. 

A.  J.   BLEDSOE. 


728873 


WHAT  SUPREME  COURT  JUDGES  HAVE 

SAID. 


JUDGE    WALTER    VAN    DYKE. 

About  a  year  before  his  death,  Walter  Van  Dyke  wrote 
the  following  letter  concerning  one  of  the  earlier  editions 
of  the  book: — 

Judicial    Department,    Supreme    Court, 
Chambers  of  Associate  Justice  Walter  Van  Dyke. 

San  Francisco. 
A.  J.  Bledsoe,  Esq.,  Attorney  at  Law. 
Dear  Sir: — 
I   have  received  a  copy  of  your  book  entitled  "Business 
Law    for    Business    Men,"    and   you    will   please    accept    my 
thanks   for  the  same.     The  book  contains  the  code  law  of 
the    State,    conveniently    arranged,    bearing    upon    the    most 
important  subjects  pertaining  to  business  affairs,  and  c-    ^    '; 
fail  to  be  of  great  service  to  business  men,  for  whose  benelTt' 
it  appears  to  have  been  specially  intended,  but  will  also  prove 
to  be  very  convenient  and  useful  to  the  practicing  lawyer. 

Very  truly  yours,        y 

WALTER  VAN  DYKE. 


JUDGE  F.  M.  ANGELLOTTI. 

State  of  California, 

Judicial  Department,  Supreme  Court, 

Chambers  of  Associate  Justice  Frank   M.   Angellotti. 

San  Francisco. 
A.  J.  Bledsoe,  Esq. 
Dear  Sir: — 
I  appreciate  your  courtesy  in  sending  me  a  copy  of  your 
book,  "Business  Law  for  Business  Men,"  and  the  limited  ex- 
amination I  have  been  able  to  give  it  satisfies  me  that  it  is 
a  very  creditable  work,  containing  much  useful  information. 

Yours  very  truly, 

F.  M.  ANGELLOTTI. 

(vii) 


Viu  WHAT  SUPREME  COURT  JUDGES  HAVE  SAID 

JUDGE    LUCIEN    SHAW. 

State  of  California, 

Judicial  Department,  Supreme  Court, 

Chambers  of  Associate  Justice  Lucien  Shaw. 

San  Francisco. 
Mr.  a.  J.  Bledsoe. 
Dear  Sir: — 
I  have  examined  your  "Business  Law  for  Business  Men" 
with  some  care,  and  am  very  much  pleased  with  it.     It  is 
concise,  the  style  is  clear,  and  the  matter  generally  accurate 
and  complete.     It  is  the  best  work  of  the  kind  that  I  have 
seen.  Yours  very  truly, 

LUCIEN    SHAW. 


CHIEF    JUSTICE    BEATTY. 

State  of  California, 
Judicial  Department,  Supreme  Court, 

,   ,  Chambers  of  the  Chief  Justice. 

/      . 

V^'^^'K  San  Francisco. 

A.  J.  Bledsoe,  Esq. 
Dear  Sir: — 
At  the  time  I  received  your  book  ("Business  Law  for 
Business  Men"),  and  for  some  time  after,  I  was  too  busy 
to  examine  it  with  any  care,  and  only  lately  have  done  so. 
As  the  result  of  such  examination,  I  am  happy  to  say  that  I 
find  it  very  accurate  and  trustworthy,  and  should  think  it 
would  be  very  useful  to  non-professional  men  in  ordinary 
matters  of  business.  Yours  truly, 

W.  H.  BEATTY. 


INDEX   TO    SUBJECTS 

PAGE 

Accident  Insurance  324-329 

Accident  Insurance  Agents 329 

Administration  of  Estates  of  Deceased  persons 824-869 

Agreements  of  Sale 65-70 

Architects 424-431 

Assignment  for  Benefit  of  Creditors 526-532 

Assignment  of  Contracts  1006-1011 

Auction    Sales    130-132 

Automobile  Law  of  California 896-928 

Attachments    597-606 

Bank  Checks 519-526 

Bank   Laws   of   California 684-740 

Bills  of  Exchange 513-519 

Building  Contracts   342-392 

Carriers  of  Freight 502-510 

Collection  of  Bills  and  Accounts 533-544 

Commission  Merchants 235-241 

Corporations  in  California   ; 618-683 

Damages  for  Breach  of  Contract 438-442 

Deposit  of  Personal  Property   132-134 

Employer  and  Employee 189-216 

Fire  Insurance   268-303 

Fire  Insurance  Agents  303-313 

Guaranty  of   Accounts    1012-1015 

Hotel  Keepers  and  Lodging  House  Keepers 150-158 

Installment  Sales  of  Personal  Property  111-119 

Installment  Sales  of  Real  Estate 185-188 

Judgments  and  Executions  606-608 

Landlord  and  Tenant  158-173 

Last  Wills  609-617 

Lien  of  Persons  Working  on  Threshing  Machines 436-437 

Liens  in  Favor  of  Owners  of  Stallions,  Jacks  and  Bulls 437-438 

Liens  for  Salaries  and  Wages 431-432 

Letters  of  Credit 510-513 

Life  Insurance    313-323 

Life  Insurance  Agents 323 

Logger's  Lien   434-436 

Making  of  Contracts 49-65 

Manufacturer 's  Agents   233-235 

Marine  Insurance    329-342 

Marine  Insurance  Agents 342 

Master  and  Servant 217-218 

Mechanic 's  Liens    393-423 

(ix) 


X  INDEX  TO  SUBJECTS. 

PAGB 

Mines  and  Mining 741-787 

Mortgages   573-596 

Notary  Public    495-502 

Partnership    442-471 

Powers    of    Attorney 1016-1021 

Principal  and  Agent 218-227 

Promissory  Notes 545-573 

Real  Estate  Agents 241-268 

Sale  of  Personal  Property 70-111 

Sale  of  Eeal  Property 174-185 

Searchers  of  Record    490-495 

Storage  of  Personal  Property 134 

Storage  in  Warehouses   135-150 

Stoppage  in  Transit 119-121 

Spaulding's  Table  for  Measurement  of  Logs 486-490 

Surveys  of  Land 471-486 

Taxes  and  Tax  Titles 929-994 

Trust  Deeds    995-1005 

United  States  Bankrupt  Laws 870-895 

Vendor's  Lien 432-433 

Warranty  of  Personal  Property 121-130 

Water  and  Water  Rights 788-823 

Wholesaler 's  Agents 227-232 


INDEX   TO    FORMS 

PAGE 

Agreement  to  Sell  Keal  Property 66 

Agreement  to  Sell  Personal  Property 69 

Assignment  of  Account   543 

Assignment  of  Contracts — 

Assignment  of  Contract  1009 

Assignment — Endorsed    1010 

Assignment  of  Debt  Due 1010 

Assignment  of  Account    1010 

Assignment  of  Contract  for  Sale  of  Keal  Estate 1011 

Automobile  Law  of  California — • 

Notice  of  Sale  for  Storage  Charges 927 

Bill    of    Sale    74 

Builder's  Contract   343 

Corporations  in  California — 

Articles  of  Incorporation    619 

Notice  of  Assessment   659 

Notice  of  Sale  661 

Deeds 

Deed  of  Gift  175 

Bargain  and  Sale  Deed   177 

Quitclaim  Deed  178 

Warranty  Deed  180 

Corporation  Deed  and  Asknowledgment 181 

Trust  Deed  , 1002 

Fire  Insurance — 

Standard  Form  of  Policy 291 

General  Power  of  Attorney 1017 

Guaranty  of  Account 1015 

Installment  Agreement  for  Sale  of  Real  Estate 187 

Installment  Sales  of  Personal  Property — 

Conditional  Agreement   113 

Conditional  Agreement  Where  Personal  Property  is  At- 
tached or  to  be  Attached  to  a  Building 115 

Conditional  Agreement  for  Sale  of  Machinery 116 

Assignment  of  Installment  Contract 119 

Landlord  and  Tenant — 

Lease  of  Land  159 

Lease  of  Agricultural  Lands  160 

Assignment  of  Lease  162 

Notice  of  Intention  to  Renew  Lease 165 

Notice  to  Quit    168 

Notice  to  Pay  Rent  or  Surrender  Possession 168 

Lease  of  Personal  Property 169 

Farming  Lease  on  Shares 171 

Mortgages — 

Assignment  of  Mortgage 596 

Chattel   Mortgage    584 

Real  Estate  Mortgage  581 

(xi) 


xii  INDEX  TO  FORMS. 

PAGE 

Mines  and  Mining — 

Notice  of  Location  of  Lode  Claim 745 

Notice  of  Location  of  Placer  Claim 746 

Proof  of  Assessment  Work   754 

Mining    Lease 761 

Oil  Lease    765 

Mining  Deed   769 

Mechanics'  Liens — 

Assignment   of   Lien 423 

Contractor 's  Bond 412 

Notice  of  Agreement  to  Furnish  Materials  to  Contractor. .  413 

Notice  to  Owner  of  Materials  Furnished  to  Contractor. .  414 

Notice  to  Owner  of  Labor  Performed 414 

Notice  of  Mechanic 's  Lien  for  Labor 415 

Mechanic's  Lien  by  Contractor  or  Sub-Contractor 417 

Notice  of  Claim  Against  Public  Improvement  Fund....  419 

Owner's  Notice  of  Completion 420 

Owner's  Notice  That  He  will  cot  be  Responsible 421 

Notice  of  Sale  of  Stock  of  Goods 73 

Olographic  Will 612 

Option,  Form  of 68 

Partnership — 

Certificate     of    Partnership     Transacting    Business 

Under  Fictitious   Name 453 

Certificate  of  Special  Partnership 455 

Partnership   Agreement    469 

Power  of  Attorney 1019 

Promissory  Notes — 

Ordinary  Note 552 

Note  Signed  with  an  X ■ 555 

Note  Payable  on  or  Before  a  Certain  Date 556 

Joint  Note   558 

Joint  and  Several  Note  559 

Notice  of  Dishonor 571 

Installment  Note    572 

Real  Estate  Agent  Written  Authority  to 243 

State  Homestead — 

Declaration  of  Homestead  by  Husband  and    Wife 578 

Declaration  of  Homestead  by  Husband    579 

Declaration  of  Homestead  by  Wife    580 

Water  and  Water  Rights — 

Notice  of  Appropriation 789 


TABLE   OF   CONTENTS 

Alphabetically  Arranged. 


PART    I 

Business  Contracts  and  Legal  Obligations 

ACCIDENT    INSUEANCE. 

PAGE 
Section       255z. — Being  Killed  by  Bobbers 325 

Section  255mm. — Condition  Against  Change  of  Occupation 328 

Section      255w. — Definition  of  Accident 324 

Section       255x. — Death  by  Accidental  Means 325 

Section     255aa. — Death  by  Drowning 325 

Section     255bb.— Death  from  Fright 325 

Section     255cc.— Death  by  Falling  326 

Section     255ee. — Death  by  Murder 326 

Section      255flf.— Death  by  Inhaling  Gas 326 

Section    255kk. — Disease  and  Bodily  Infirmity 328 

Section     255  11. — Disease  Produced  by  Known  Cause 328 

Section       255y. — Hanging  One 's  Self  While  Insane   325 

Section     255gg. — Loss  of  Hand 327 

Section     255hh.— Loss   of   Feet    327 

Section      25511. — Loss  of  Business 327 

Section    255  oo. — Proof  of  Injury  or  Death 329 

Section     255dd. — Taking  Poison  by  Mistake 326 

Section       255v.— The  Policy  324 

Section      255J3.— Total  Disability   327 

Section    255nn. — Voluntary  Exposure  to  Danger 328 

ACCIDENT  INSUEANCE  AGENTS. 
Section   255  pp. — Principles  of  Agency 329 

AGEEEMENTS    FOE    SALE. 

Section       24. — Agreement  to  Sell  Eeal  Property 66 

Section       25. — Agreement  to  Sell  Personal  Property 69 

Section     24a. — ^Form  of  Agreement  to  Sell  Eeal  Property 66 

Section     24  c. — ^Form  of  Option   68 

Section     25a. — Form  of  Agreement  to  Sell  Personal  Property. ...     69 

Section       23. — Kinds  of  Agreements  for  Sale 65 

Section     24b. — Option  to  Buy  Eeal  Property 67 

(xiii) 


Jdv  CONTENTS. 

PAGS 

ARCHITECTS. 

Section     333. — Architect 's  Certificate  as  to  Liens 426 

Section     335.— Architect's  Plans  Part  of  Contract 427 

Section     329. — Architect 's  Lien  424 

Section     330. — Architect  Cannot  File  Lien  Against  Public  Building  424 
Section     331. — Architect    Has    No    Lien    Against    Monument    in 

Public  Park  425 

Section     341. — Certificate   and   License   of  Architect 429 

Section     334. — Condition    as    to    Certificate    May   be   Waived   by 

Owner    426 

Section     338. — Contract  for  Percentage  on  Cost  of  Building 428 

Section     328. — Compensation    of    Architect 424 

Section    337. — Liability  of  Architect  for  Negligence 428 

Section     339. — Liability  for  Disclosing  Intention  of  Owner 429 

Section     332. — Payments  Made  on  Architect's  Certificate 426 

Section     336. — Services  of  Architect 427 

Section     340. — Time  Spent  on  Plans  and  Specifications 429 

ASSIGNMENT  FOE  BENEFIT  OF    CREDITORS. 

Section  539. — Accounting  by  Assignee 531 

Section  532. — Assignment  by  Insolvent  Debtor 526 

Section  542. — Assignee  Protected  for  Acts  Done  in  Good  Faith. .  531 

Section  543. — Assignment   Not    Revocable 531 

Section     538. — ^Bond  of   Assignee 530 

Section     541. — Compensation  of  Assignee 531 

Section     544. — Creditor 's  Claim  531 

Section     545. — Creditor  Holding  Mortgage  or  Pledge 532 

Section     537. — Effect  of  Failure  to  Record  Assignment 530 

Section     536. — Failure  to  File  Inventory 529 

Section    535. — ^Inventory  to  Be  Made  by  Debtor 529 

Section     540. — Property  Exempt  from  Assignment 531 

Section     534. — Void  Assignment    528 

Section    533. — What  is  Insolvency 528 

AUCTION  SALES. 

Section       43. — Authority  of  Auctioneer   130 

Section       46. — ^Auction  Sale  Under  Written  Conditions 131 

Section       47. — Auction  Sale  Without  Reserve 131. 

Section       49. — Auctioneer's    Memorandum    of    Sale    Binds    Both 

Parties 132 

Section       48. — ^Frauds   Upon   the  Buyer 132 

Section      44. — When  Auction  Sale  is  Complete 130 

Section      45. — Withdrawal  of  Bids 131 


Section  519.- 

Section  515.- 

Section  531.- 

Section  518.- 

Section  526.- 

Section  527.- 

Section  528.- 

Section  525.- 

Section  530.- 

Seetion  529.- 

Section  514.- 

Section  516.- 

Section  522.- 

Seetion  517.- 

Section  520.- 

Section  524.- 

Section  523.- 

Section  521.— I 


Section  505.- 

Section  509. 

Section  501. 

Section  513. 

Section  511. 

Section  504. 

Section  500. 

Section  510.- 

Section  512.- 

Section  502.- 

Section  503. 

Section  506.- 

Section  507.- 

Section  508.- 


Section     265.- 
Section     267.- 

Section     266. 


CONTENTS.  ^^ 

PAGE 
BANK  CHECKS. 

Certified  Checks   520 

Delivery  of  Cheek 520 

Drawing  Check  with  Intent  to  Defraud 526 

Drawing  on  Anticipated  Funds 520 

Forged  Checks    524 

Forged   Indorsements    524 

Garnishment  of  Money  on  Deposit 525 

•Liability    of   Bank    to    Depositor    for    Eefusal    to 

Pay  Check    522 

Liability  of  Bank  for  Payment   of   Check   After 

Death  of  Drawer 526 

•Lost  Checks  525 

-Nature  of  Bank  Checks 519 

■Negotiability   : .   520 

-Payment  of  Check  by  Mistake 521 

-Possession   of   Check 520 

-Presentment  and  Demand  for  Payment 521 

-Eefusal  to  Pay  522 

-Eights  and  Liabilities  of  Indorsers 522 

Stopping  Payment   521 

BILLS  OF  EXCHANGE. 

Acceptance  Must  Be  in  Writing 515 

Acceptance  or  Payment  for  Honor 516 

Bill  in  Parts  of  a  Set 513 

Damages  Allowed  on  Dishonor  of  Bill  of  Exchange  518 

Foreign  Bills  517 

•How  Presentment  Must  Be  Made 514 

Nature  of  Bills  of  Exchange 513 

•Presentment    for    Payment 516 

•Protest  of  Foreign  Bills  of  Exchange 517 

Where  Bill   of   Exchange   is  Payable 513 

•When   Bill    of   Exchange   May   Be    Presented   for 

Acceptance   514 

What  May  Be  Treated  as  Suflfieient  Acceptance..  515 

When  Acceptance  May  Be  Cancelled 515 

What  is  Admitted  by  Acceptance 515 

BUILDING    CONTEACTS. 

Acceptance  by  Agent 349 

Agreement  as  to  Extra  Work 350 

•Breach  of  Contract  by  Owner 350 


xvi  CONTENTS. 

PAGE 

Section     262.— Contract  of  Minor    349 

Section     269.— Contract  Providing  for  Arbitration 351 

Section    273. — Excavations  353 

Section    261.— Failure  to  File  Contract 348 

Section     259.— Form  of  Builder 's  Contract   343 

Section     268. — Loss  by  Fire  Before  Completion 350 

Section     258. — Materials     Furnished     Contractor     Exempt     from 

Execution    343 

Section     272. — Material  Departure  from  Specifications 353 

Section    264. — Owner  Preventing  Work 349 

Section     263. — Price  Where  Contractor  Abandons  the  Work 349 

Section     257. — Recording  of  Contract 343 

Section     260. — Reference  to  Plans  and  Specifications  in  Contract. .  348 
Section     271. — Right  of  Contractor  to  Abandon  Work 353 

Section     270. — Substantial    Performance    351 

Section     275. — Temporary  Flooring  for  Protection  of  Workmen..  355 

Section     256.— The    Contract    342 

Section     276. — Tenement   House   Law 356 

1. — Tenement   House    356 

2. — Apartments    356 

3.— Yards  357 

4.— Courts    357 

5.— Shafts 357 

6.— Public   Halls    357 

7.— Stair  Halls  357 

8. — Basements 357 

9.— Cellars   357 

10. — Fireproof  Tenement  House   357 

11.— Wooden  Tenement   358 

12.— Length,  Width  and  Height   358 

13. — Building  Not  Erected  for  Tenement 358 

14. — Tenement  Not  to  Be  Altered 358 

15. — Per  Cent  of  Lot  House  May  Occupy 359 

16. — Corner  Lot  359 

17. — Limit  of  Height 359 

18.— Rear  Yard    360 

19. — Houses    Sixty    Feet    High — Yard    Not    Less    than 

Twelve  Feet  Wide    360 

20. — Yard  of  Corner  Lot  Not  Less  than  Ten  Feet  Wide.  360 
21.— When  One-half  Width  of  Alley  May  Be  Included 

in  Yard    361 

22. — When  Lot   is  Surrounded  by  Streets 361 

23. — Minimum  Widths  and  Maximum  Lengths  of  Outer 

Courts  362 

24. — Areas  and  Widths  of  Inner  Courts 362 

25. — Areas  and  Widths  of  Lot  Line  Courts  363 

26. — Air  Intakes  of  Inner  Courts  363 

27. — Enlarging  Existing  Tenements 364 

28. — Windows   364 

29. — Window  Area  of  Each  Boom 364 


CONTENTS.  ^"^^^ 

PAGE 

30.— Area  of  Each  Eoom 365 

31. — Alcoves  to  Be  Separately  Lighted 365 

32.— Windows  in  Stair  Halls 365 

33. — Minimum  Area  of  Hall  Windows  and  Skylights...   366 

34. — Minimum  Area  of  Stair  Hall  Windows 366 

35.— Area  of  Vent  Shafts— Air  Intakes , 367 

36. — Access  to   Rooms    367 

37. — Basement   Rooms    367 

38. — Basement  Walls  Dampproofed   368 

39. — Bottom   of  Shaft   to  Be   Six  Inches   Below  Floor 

Level    368 

40. — Sinks  and  Running  Water  368 

41.— Water-CIosets  and  Baths 369 

42. — Rooms  in  Wooden  Tenements 369 

43.— Height  of  Tenements    369 

44. — Stand  Pipes,  Fire  Escapes,  etc 370 

45.— Stairs   to   Roof    370 

46. — Stairs  from  Entrance  to  Roof 371 

47. — Additional  Flight  of  Stairs  for  Tenement  Having 

More  than  Fifty  Rooms 371 

48. — Additional    Flight   of   Stairs   for   Fireproof   Tene- 
•  ments  Having  More  than  One  Hundred  and 

Twenty  Rooms  371 

49. — Stairs  to  Have  Entrance  from  Street 372 

50.— Width  of  Entrance 372 

51. — No  Closet  Under  Stairs  in  Non-fireproof  Tenements  372 

52.— Entrance    to    Cellar 373 

53. — Increase  of  Height — Decrease  of  Lot 373 

54. — Courts  for  Ventilation  and  Light 373 

55. — Alteration    Diminishing    Light 374 

56. — Subdividing  Rooms  by  Curtains 374 

57.— New  Water-Closets    374 

58. — Increasing  Size  and  Height  of  Wooden  Tenements. .  374 
59. — Altering  Non-fireproof  Tenements  to  Four  Stories. .  375 

60. — Altering  Tenements  to  Six  Stories 375 

61. — Stairs  to  Roof  Not  to  be  Removed 375 

62.— Public  Hall  Not  to  be  Reduced 375 

63. — Health  Department  May  Require  Lights  in  Hall.  .  .   375 

64. — Lights  to  be  Kept  Burning  by  Owner 376 

65. — No  Water-Closets  in  Cellars 376 

66. — Water-Closets  in  Existing  Tenements 376 

67. — Basement   Rooms  for  Living  Purposes 376 

68. — Floors  and  Walls  Around  Water-Closets 377 

69. — Keeping  Tenements  in  Order 377 

70.— Walls  of  Courts  to  be  Whitewashed 377 

71. — Kalsomining   and  Painting 378 

72.— Using  Wall  Paper 378 

73. — Garbage  Receptacles 378 

74. — ^Keeping  Stock  Prohibited 378 

75. — Janitor  for  Tenement  of  More  Than  Eight  Families  378 

76. — Four  Hundred  Feet  of  Air  for  Each  Person 378 

77. — Cannot  Store  Combustibles 379 

78. — No  Bakery  in  Any  Except  Fireproof  Tenement 379 

79. — Windows  Where  Paint  is  Stored 379 

80.— Scuttles 379 

81. — Outside  Windows    380 


xviu  CONTENTS. 

PAGE 

82,— Glass   Doors 381 

83. — Woodwork  Enclosing  Water-Closets  and  Sinks 381 

84.— Window  at  Bottom  of  Shaft 382 

85. — Sinks  and  Vaults  to  Be  Replaced  by  Individual 

Water-Closets    382 

86. — Penthouse  or  Scuttle  in  Roof 383 

87. — Plans  to  be  Submitted  to  Building  Department 383 

88.— Issue   of  Certificates 384 

89. — Occupation  Certificates  385 

90. — Enforcing  the  Law 386 

91.— Penalty  for  Violation  of  Law 387 

92. — Court  Proceedings 387 

93. — Fine  Becomes  Lien  on  Teaement 388 

94.— Notice  of  Action 388 

95. — Tenement  Owner  to  File  Statement  in  Department 

of  Health 389 

96. — Owner  to  File  Notice  of  Agent  to  Receive  Service 

of  Process 389 

97.— Public    Records 390 

98.— Serving    Notices 390 

99. — Penalty  for  Using  Tenement  as  House  of  Prosti- 
tution     .• 390 

100. — Competent   Evidence 391 

101. — Suit  Against  Tenement  House 391 

102. — Inconsistent  Laws  Repealed 391 

103. — Improvements  to  Be  Made  in  One  Year 392 

104. — Permits  and  Licenses 392 

Section     274. — ^Unsafe  Scaffolding  and  Ladders 355 

CARRIERS  OP  FREIGHT. 

Section  490a. — Accepting  Freight  for  Place  Beyond  Usual  Route. .  509 

Section     486. — Agreements  to  Limit  Liability 507 

Section    478.— Bill  of  Lading 503 

Section     474. — Care  and  Diligence  Required  of  Carriers 502 

Section     480. — Carrier  Exonerated  by  Delivery 505 

Section     482. — Carrier 's    Lien 505 

Section     476. — Delivery   of  Freight 503 

Section     475. — Directions   to    Carriers 502 

Section     473. — Freight  and  Freightage 502 

Section     484. — Freight  Carried  Farther  Than  Agreed 506 

Section     487. — General  Liability  of  Common  Carriers  for  Loss. .. .  507 

Section     489. — Liability  for  Delay 509 

Section    488. — Losses  Not  Waived  by  Contract 508 

Section     479. — Number  of  Bills  of  Lading 505 

Section     477. — Obligations    of    Carriers    When    Freight    Not    De- 
livered     503 

Section     485. — Obligation  to   Accept  Freight 506 

Section     491. — Railroads  Must  Furnish  Cars 509 


CONTENTS.  ^IX 

PAGE 
Section     490. — Shipment  of  Gold,  Precious  Stones,  Statuary,  Pict- 
ures, Glass  or  Chinawajre 509 

Section     481.— When  Freight  Must  Be  Paid 505 

Section     483.— Who  Must  Pay  Freight 505 

COMMISSION  MERCHANTS, 

Section     129.— Authority  to  Sell  on  Credit 236 

Section     131. — Authority  of  Partner  or  Servant 236 

Section     143. — Authority  as  General  Agent 239 

Section     133.— Cannot  Extend   Credit 237 

Section     144. — Care  to  Be  Taken  of  Goods  Consigned 240 

Section     146. — Duty  to  Render  Accounts 240 

Section     134. — Guaranty  of  Certain  Price 237 

Section  128. — Insurance  of  Consigned  Property 236 

Section  132. — Instructions  from  Consignor 237 

Section  135. — Instructions  to  "Sell  on  Arrival" 237 

Section  137. — In  Whose  Name  Insurance  May  Be  Put 238 

Section     142. — Lien  of  Commission  Merchant 239 

Section     140. — May  Sell  in  His  Own  Name 239 

Section     145.— Must  Not  Mix  Goods  With  Another's 240 

Section     130. — Pledge  of  Consigned  Property 236 

Section     138. — Responsibility  of  Purchaser 238 

Section     139. — Right  to  Commissions 239 

Section     127. — Selling  Property  on  Commission 235 

Section     136. — Special  Property  in  Consignments 238 

Section     141. — Taking  Promissory  Note  in  Payment 239 

DAMAGES  FOR  BREACH  OF  CONTRACT. 

Section  369. — Breach  of  Contract  to  Pay  Money 439 

Section  370.— Breach  of  Warranty  of  Title 439 

Section  372. — Breach  of  Agreement  to  Convey  Real  Property. . . .  439 

Section  373. — Breach  of  Agreement  to  Buy  Real  Property 440 

Section  374. — Breach  of  Warranty  of  Title  to  Personal  Property. .   440 

Section  376. — Breach  of  Warranty  for  Special  Purpose 440 

Section     371. — Damages  in  Case  of  Exchange  of  Land 439 

Section     375. — Damages  for  Breach  of  Warranty  of  Quality  of 

Personal    Property 440 

Section     377. — Damages  for  Breach  of  Carrier's  Obligations 441 

Section     378. — Damages  for  Breach  of  Other  Contracts 441 

Section     368. — Measure  of  Damages 438 

DEPOSIT  OF  PERSONAL  PROPERTY. 

Section       50. — Deposit  for  Safe  Keeping 132 

Section       51. — Deposit  for  Exchange 132 

Section       52. — Obligations  of  the  Depositary 133 


X*  CONTENTS. 

PAGE 

Section      53.^Things  Which  Will  Excuse  Delivery 133 

(a)— Sale  of  Pledged  Property 134 

EMPLOYER  AND  EMPLOYEE. 

flection      88. — Contract  of  Employment 189 

Section     89a. — Employer 's  Liability  for  Injuries 190 

(1) — Contributory  Negligence 190 

(2) — Employer  Not  Exempted  by  Contract 191 

(3) — Employer  Liable  for  Compensation 191 

(4)— Employer   Defined 192 

(5) — Employers  Subject  to  the  Provisions  of  This  Act. .  192 

(6)— Employer  Defined  192 

(7) — Employees  Subject  to  the  Provisions  of  This  Act. .   193 

(8) — Medical  and  Surgical  Treatment  and  Supplies 194 

Amount  of  Payments 194 

Liability  in  Case  of  Death 195 

(9) — Average  Annual  Earnings 196 

(10)— Notice  of  Accident  Within  Thirty  Days 198 

(11) — Examination  by  Physician 199 

(12) — Industrial  Accident  Board 200 

(13)— Board  May  Take  Testimony 200 

(14)— Filing  of  Judgment 201 

(15) — Court  May  Confirm  or  Set  Aside  Award 201 

(16)— Appeal  from  Award 202 

(17)— Assignment  of  Claim 203 

(18)— Preferred    Claim 203 

(19)— Right  of  Employer  to  Insure 203 

(20) — Release  from  Liability 204 

(21) — Notice  of  Election  by  Employer 204 

(22) — Right  of  Compromise 205 

Section     91c. — Employment  Agents 212 

Section     91b. — Employment  of  Children 207 

(1) — Employment  During  Vacations 208 

(2)— Notice  to  Be  Posted  by  Employer 209 

(3) — Record  of  Employees 209 

(4) — Age  and  Schooling  Certificates 210 

(5)— School  and  Work 211 

(6) — Penalty  for  Violating  Law 212 

(7) — ^Farm  Labor — Domestic  Service — Child  Actors 212 

Section     91d. — Hours  of  Labor  of  Females 213 

Section       89. — Obligations  of  the  Employer 189 

Section      90. — Obligations  of  the  Employee 205 

Section     91e. — Payment  of  Wages 214 

Section     91f. — Railroad  Employees 215 

Section     91a. — Sanitary  Condition  of  Workshops 207 

Section       91. — Termination  of  Employment 206 

FIRE  INSURANCE. 


Section     207. — Acknowledgment  in  Policy  of  Receipt  of  Premium,.  274 
Section     208. — Agreement  Not  to  Transfer 274 


CONTENTS.  3tXl 

PAGE 

Section     215. — Alteration  Increasing  Risk 277 

Section     216. — Alteration  Which  Does  Not  Increase  Risk 277 

Section     209. — Certain   Warranties 274 

Section     218. — Certificate  of  Notary 278 

Section     196. — Contract  Between  the  Parties 268 

Section     229. — Condition  as  to  Change  Occurring  in  Building....  283 
Section     232. — Contract  of  Reinsurance — Effect  of  Prior  Loss....  286 
Section  238b. — Contracts  for  Indemnity  Among  Individuals,  Part- 
nerships  or   Corporations 298 

(1) — Attorney — Certificate    299 

(2) — Examination  of  Rating  Subscribers 300 

(3) — Attorney's  Certificate  of  Authority 301 

(4) — Annual    Statement 301 

(5) — Examination  by  Insurance  Commissioner 301 

(6)— Void  Policies 302 

Section     197. — Designation  of  Parties 269 

Section     214. — Double  Insurance 277 

Section     203. — Duty  of  Parties  in  Making  the  Contract 272 

Section     211. — Exoneration   of  Insurer ' 275 

Section     219. — Falsity  of  Material  Representations  by  Insured...   278 

Section     198. — Insurable   Interest 269 

Section     201. — Insurance  Without  Interest  Illegal 271 

Section     222. — Insurance     by     Commission     Merchant — Incorrect 

Statement  as  to  Ownership 280 

Section     227. — Insurance  of  Unoccupied  Building 282 

Section     237. — Insurance  on  Harvester  While  in  Use 289 

Section     228. — Liability  of  Insurance  Company  for  Fires  Caused 

by  Earthquakes 282 

Section     236. — Liability  of  Heir  for  Premium 289 

Section     238. — Liability  of  Company  on  Policy  Written  But  Not 

Delivered  Until  After  Fire 289 

Section     199. — Measure  of  Interest  in  Property 270 

Section     212. — Notice  of  Loss 276 

Section     205. — Open  and  Valued  Policies 273 

Section  211a. — Proximate  and  Remote  Cause  of  Loss 275 

Section     213. — Preliminary  Proofs  of  Loss 276 

Section     234. — Provision  as  to  Bringing  Suit 288 

Section     235. — Proofs  of  Loss  to  Reinsuring  Company 289 

Section     226. — Remedy  for  Unauthorizea  Term  of  Credit 282 

Section     221. — Rights  of  Mortgagee — Effect  of  Sale  Under  Fore- 
closure     279 

Section     223. — Right  of  Arbitration 280 

Section     230. — Rules  for  Interpreting  Contract  of  Insurance 283 

Section     206. — Running  Policy 274 

Section     220. — Statements  as  to  Valuations 279 

Section  238a. — Standard  Form  of  Fire  Insurance  Policy 290 

Property  Not   Covered 292 

Hazards  Not  Covered 292 


xxii  CONTENTS. 

I-'  ..-  PAGE 

Matters  Avoiding  Policy 292 

Matters  Suspending  Insurance 293 

Chattel  Mortgage 293 

Fallen  Building  Clause 294 

Removal  When  Endangered  by  Fire 294 

Cancellation    294 

Duty  of  Insured  in  Case  of  Loss 294 

Ascertainment  of  Amount  of  Loss 295 

Options  of  Company  in  Case  of  Loss 296 

Apportionment  of  Loss 297 

Loss,  "When  Payable 297 

Non-waiver  by  Appraisal  or  Examination 297 

Subrogation    297 

Time  for  Commencement  of  Action 297 

Definitions    297 

Section     204. — The  Policy  of  Insurance 273 

Section     231.— Time  When  Policy  Takes  Effect 286 

Section    217. — Verbal  Contract  to  Issue  Policy 277 

Section     202.— Wager  Policies  Void 271 

Section     224. — Waiver  of  Proof  of  Loss  by  Arbitration 281 

Section  225. — Waiver   of   Condition   as   to   Prepayment    of   Pre- 
mium      281 

Section     233.— Warranties   286 

Section     200. — When  Insurable  Interest  Must  Exist 270 

Section    210.— What  Acts  Avoid  Policy 275 

FIRE  INSURANCE  AGENTS. 

Section  241. — Agent  Waiving  Forfeiture 307 

Section  252. — Agent's  Knowledge  of  Former  Insurance 312 

Section  239. — Appointment  and  Authority  of  Agents 303 

Section  246. — Application  Made  Out  by  Agent  of  Company 310 

Section  242.— Authority  of  Local   Agent 308 

Section  250. — Authority  of  Special  Agent 311 

Section     240. — Brokers    or    Agents 307 

Section     247. — Fraud  of  Agent — Disobedience  of  Instructions....  810 

Section     244. — Knowledge  of  Agent  is  the  Knowledge   of  Com- 
pany      309 

Section  253.— Offer  to  Renew  Policy 312 

Section  245. — Oral  Waiver  of  Indorsement  by  Local  Agent 309 

Section  251.— Oral  Promise  of  Policy 311 

Section  243. — Ostensible  General  Power  of  Local  Agent 308 

Section  239a. — Surplus  Line  Brokers 303 

(1) — License  of  Surplus  Line  Brokers 304 

(2) — Duties  of  Surplus  Line  Brokers 304 

(3) — Revoking    License 306 

(4) — Examination  of  Policies 306 

Section     254. — Unauthorized  Contract  of  Local  Agent 312 

Section    248. — Waiver  of  Petroleum  Clause  by  Agent 310 

Section     249. — Waiver  Continues  During  Renewal  of  Policy 311 

Section     255. — Waiver  from  Knowledge  of  Agent 313 


CONTENTS.  ^^"1 

PAGE 
HOTEL  KEEPERS  AND  LODGING-HOUSE  KEEPERS. 

Section     72a. — Defrauding  Hotel  Keepers 157 

Section     72b. — Exit  and  Stairway  Signs 157 

Section       65. — Exemption  from  Liability  in  Certain  Cases 151 

Section       64. — Liability    of    Hotel    Keepers    and    Lodging-House 

Keepers   150 

Section  67. — Liability  of  Hotel,  Boarding-House  and  Lodging- 
House  Keepers  for  Loss  by  Fire 153 

Section  68. — Liability  of  Hotel,  Boarding-House  and  Lodging- 
House  Keepers  for  Loss  by  Theft 154 

Section  69. — Liability  of  Hotel,  Boarding-House  and  Lodging- 
House  Keepers  for  Loss  of  Baggage 155 

Section       70. — Lien  of  Hotel,  Boarding-House  and  Lodging-House 

Keepers  on  Baggage  and  Other  Property 155 

Section  71. — Sale  of  Unclaimed  Baggage  by  Hotel,  Boarding- 
House  and  Lodging-House  Keepers 156 

Section       72. — Statement  of  Charges,  Etc.,  to  Be  Posted  by  Hotel, 

Boarding-House  and  Lodging-House  Keepers..   156 

Section       66. — What  Property  Must  Be  Deposited  in  the  Safe 152 

INSTALLMENT  SALES  OF  PERSONAL  PROPERTY. 

Section     31q. — Absolute  Sale  on  Installments 113 

Section     31  v. — Assignment   of   Contract 118 

Section     31k. — Conditional  Sales  of  Personal  Property Ill 

Section    31m. — Default  in  Payments 112 

Section     31r. — Form  of  Conditional  Agreement 113 

Section  Bit. — Form  of  Conditional  Agreement  Where  Personal 
Property  Is  Attached  or  to  Be  Attached  to  a 
Building    115 

Section  31u. — Form  of  Conditional  Agreement  for  Sale  of  Ma- 
chinery     116 

Section    31w. — Form  of  Assignment  of  Installment  Contract 119 

Section     311. — Language  of  the  Contract Ill 

Section     31p, — Money  Already  Paid 113 

Section     31o. — Remedy  of  Seller  in  Case  of  Purchaser's  Default. .  112 

Section     31n. — Sale  by  Vendee  to  Another  Person 112 

Section     31s. — Selling  as  a  Pledge 115 

INSTALLMENT  SALES  OF  REAL  ESTATE. 

Section     87x. — Form  of  Installment  Agreement  for  Sale  of  Real 

Estate   187 

Section     87u. — Payment  of  Installments 185 

Section    87w. — Purchaser's    Remedy    if    Vendor    Fails    to    Fulfill 

Contract  187 

Section     87t. — Sales  on  the  Installment  Plan 185 

Section     87v.— Vendor 's  Remedy  if  Installments  Are  Not  Paid. . .  185 


XXIV  CONTENTS. 

PAGK 

LANDLORD  AND  TENANT. 

Section     77b. — Assignment  of  Lease 162 

Section     87b. — Destruction  of  Premises  by  Fire 173 

Section    87a. — Fixtures  on  Leased  Premises 172 

Section      74. — For   What   Term  Leases  May   Be   Made   in   Cali- 
fornia      158 

Section       77. — Form  of  Lease 159 

Section     77a. — Form  of  Lease  of  Agricultural  Lands 160 

Section     77c. — Form  of  Assignment  of  Lease 162 

Section     81a. — Form  of  Notice  of  Intention  to  Renew  Lease 165 

Section     85a. — ^Form  of  Notice  to  Quit 168 

Section     85b. — Form  of   Notice  to  Pay  Rent   or  Surrender  Pos- 
session      168 

Section     86a. — Form  of  Lease  of  Personal  Property 169 

Section       87. — Form  of  Farming  Lease  on  Shares 171 

Section      85. — How  Notice  to  Quit  Must  Be  Served 167 

Section       73. — Leases  of  Real  Estate 158 

Section       84. — Notice  to  Quit 166 

(a) — Raising  the  Rent 167 

Section       86. — Option  to  Purchase  in  Lease .' 169 

Section      81. — Renewal  of  Lease 164 

Section       80. — Termination  of  Lease 164 

Section       82.— Term  of  Hiring  When  No  Limit  Is  Fixed 165 

Section     86b. — Tenant  Must  Deliver  Notice  Served  on  Him 170 

Section       75. — When  Verbal  Lease  May  Be  Made 158 

Section       76. — When  Lease  Must  Be  in  Writing 159 

Section       78. — What  Repairs  Lessor  Must  Make 163 

Section       79. — When  Lessee  May  Make  Repairs 163 

Section      83.— When  Rent  Is  Payable 166 

LETTERS  OF  CREDIT. 

Section     498. — Credit  Given  Must  Agree  With  Terms  of  Letter. . .  512 

Section     493. — How  Addressed 511 

Section     499. — Intention  of  Parties 512 

Section     494. — Letters  General  or  Special 511 

Section     496. — Letters  of  Credit  May  Be  a  Continuing  Guaranty. .  511 

Section     495. — Liability  of  the  Writer 511 

Section     492.— What  Is  a  Letter  of  Credit 510 

Section     497. — When  Notice  to  the  Writer  Necessary 511 

LIENS  FOR  SALARIES  AND  WAGES. 

Section     342. — Preferred  Claims  for  Salary  and  Wages 431 

Section    343. — Preferred  Claims  for  Wages  and  Salaries  Against 

Estates   431 

Section     344. — Wages  and  Salaries  in  Case  of  Attachment  and 

Execution    432 


CONTENTS.  **▼ 

PAGE 
LIFE  INSUEANCE. 

Section  255r. — Assignment  of  Policy 320 

Section  255s. — Beneficiaries  of  Life  Insurance 321 

Section  255f. — Conditions  in  Policy 316 

Section  255b. — Creditor 's  Interest 315 

Section  255m. — Credit    for   Premiums 319 

Section  255t. — Deduction  of  Unpaid  Premiums 321 

(a) — Paid-up  Life  Insurance 321 

Section  255c. — Delivery  of  Policy 315 

Section  255i. — Effect  of  Disease  of  Applicant  on  Policy 318 

Section  255n. — Forfeiture  for  Non-payment  of  Premium 319 

Section  255a. — Insurable   Interest 313 

Section  255e. — Interpretation  of  Policy 316 

Section  255k. — Malt  and  Spirituous  Beverages 318 

Section  255j. — Meaning  of  Good  Health 318 

Section  2551. — Payment   of  Premiums 318 

Section  255d. — Place  of  Contract 315 

Section  255p.— Proof  of  Death 319 

Section  255h. — Representations  by  Insured 317 

Section  255o. — Revival  of  Forfeited  Policy 319 

Section  255q.— Suicide   320 

Section  255g. — ^Waiver  of  Conditions 317 

LIFE  INSUEANCE  AGENTS. 

Section  255u. — Principles  of  Agency 323 

LIEN  OF  PERSONS  WORKING  ON  THRESHING  MACHINES. 

Section     357.— Extent  of  Lien 436 

Section     361. — Lien  Is  Assignable 437 

Section     360. — No  Notice  Required 437 

Section     356. — Persons  Entitled  to  the  Lien 436 

Section     359. — Proceeds  of  Sale  Distributed  Pro  Rata 436 

Section     358. — Suit  Must  Be  Commenced  "Within  Ten  Days 436 

LIENS  IN  FAVOE  OF  OWNERS   OF   STALLIONS,  JACKS   AND 

BULLS. 

Section     367. — Attachment  as  Security 438 

Section     363.— Claim  to  Be  Filed 437 

Section     364. — Notice  to  Subsequent  Purchasers 438 

Section     365. — False  Representations  Invalidate  Lien 438 

Section     362. — ^Persons  Entitled  to  the  Lien 437 

Section    366. — Suits  to  Foreclose 438 


XXVI  CONTENTS. 

PAGE 
LOGGER'S  LIEN. 

Section  352.— Attachment  as  Further  Security 435 

Section  355. — Attachment  Not  Necessary  to- Hold  Lien 435 

Section  350.— Claim  of  Lien  to  Be  Filed  for  Record 434 

Section  354. — Extent  of  the  Lien 435 

Section  349. — Lien  for  Labor  on  Logs  and  Lumber 434 

Section  353. — Undertaking  on  Attachment 435 

Section  351. — When  Suit  Must  Be  Commenced  to  Foreclose  Lien..  434 

MAKING  OP  CONTRACTS. 

Section       13. — Alteration  of  Verbal  Contract 57 

Section       14. — Alteration  of  Written  Contract 57 

Section        1. — ^Business  Contracts 49 

Section         3. — Consent  of  Parties  to  Contract 51 

Section         7. — Consideration  of  a  Contract 53 

Section       10. — Contracts  Against  Public  Policy 55 

Section       11. — Contracts  in  Restraint  of  Trade 56 

Section  22aa. — Contracts  by  Letter  or  Telegraph 60 

Section     22e. — Contracts  Coming  Due  on  a  Holiday 64 

(a) — What  Are  Holidays 64 

Section       15. — Express   Contracts 57 

Section      19. — Extinction  of  Written  Contract  by  Cancellation. . .     58 

Section       16. — Implied    Contracts 57 

Section       20. — Interpretation   of  Contracts 59 

Section        6. — Objects  of  Contract 53 

Section         2. — Parties  to  Contracts 49 

(a) — Contracts  of  Married  Women 51 

Section     22a. — Place  of  Performance 60 

Section        5. — Proposal     of    Contract,     Acceptance,    and    Revo- 
cation   52 

Section       21. — Printed  and  Written  Parts  of  Contract 60 

Section       18. — Rescission  of  Contract 58 

Section      12. — Sale  of  Good  Will  of  a  Business 56 

Section       17. — Termination  of  Contracts 58 

Section     22b.— The  Anti-Trust  Law 61 

(a) — Amendments  of  1909 63 

(b) — Decision  Under  the  Cartwright  Law 64 

Section      22. — Time  of  Performance  of  Contract 60 

Section         4. — When  Consent  Is  Not  Mutual 52 

Section         8. — What  Contracts  May  Be  Verbal 54 

Section         9. — What  Contracts  Must  Be  in  Writing 54 

MANUFACTURER'S  AGENTS. 

Section     122. — Agent's  Authority  to  Borrow  Money 233 

Section    123. — Agent  Selling  Goods  Out  of  Manufacture 034 


I 


CONTENTS.  xxvii 

PAGE 
Section     125. — Limitation   of  Authority 235 

Section     121. — Manufacturer's  Agents  to  Buy  or  Sell 233 

Section     126. — Sale  of  Property  When  Manufactured 235 

Section     124. — Selling  Goods  for  One  Year  Made  in  Another 235 

MARINE  INSUEANCE. 

Section  255ccc. — Acts  of  Master  and  Crew 341 

Section  255yy. — Abandonment    336 

(a) — Refusal  to  Accept 337 

(b) — Waiver  of  Formal  Abandonment 338 

(c) — Omission  to  Abandon 338 

(d) — ^Notice  of  Abandonment 338 

Section    255rr. — Definition  of  Marine  Insurance. 330 

Section  255ww. — Deviation  from  Voyage 334 

(a) — What  Constitutes  Deviation 334 

(b) — Deviation  Exonerates  the  Insured 334 

Section  255uu. — Duty  of  Parties 331 

(a) — Presumption  of  Knowledge  of  Loss 332 

(b) — Concealments    Which    Only   Affect    the    Risk    in 

Question   332 

(c) — Effect   of  Intentional   False   Representations....  332 

Section  255aaa. — General  Average 340 

Section    255ss. — Insurable  Interest 330 

Section  255zz. — Measure  of  Indemnity 338 

(a)— Partial   Loss 338 

(b)— Profits     338 

(c) — Valuation  Apportioned 339 

(d) — Valuation  Applied  to  Profits 339 

(e) — Estimating  Loss  Under  an  Open  Policy 339 

(f) — Arrival  of  Cargo  Damaged 339 

(g) — Labor  and  Expenses 340 

(h)— One-third  New  for  Old 340 

Section    255tt.— Perils  of  the  Sea 331 

Section  255bbb. — Perishable    Goods 341 

Section  255qq.— The  Policy 329 

Section  255xx. — Total  and  Partial  Loss 335 

(a) — Actual  Total  Loss 335 

(b) — Constructive  Total  Loss 335 

(c) — Insurance  Against  Total  Loss 336 

(d) — Liability  of  Insurer  When  Voyage  Is  Broken  Up. .  336 

Section  255vv. — Warranty  of  Seaworthiness 332 

(a) — Seaworthiness  Defined 332 

(b) — Different  Degrees  of  Seaworthiness  at    Different 

Stages  of  the  Voyage 333 

(c) — Delay  in  Making  Repairs 333 

(d) — Seaworthiness  for  Cargo 333 

(e)— Neutral  Papers  333 

(f) — At  What  Time  Seaworthiness  must  Exist 333 


«V1U  CONTENTS. 

PAGE 
MARINE  INSURANCE  AGENTS. 

Section  255ddd. — Principles  of  Agency 342 

MASTER  AND  SERVANT. 

Section      93,— Term  of  Hiring 217 

Section      92,— Who  Is  a  Servant 217 

Section      94, — When  Servant  May  Be  Discharged 218 

MECHANIC'S   LIENS. 

Section    305. — Abandonment  and  New  Contract 406 

Section     312. — Assignment  of  Mechanic's  Lien 408 

Section     300. — Attorney 's  Fees. 404 

Section     299. — Building  Constructed  Under  Distinct  Contracts — 

Who  Is  Original  Contractor 404 

Section  286.— Claim  of  Lien 397 

Section  293. — Claimants  May  Join  in  Suit 401 

Section  287.— Completion   398 

Section  291. — Contractor  May  Recover  Only  Amount  Due  Him .. .  400 

Section     292. — Deficiency  of  Proceeds  Under  Decree  of  Foreclosure  401 
Section     309. — Dwelling-House — Land  Subject  to  Lien 407 

Section     310.— Elevator  Part  of  Building 407 

Section     295. — False  Notice  of  Claim 401 

Section     281.— Filing  of  Contract  and  Bond 394 

Section     318. — Form  of  Contractor's  Bond 412 

Section     319. — Form  of  Notice  of  Agreement  to  Furnish  Materials 

to  Contractor 413 

Section     320. — ^Form  of  Notice  to  Owner  of  Materials  Furnished 

to   Contractor 414 

Section     321. — Form  of  Notice  to  Owner  of  Labor  Performed. . . .  414 
Section     322. — Form  of  Notice  of  Mechanic's  Lien  for  Labor. . . .  415 
Section    323. — Form  of  Mechanic's  Lien  by  Contractor  or  Sub- 
Contractor   417 

Section     324. — Form  of  Notice  of  Claim  Against  Public  Improve- 
ment Fund   419 

Section     325. — Form  of  Owner's  Notice  of  Completion 420 

Section     327. — Form  of  Assignment  of  Lien 423 

Section     289. — How  Long  Lien  Continues 399 

Section     313. — If  Building  Is  Destroyed  by  Fire,  No  Lien   Can 

Afterwards  Be  Filed 408 

Section     284. — Land  Subject  to  Lien 396 

Section     280. — Limit  of  Liens 394 

Section     282. — Limit  to  Owner's  Liability 395 

Section     297, — Lien  Law  to  Be  Liberally  Construed 402 

Section     302. — Lien  for  Moving  a  House 405 

Section     303, — Lien  on  Homestead 405 

Section     304. — Lien  Against  Railroad 406 

Section  314. — Lien  for  Work  Done  by  Order  of  Health  Officer. . .  409 


CONTENTS.  *:«^ 

PAGE 

Section     311. — Materials  Must  Be  Expressly  Furnished  for  Struct- 
ure Charged  With  Lien 408 

Section     279. — Mining   Claim  Liens 393 

Section     296. — Mistakes  in  Statement  Not  to  Invalidate  Lien....  402 

Section     315. — Miner's  Lien  Must  Be  Upon  the  Whole  Claim....  409 

Section     316, — Mining  Ground — Patented  Land 411 

Section     277. — New  Lien  Law 393 

Section     283. — Notice  to  Owner  of  Labor  Performed  and  Materials 

Furnished    396 

Section     326.— Notice  of  Owner  That  He  Will  Not  Be  Responsible 

for  Improvements  on  His  Premises 421 

Section     288. — Owner's  Notice  of  Completion 398 

Section     294. — Personal  Action  to  Eecover  Debt 401 

Section     317. — Personal  Property  Liens 411 

Section     308. — Priority  of  Material  Man's  Claim  Over  Mortgage  407 

Section     307. — Eeal  or  Reputed  Owner 406 

Section     298. — Security   for   Payment   by   Contractors   on   Public 

Work    402 

(a)— Filing  of  Claim 403 

(b)— Suit  on  Bond 403 

Section     278.— The  Persons  Entitled  to  Liens 393 

Section     285.— When  Lien  Must  Be  Filed 397 

Section     290.— When  Building  Will  Be  Held  to  Have  Been  Con- 
structed at  Owner's  Instance 399 

Section     301. — When  Lien  for  Materials  Begins 405 

Section     306.— What  Is  Meant  by  "Owner" 406 

NOTARY  PUBLIC. 

Section     461.— Bond  of  Notary 496 

Section     459. — Duties    of    Notary 495 

Section     466. — ^False  Certificate  to  Acknowledgment 498 

Section     472.— Fees  of  Notary 501 

Section     462. — Liability   of   Notary 496 

Section     464. — Liability  of  Sureties  on  Official  Bond 497 

Section     470. — Misappropriation   of   Moneys 501 

Section     467. — Notary  Cannot  Amend  Certificate 498 

Section     468. — Notary's  Knowledge  of  Party  Acknowledging  In- 
strument       499 

Section     460. — Number  of  Notaries 495 

Section     469, — Party  Introduced  to  Notary 500 

Section     465. — Premature  Protest  of  Promissory  Note 497 

Section     471.— Taking  Oath  Over  Telephone 501 

Section     463.— What  Acts  Covered  by  Official  Bond 496 


XXX  CONTENTS. 

PAGE 
PARTNERSHIP. 

Section    385.— Application  of  Partnership  Property  to  Payment 

of  Debts   445 

Section     392.— Authority  of  Individual  Partner 449 

Section    400. — Certified  Statement  of  Special  Partnership 454 

Section     389.— Compensation  for  Services  to  Firm 448 

Section     410.— Contract  in  Writing 460 

Section     397. — Doing  Business  Under  Fictitious  Name 452 

Section     412. — Duration  of  Partnership 461 

Section     380. — Formation  of  Partnership 443 

Section     398.— Form    of    Certificate    of    Partnership    Transacting 

Business  Under  Fictitious  Name 453 

Section     403. — Form  of  Certificate  of  Special  Partnership 455 

(a)— Affidavit  That  Special  Partner  Has  Paid  in  His 

Share    456 

Section    419. — ^Form  of  Partnership  Agreement 469 

Section    395. — General  Liability  of  Partner 451 

Section    404. — Interest  and  Profits  of  Special  Partner 458 

Section     388. — Liability  of  Partners  to  Account 448 

Section     407. — Liability  of  Mining  Partners 459 

Section     396. — Liability  of  One  Who  Permits  Himself  to  Be  Held 

Out  as  a  Partner 452 

Section     405. — Mining  Partnerships 458 

Section     408. — Mining  Ground  Partnership  Property 459 

Section     387. — Mutual  Obligations  of  Partners 446 

Section     409. — ^New  Member  of  Mining  Partnership 460 

Section     416. — Notice  of  Dissolution  of  Partnership 467 

Section    411. — Owners  of  Majority  of  Shares  Govern  Conduct  of 

Mine    461 

Section  381. — Partnership   Property 443 

Section  382. — Partner's  Interest  in  Partnership  Property 443 

Section  384. — Partner's  Share  in  Profits  and  Losses 444 

Section  394.— Partner  Engaging  in  Other  Business 451 

Section  414. — Partial  Dissolution  of  Partnership 462 

Section  383. — Possession  of  Partnership  Property 444 

Section  391. — Power  of  Majority  of  Partners 449 

Section  406. — Profits  and  Losses  in  Mining  Partnership 459 

Section     390. — Renunciation   of  Partnership 448 

Section     402. — Rights  of  Special  Partners 455 

Section     418. — Rights  of  Partners  After  Dissolution 469 

Section     399. — Special  Partnerships .• 454 

Section     401. — Special  Partnership — Liability  of  the  Partners. . . .  454 

Section     413. — Total  Dissolution  of  Partnership 461 

Section  379. — What  Constitutes  a  Partnership 442 

Section  386. — What  Is  Partnership  Property 446 

Section  393. — What  Partner  Cannot  Do 451 

Section  415. — When  Partner  Entitled  to  Dissolution 462 

Section  417. — Winding  Up  the  Partnership  Affairs 468 


CONTENTS.  3CXX1 

PAGE 
PRINCIPAL  AND  AGENT. 

Agent's  Power  to  Disobey  Instructions 220 

Agent  Cannot  Have  Authority  to  Defraud  Prin- 
cipal     220 

Agent 's  Actual  Authority 221 

Agent 's  Ostensible  Authority 222 

Agent 's  Delegation  of  His  Power 226 

A  uthority  of  Agent 219 

Authority  of  Agent  to  Receive  Price  of  Property. .   220 

Definition  of  Agency 218 

How  Agency  Is  Created 224 

Kinds  of  Agency 218 

Mutual  Obligations  of  Principal  and  Third  Persons.  224 

Obligations  of  Agents  to  Third  Persons 226 

Ratification  of  Agents  Acts 223 

Termination  of  Agency 227 

What    Included    in    Authority    to    Sell    Personal 

Property    219 

What  Included  in  Authority  to  Sell  Real  Estate . . .   219 

REAL  ESTATE  AGENTS. 

Agent 's  Mistake  as  to  Title 254 

•Agreement  Between  Agents  to  Co-operate  in  Selling  260 

-Agent's  Knowledge  of  Title 261 

-Agent  Buying  in  His  Own  Name 264 

•Amount   of   Commissions 256 

-Authority  to  Sell  on  Credit 260 

-Authority  of  Agent  Making  Lease  for  Term  Longer 

Than  One  Year 265 

-Commissions  Upon  Sale  or  Exchange  by  Owner...  251 

-Costs  in  Suit  for  Commissions 262 

-Commissions  Out  of  Purchase  Money 262 

-Commissions  on  Sales  of  Real  Property  Under  Or- 
der of  Court 266 

-Description  of  Land 243 

-Death  of  Principal  Revokes  Authority  of  Agent. . .   266 

-Employment  Must  Be  in  Writing 241 

-Evasion  of  Contract  by  Owner 249 

-Failure  of  Sale  by  Defective  Title 248 

-Failure  of  Owner  to  Remove  Defects 248 

-Form  of  Written  Authority  to  Agent 243 

-How  Authority  of  Agent  Can  Be  Extended 262 

-Husband  Giving  Agent  Property  of  Wife  to  Sell . .   255 

Section     184. — Interest  Allowed  by  Law  on  Agent's  Commissions. .   262 


Section  101.- 

Section  102.- 

Section  103.- 

Section  104.- 

Section  109.- 

Section  97.- 

Section  100.- 

Section  95.- 

Section  106.- 

Sectlon  96. — 

Section  107. 

Section  108. 

Section  105. 

Section  110. 

Section  98. 

Section  99. 


Section  168.- 

Section  178.- 

Section  183.- 

Section  191.- 

Section  174.- 

Section  179.- 

Section  194.- 

Section  161.- 

Section  186.- 

Section  187.- 

Section  195a. 


Sectiom  150.- 

Section  195.- 

Section  147.- 

Section  157a.- 

Section  156.- 

Section  157.- 

Section  150. 

Section  185.- 

Section  171. 


*»xii  CONTENTS. 

PAGE 
Section     165, — Liability   of   Agent   Under   Contract   to    Sell   for 

Specified  Amount 252 

Section     166. — Liability  of  Owner  to  Auctioneer 253 

Section     382. — Liability    of   Auctioneer    for   Deposit   at   Auction 

Sale  261 

Section     163. — Misrepresentation  by  Owner 251 

Section     155. — Option  to  Agent  to  Sell  for  Commission  Above  a 

Fixed  Price 246 

Section     173. — Owner  and  Purchaser  Need  Not  Be  Brought  Face 

to  Face 256 

Section     175. — Prevention  of  Sale  by  Owner 257 

Section  195b. — Personal  Property  Brokers 267 

Section     180. — Power  of  Attorney  to  Agent  to  Make  Deed 260 

Section     189. — Purchase  by  Agent  from  Himself 263 

Section     190. — Purchase  by  Agent  from  Principal 264 

Section     154. — Ratification  of  Unauthorized  Employment  by  Cor-" 

po ration    246 

Section     158. — Ratifying  Authority  of  Brokers 249 

Section     169. — Repudiation  of  Contract  by  Vendor 254 

Section     181. — Risk   of  Purchaser  "Who   Takes  Lawyer's  Advice 

as  to  Title 261 

Section     151. — Right   of   Agent   to   Commissions   When   Property 

Withdrawn  from  Sale 243 

Section     160. — Sale  by  Owner 250 

Section     162. — Sale  by  Owner  Through  Another  Agent 251 

Section     188. — Selling  Land  on  Shares 263 

Section     170. — Terms  of  Payment  and  Refusal  to  Accept  Tender. .   255 

Section     148. — Verbal   Contract  Invalid 241 

Section     149.— When  Letter  Not  Sufficient 242 

Section     152. — When  Contract  Fulfilled  and  Commission  Earned..   244 
Section     153. — What  Is  Sufficient  Authority  from  Corporation.  . . .   244 

Section     159.— What  Is  Good  Title 250 

Section     164. — What  Constitutes  a  Sale  by  Owner 252 

Section  167. — What  Agent  Must  Prove  in  Suit  to  Recover  Com- 
missions   253 

Section     172. — What  Constitutes  Finding  a  Purchaser 255 

Section  176. — When  Purchaser  and  Owner  Are  Not  Brought  To- 
gether, Purchaser  Must  Sign  a  Written  Con- 
tract     257 

Section     177. — When  Owner  Must  Return  Money  Paid  on  Contract  259 

Section     192. — When  Authority  of  Agent  Revocable 264 

Section  192a. — When  Option  Can  Be  Revoked 265 

Section  193.— Which  One  of  Two  Brokers  Is  Entitled  to  Com- 
missions     265 


SALE  OF  PERSONAL  PROPERTY. 

Section     31d. — Adulterated,  Mislabeled  or  Misbranded  Foods  and 

Liquor    75 

Section      31i.— Adulteration  of  Dairy  Products 81 

(10) — Unsanitary  Dairies 83 

(11) — Unsanitary  Creamery  or  Factory 83 


(13)- 

(14)- 

(15)- 

(16)- 

(17)- 

(1«)- 

(19)- 

(20)- 

(21)- 

(22)- 

(23)- 

(24)- 

(25)- 

(26)- 

(^7)- 

(28)- 

(29)- 

(30)- 

(31)- 

(32)- 

(33)- 

(34)- 

(35)- 

, 

(36)- 

(37)- 

Section 

31b.- 

Section 

31.- 

Section 

31e.- 

(a)- 

Section 

30.- 

Section 

31.ic.- 

(1)- 

(2)- 

(3)- 

(4)- 

(5). 

(6)- 

(7)- 

(«)- 

Section 

31.i.- 

(a)- 

Section 

31c.- 

Section 

31h.- 

Section 

31s.- 

Section 

31ii. 

Section 

29.- 

Section 

311- 

Section 

31,ia. 

Section 

31jb. 

CONTENTS.  xxxiu 

PAGE 

—Liquid    Measurements 84 

—Pasteurized  Butter 85 

-Weight     85 

— Eegistration   of   Dairies 85 

—Packages  or  Wrappers -, 86 

—Imitation  Butter  or  Cheese 86 

-Marks  on  Imitation  Butter  or  Cheese 87 

—Possession  and  Transportation 87 

—Sale  of  Imitation  Butter  or  Cheese 88 

—License  to  Sell 90 

—Record  of  Sales 91 

—False  Tests  or  Statements 92 

—Inspection  by  State  Dairy  Bureau 93 

—Standard  Measure 93 

—The  Babeock  Test 94 

-Meaning  of  "Product  of  Milk" 95 

—Cheese  and  Its  Mark* 95 

—Ice  Cream 96 

—Skimmed  Milk 96 

—Name  on  Wagons 97 

—Use  of  Chemical  Substances 97 

—Sale  of  Ice  Milk 97 

—Cheese  Brands  and  Grades 99 

—Acts  of  Agents 100 

—Penalties  for  Violating  the  Law 100 

—Notice  to  Change  Unsanitary  Conditions 101 

—Bill  of  Sale 74 

— Buyer 's  Directions  as  to  Manner  of  Sending  Things 

Sold  71 

—Cold  Storage  Eggs  and  Poultry 76 

—Marking  Oleomargarine 76 

— Expense  of  Transportation 71 

— Explosives — Transportation,  Storage  and  Sale 104 

—Storage    104 

—Magazines 105 

—Storing  in  Tunnels 106 

—Penalties  106 

—Transportation    106 

—Record  of  Sales 108 

—Mining  Operations 109 

—Other    Regulations 110 

— ^False  Advertisements 102 

—False  Labels,  Etc 102 

—Form  of  Bill  of  Sale 74 

— Manufacture  or  Sale  of  Stuffed  Furniture 81 

— Poisonous    Confectionery 81 

— Production  and  Sale  of  Certified  Butter 102 

— Eight  to  Inspect  Goods  Before  Acceptance 71 

— Sanitary  Regulation  of  Food-Producing  Establish- 
ments        77 

—Selling  Fish  and  Wild  Game  by  Wholesale 103 

— Selling  Tobacco  or  Cigarettes  to  Minors 103 


*»»▼  CONTENTS. 

PAOX 

Section     31a.— The  Bulk  Law 72 

Section      26.— When  Goods  Sold  Must  Be  Delivered 70 

Section       27. — Where  Delivery  Must  Be  Made 70 

Section      28. — When  Price  of  Goods  Bought  Must  Be  Paid 71 

SALE  OF  REAL  PROPERTY. 

Section     87h. — Bargain  and  Sale  Deed 177 

Section     87n. — Corporation  Deed  181 

Section  87d. — Deed  to  Community  Property 174 

Section  87e. — Deed  to  Separate  Property 175 

Section  87f.— Deed  of  Gift 175 

Section  87p. — Deed  in  Escrow 183 

Section  87r. — Deed  Cannot  Be  Canceled 184 

Section     87q.— Effect  of  Deed  in  Escrow 184 

Section     87g.— Form  of  Deed  of  Gift 175 

Section      87i. — Form  of  Bargain  and  Sale  Deed 177 

Section     87k. — Form  of  Quitclaim  Deed 178 

Section    87m. — Form  of  Warranty  Deed 180 

Section  87o. — Form  of  Corporation  Deed  and  Acknowledgment..  181 

Section     87s. — ^Power  of  Attorney  to  Make  Deed 184 

Section      87j. — Quitclaim  Deed 178 

Section     87c. — Transfer  by  Deed 174 

(a) — Condition  Againsf  Sale  of  Liquor 174 

(b) — Who  May  Take  Acknowledgments  of  Deeds 174 

Section     871.— Warranty  Deed    180 

SEARCHERS  OF  RECORD. 

Section     447.— Abstracts  of  Title 490 

Section     455. — Incorrect  Report  of  Quantity  of  Land  Conveyed. .  494 

Section     449, — Liability  of  Searchers  of  Record 491 

Section     451. — Liability  for  Mistake 493 

Section     452. — Liability  for  Omitting  Encumbrance 493 

Section    453. — Marginal  Reference  in  Record  Book 493 

Section     456. — Measure  of  Damages 494 

Section    454. — Omitting  Judgment  and  Sale 494 

Section     458. — Sale  of  Good  Will  of  Abstracting  Business 495 

Section     448. — Searchers  of  Record 491 

Section     450.— To  Whom  Liable 492 

Section     457. — When  Suit  for  Damages  Must  Be  Commenced....  494 

SPAULDING'S    TABLE    FOR    MEASUREMENT    OF    LOGS. 

Section     446.— Explanation  of  Table 490 

Section    445. — Legal  Standard  of  Log  Measure 486 


CONTENTS.  ^^^^^ 

PAGE 

STOPPAGE  IN  TEANSIT. 

Section       32. — When    Seller    or    Consignor   May    Stop    Goods    in 

Transit 119 

Section      33. — Resale  of  Personal  Property 120 

Section       34.— What  Will  Defeat  Vendor's  Right  to  Stop  Goods..  121 

STORAGE  OF  PERSONAL  PROPERTY. 

Section       55. — Care  to  Be  Taken  of  Thing  Deposited 134 

Section       54. — Storage    134 

STORAGE  IN  WAREHOUSES. 

Section       59. — Delivery  of  Property  by  Warehouseman 137 

Section     63b. — ^Fraud  by  Warehouseman 148 

Section     63c. — Insurance  on  Stored  Property 149 

Section       60. — Liability  of  Warehouseman 140 

Section       64. — Liability  for  Loss  by  Reason  of  Defective  Building  150 

Section       57. — Negotiability  of  Warehouse  Receipt 136 

Section     63a. — Negotiation  of  Warehouse  Receipt 145 

Section       58. — Removal  of  Property  by  Warehouseman 137 

Section       63. — Sale  of  Property  for  Storage  Charges 142 

Section       56. — ^Warehouse    Receipts 135 

Section       61. — Warehouseman's  Liability  for  Delivering  Property 

to  Wrong  Person 141 

Section       62. — Warehouseman's  Liability  for  Loss  by  Fire 141 

SURVEYS  OF  LAND. 

Section     432. — Closing    Corners 476 

Section     444. — Completion  of  United  States  Survey 486 

Section     423. — Finding  Original  Location  of  Tovirnship  Line 473 

Section     424. — Field  Notes  and  Maps 473 

Section     421. — Government  Surveys 472 

Section     422. — Government    Survey    Accepted    and    Approved    Is 

Fixed  and  Unchangeable 472 

Section     437. — Government  Lines  and  Corners  Must  Control 480 

Section     441. — Instructions  from  the  General  Land  Office 483 

Section     436. — Meander  Corners 480 

Section     425. — Monuments  on  the  Ground 473 

Section     443. — Monuments  Control  Courses  and  Distances 485 

Section     439. — Perpetuating  Corners 482 

Section     429. — Principal  Meridians  and  Base  Lines 476 

Section     440. — Proportionate  Measurements 482 

Section     420. — Public  and  Private  Land  Surveys 471 

Section     435. — Quarter  Section   Corners 479 


^Xxvi  CTDNTENTS. 

PAGE 
Section     430. — Kanges   476 

Section  438. — Kestoring  Lost  Corners 481 

Section  427. — Sections    475 

Section  434. — Section  Corners 478 

Section  431. — Standard  Corners 476 

Section  428. — Subdivisions  of  Sections 475 

Section     426. — Townships    475 

Section     433.— Township  Corners 477 

Section     442.— Where  Surveyor  Should  Start 485 

VENDOR'S  LIEN. 

Section     347.— Extent  of  Vendor 's  Lien 433 

Section     345.— Lien  of  Seller  of  Real  Property 432 

Section     348. — Lien  of  Seller  of  Personal  Property 433 

Section     346. — When  Transfer  of  Contract  Waives  Vendor's  Lien.  433 

WARRANTY  OP  PERSONAL  PROPERTY. 

Section     42b. — Bottles,  Boxes,  Siphons  and  Kegs 126 

(1)— Penalty    127 

(2)— Search  Warrants 127 

(3) — Accepting  Deposits 128 

(4)— Sale  of  Rights 128 

Section     42a. — Damages  Allowed  on  Breach  of  Warranty 125 

Section     42c. — Examination  of  Property  by  Purchaser 129 

Section       38. — Manufacturer 's  Warranty  Against  Defects 122 

Section       35.— Warranty  of  Title 121 

Section       36. — Warranty  on  Sale  by  Sample! 121 

Section       37. — Warranty  on  Agreement  to  Sell  Merchandise  Not 

in   Existence 122 

Section       39. — Warranty  of  Soundness 123 

Section       40. — Warranty  by  Trademarks  and  Other  Marks 123 

(a)— "Trademark"  Defined 123 

(b) — Recording  Trademarks 124 

(c) — Assignment  of  Trademarks 124 

(d) — Protection  of  Trademarks 124 

Section       41. — Warranty  of  Provisions  for  Domestic  Use 125 

Section       42. — Warranty  on  Sale  of  Good  Will  of  Business 125 

WHOLESALERS'  AGENTS. 

Section     114. — Collections  by  Traveling  Agent 228 

Section     116. — Declarations  of  Wholesaler's  Agent 229 

Section     118. — Failure  to  Ship  Goods 229 

Section     115. — Giving   Credit 228 

Section     117. — Notice  to  Wholesaler's  Agent 229 

Section     119. — ^Notice  by  Wholesaler  of  Termination  of  Agency. .  229 


CONTENTS.  xxxvii 

PAGE 
Section     113. — Purchaser's  Right  to  Return  Goods 228 

Section     112.— Sale  by  Sample 228 

Section  120a.— Sale  of  Samples 232 

Section     111. — Traveling  Agents 227 

Section     120. — Wholesaler's  Repudiation  of  Agency 230 


PART    II 


Section 
Section 
Section 
Section 
Section 
Section 
Section 

Section 

Section 

Section 
Section 

Section 
Section 

Section     579. — '. 

Section 
Section 
Section 

Section     548. — 

Section 
Section 
Section 

Section 

Section 
Section 
Section 

Section 

Section 
Section 
Section 

Section 


Collection  of  Bills  and  Accounts 

575. — Accepting  Promissory  Note 542 

564. — Agent's  Commissions  Upon  Collections 539 

577. — Application  of  Payments  on  Account 542 

556. — Assignment  for  Collection 536 

557. — Assignee  May  Sue  in  His  Own  Name 536 

558. — Assignment  May  Be  Verbal  or  Written 537 

559. — Assignment   by   One   Partner   of   Partnership   Ac- 
count    537 

570. — Attachment  of  Debtor's  Property  in  Suit  to  Col- 
lect Account 541 

562. — Authority  of  Agent  in  Making  Collections 538 

560. — Collection  of  Accounts  When  Books  Are  Lost 537 

565. — Collection    of    Bills    and    Accounts    When    Debtor 

Is  Dead 539 

576. — Collection  of  Notes  by  Agent 542 

578. — Collection  of  Accounts  for  Liquors  Sold 543 

579. — ^Form  of  Assignment  of  an  Account 543 

555. — Interest  on  a  Stated  Account 536 

567.— In  What  Township  Suit  Must  Be  Brought 540 

569. — In  What  County  Suit  in  Superior  Court  Must  Be 

Brought   540 

548. — Itemized   Account 533 

546. — Methods  of  Making  Collections 533 

571. — Means  for  Collection  to  Be  Employed  by  Agent. . . .  541 
551. — Mutual  Account 534 

549. — Open  and  Current  Account 533 

572.— Payment  to  Wife  of  Creditor 541 

573. — Payment  of  Note  to  Supposed  Agent 541 

547. — Presentment  of  Bills  or  Statements  of  Account. . . .  533 

563. — Ratification  of  Agent's  Acts 538 

553. — Stated  Account 535 

566. — Suit  in  Justice  Court  on  Bills  and  Accounts 540 

568. — Suit  in  Superior  Court  on  Bills  and  Accounts 540 

574.— Taking  Goods  for  Creditor's  Claims 542 


xxxviii 


Section 
Section 
Section 
Section 


CONTENTS. 

PAGE 

550. — When  Open  Account  Outlaws 534 

552. — When  Mutual  Account  Outlaws 535 

554. — When  Stated  Account  Outlaws 535 

561. — What  Debtor  May  Set  Off  Against  Assigned  Ac- 
count     538 


PART    III 
Notes  and  Mortgages 


Section  619.- 

Section  626.- 

Section  617.- 

Section  633.- 


Section     631.—: 

Section     596.- 
Section     608.- 


Section  593.- 

Section  599.- 

Section  603.- 

Section  610.- 

Section  613.- 

Section  640.- 

Section  645a.- 

Section  623. — i 

Section  598.- 

Section  638.- 

Section  615.- 

Section  621.- 

Section  625.- 

Section  628.- 

Section  644.- 

Section  645. — 

Section  609.- 

Section  612.- 

Section  622.—: 

Section  616.- 

Section  611.- 

Section  614.- 

Section  627.- 


PROMISSORY  NOTES. 

Apparent  Maturity  of  Note 561 

Assignment  of  Note  Not  Negotiable 564 

Attorney   Fees    561 

At  What  Place  Note  Must  Be  Presented  for  Pay- 
ment    568 

•By  Whom  Note  Must  Be  Presented  for  Payment. .  567 

Date  of  Note 554 

Difference  Between  Negotiable  Note  and  Note  Not 

Negotiable  557 

Form  of  Note 552 

•Form  of  Note  Signed  With  an  X 555 

•Form   of   Note   Payable   on   or   Before   a  Certain 

Date   556 

•Form  of  Joint  Note 558 

•Form  of  Joint  and  Several  Note 559 

•Form  of  Notice  of  Dishonor 571 

-Form  of  Installment  Note 572 

General  Indorsement 564 

How  Must  Be  Signea  by  Maker 554 

How  Notice  of  Dishonor  May  Be  Given 570 

Interest  560 

•Indorsement  of  Negotiable  Note 563 

■Indorser  of  Non-Negotiable  Note 564 

•Indorsement  * '  Without  Recourse  " 566 

-In    What    Court    Suit   to   Collect   Note   Must   Be 

Brought  572 

Installment  Note 572 

•Joint  Note 558 

Joint  and  Several  Note 559 

Kinds  of  Indorsements 564 

•Legal  Rate  of  Interest 560 

•Liability  on  Joint  Note 559 

Liability  of  Maker  of  Joint  and  Several  Note 560 

Liability  of  Indorsers 565 


Section  600.- 

Section  590.- 

Section  591.- 

Section  592.- 


Section  601.- 

Section  582.- 

Section  583.- 

Seetion  584.- 

Section  585.- 

Section  586.- 

Section  587.- 

Section  588.- 

Section  589.- 

Section  597.- 

Section  602.- 

Section  604.- 

Section  605.- 

Section  637.- 

Section  595.- 

Section  642.- 

Section  629.- 

Section  624.- 

Section  594.- 

Section  632.- 

Section  580.- 

Section  581.- 

Section  606.- 

Section  607.- 

Section  618.- 

Seetion  620.- 

Section  630.- 

Section  634.- 

Section  635.- 

Section  636.- 

Section  639. 

Section  641.- 

Section  643. 


Section  685.- 

Section  703.- 

Section  674.- 

Section  684.- 

Section  670.- 

Section  682.- 

Section  700.- 

Section  659. 

Section  667.- 

Section  691.- 


CONTENTS.  XXXlx 

PAGE 

-Maker 's  Name  Spelled  Wrong 555 

-Must  Be  for  the  Payment  of  Money 551 

-Must  Be  for  a  Certain  Specified  Amount 552 

-Must  Not  Be  Subject  to   Any  Condition  or  Con- 
tingency    552 

-Name  of  Person  to  Whom  Note  Is  Payable 555 

-Note  Made  by  Minor 546 

-Note  Made  to  Minor 547 

-Note  Made  by  Married  Woman 547 

-Note  Made  to  Married  Woman 548 

-Note  Made  by  Corporation 548 

-Note  Made  to  Corporation 550 

-Note  Must  Be  in  Writing 551 

-Note  May  Be  in  Pencil 551 

-Note  Not  Dated  Is  Valid 554 

-Note  Payable  on  or  Before  a  Certain  Date 556 

-Note  With  Payee  Blank 556 

-Note  Payable  to  Order  of  Maker 556 

-Notice  of  Dishonor 569 

-Place  of  Payment 554 

-Protest  of  Foreign  Note 572 

-Eights  of  Indorsee  in  Due  Course  of  Business 566 

-Special  Indorsement 564 

-Time    of   Payment 553 

-To  Whom  Note  Must  Be  Presented  for  Payment. . .  567 

-What  Is  a  Promissory  Note 545 

-Who  May  Be  Parties 545 

-When  Note  Is  Negotiable 557 

-When  Note  Is  Not  Negotiable 557 

-When  Note  Is  Outlawed 561 

-When  Outlawed  Note  Is  Kenewed 562 

-When  Note  Must  Be  Presented  for  Payment 566 

-What  Will  Excuse  Presentment  for  Payment 568 

-What  Is  Reasonable  Diligence 568 

-When  a  Note  Is  Dishonored 569 

-When  Notice  of  Dishonor  Must  Be  Given 570 

-When  Notice  of  Dishonor  Is  Excused 571 

-When  Suit  to  Collect  Note  Can  Be  Brought 572 

MOETGAGES. 

-Assignment  of  Certificate  of  Sale 590 

-Assignment  of  Mortgage 596 

-Attorney  Fees 588 

-Certificate  of  Sale 590 

-Compound  Interest 587 

-Costs  of  Foreclosure 589 

-Collection  of  Lost  or  Destroyed  Note 595 

-Declaration  of  Homestead 577 

-Deed  as  Security  and  Agreement  to  Deed  Back ....  586 
-Deficiency  Judgment 692 


«  CONTENTS. 

PAOB 

Section  655, — Effect  of  Recording  Mortgages  of  Real  Property..  575 

Section    656. — Eflfect  of  Recording  a  Chattel  Mortgage 576 

Section     697. — Excuse  for  Not  Presenting  Claim  in  Time 594 

Section     676. — First  and  Second  Mortgages 588 

Section  660. — Form  of  Declaration   of  Homestead  by  Husband 

and  Wife 577 

Section  661. — Form  of  Declaration  of  Homestead  by  Husband. ..  579 

Section     662. — Form  of  Declaration  of  Homestead  by  Wife 580 

Section     664. — Form  of  Real  Estate  Mortgage 581 

Section     666. — Form  of  Chattel  Mortgage 584 

Section  698. — Foreclosure  of  Mortgage  When  the  Maker  Is  Dead .   594 

Section  699. — Foreclosure  of  Mortgage  Payable  in  Installments.   595 

Section     649. — How  Mortgage  Is  Executed  and  Acknowledged 574 

Section     696. — How  to  Collect  a  Note  When  Maker  Is  Dead 593 

Section    689. — How    to    Redeem 591 

Section     671. — Interest    on   Judgment 587 

Section     673. — Insurance  on  Mortgaged  Buildings 587 

Section  677. — In  What  Court  Suit  Must  Be  Brought  to  Foreclose 

Mortgage    588 

Section     668.— Lawful    Interest 586 

Section     669. — Legal  Rate  Where  No  Interest  Specified 587 

Section     702. — Liability  of  Partners  on  Partnership  Note 595 

Section     646. — Mortgage  Security 573 

Section     650. — Mortgage  of  Married  Woman 574 

Section     651. — Mortgage  of  Minor 574 

Section     652. — Mortgage  of  Partnership  Property 574 

Section  657. — Mortgage  Not  Recorded  Good  Between  Parties. . . .  577 

Section     658. — Mortgage  on   Homestead 577 

Section     675. — Mortgage   for  Future   Advances 588 

Section     701. — Note  Made  by  Partners 595 

Section     681.— Order  in  Which  Property  Must  Be  Sold 589 

Section  692. — Possession  of  Property  During  Foreclosure  Pro- 
ceedings      592 

Section  693. — Possession  of  Real  Property  During  Time  for  Re- 
demption     592 

Section     654. — Proof  of  Execution  of  Mortgage 575 

Section     653. — Recording  Mortgages    575 

Section     679. — Renewal  of  Note  Does  Not  Renew  Mortgage 588 

Section     G94.— Right  to  Rents  and  Profits 593 

Section     665. — Rules  Which  A^ply  to  Chattel  Mortgages 583 

Section     690.— The  Sheriff's  Deed 591 

Section     687. — Time  for  Redemption 590 

Section     663.— Value    of   Homestead 581 

Section  647. — What  Interest  in  Real  Property  May  Be  Mort- 
gaged    573 

Section     648. — What  Personal  Property  May  Be  Mortgaged 573 

Section     672. — Who  Must  Pay  Taxes  on  Mortgage 587 

Section     678. — When  Mortgage  Is  Outlawed 588 

Section  680.— What  Property  Can  Be  Sold  to  Satisfy  Mortgage. .  589 


CONTENTS.  ^i 

PAGE 

Section     683. — ^Who  May  Buy  at  Foreclosure  Sale 589 

Section     686. — What  Property  Can  Be  Redeemed 590 

Section     688.— Who  May  Eedeem 590 

Section     695. — Who   Must  Pay  for  Improvements   Made   During 

Foreclosure  Proceedings 593 


I 


Section 
Section 

Section 
Section 
Section 


Section 

Section 

Section 

Section 

Section 

Section 
Section 
Section 

Section 
Section 


Section 

Section 
Section 


Section 
Section 
Section 

Section 


PART    IV 

Attachments,  Judgments  and  Executions 

ATTACHMENTS. 

704. — Attachment  of  Debtor's  Property 597 

715. — Attachment  of  Partnership  Property 605 

717. — Bond  for  Release  of  Attached  Property 605 

709. — Creditor  Liable  for  Unlawful  Attachment 602 

710. — Creditor   Attaching  Personal   Property   Must  Pay 

Mortgage    603 

716. — Dissolution  of  Attachment 605 

712. — ^For  What  Property  Garnishee  Liable 604 

711. — Garnishment     603 

707. — Homestead  Money  Exempt 602 

718. — Lien  of  Attachment 606 

708. — Mortgaged  Property  May  Be  Attached 602 

713. — Money  Due  as  Salary  to  Public  OflScer 604 

714. — Money  in  the  Hands  of  the  Law 605 

705. — What  Property  Can  Be  Attached 598 

706. — What   Property   Is   Exempt   from   Attachment    or 

Execution    598 

JUDGMENTS    AND    EXECUTIONS. 

725. — Exemption  Must  Be  Claimed  by  Debtor 608 

721. — How  Long  Judgment  Lien  Continues 607 

723. — How  Justice   Court   Judgment   Is   Made   Lien    on 

Real   Property    607 

719.— Judgments    606 

720. — Judgment  a  Lien  on  Real  Property 606 

722. — ^Judgment  Lien  on  Property  in  Another  County. .   607 

724. — Time   Within  Which   Execution   May  Issue 608 


xUi 


CONTENTS. 


PART    V 
Last  Wills. 

PAGE 

Section  741. — Children    of    Devisee C15 

Section  734. — Form  of  Olographic  Will    612 

Section  736. — Gifts  to  Subscribing  Witnesses 613 

Section  745. — Grounds  for  Contest  of  Will 616 

Section  737.— How  a  Will  Is  Revoked 614 

Section  744. — Interest  on  Legacies 616 

Section  731.— Kinds  of  WUls  611 

Section  726.— Making  a   Will    609 

Section  732. — Nuncupative   Wills 611 

Section  733.— Olographic    Wills     61 1 

Section  740. — Omission  to  Provide  for  Children    61.5 

Section  738. — Revocation    by    Marriage 614 

Section  739.— Share  of  Child  Born  After  the  Will 615 

Section  727.— Who  May  Make  a  Will 610 

Section  729.— What  May  Be  Disposed  of  by  WUl 610 

Section  730.— Who  May  Take  by  Will 610 

Section  742.— When  Will  Takes  Effect 615 

Section  743. — When  Legacies  Are  Due 616 

Section  728.— Will  of  Married  Woman 610 

Section  735.— Will   Attested   by   Witnesses 613 


PART   VI 


Corporations   in   California 

Section     869. — Advances  of  Money  by  Director 675 

Section  874. — Agreement  to  Divide  Capital  Stock  Among  Stock- 
holders Void    t 677 

Section     758. — Amendment  of  Articles  of  Incorporation 624 

Section     771. — Amount  of  Subscribed  Capital  to  Be  Paid  In 633 

Section     825. — Amount  of  Assessment 657 

Section     843. — Amendment  of  By-Laws 666 

Section     763. — Annual  License  Tax 626 

Section     749. — Articles   of   Incorporation 619 

Section     796. — Assignment  of  Accounts 645 

Section     811. — Assignee  for  Creditor  May  Sue  Stockholders 651 

Section     824. — Assessment  of  Stock 657 

Section     871. — Authority   of  President 676 

Section     775. — Bonded   Indebtedness    634 

(a) — Creation    of    Bonded    Indebtedness — Meeting    of 

Stockholders 635 


(b)- 

(c)- 


(d)- 


CONTENTS.  *l"i 

PAGE 

Creation  Without  Meeting 635 

Proposed  Debt  in  Excess  of  Subscribed  Stock — Ee- 
fusal  of  Secretary  of  State  to  File  Certificate 

Unjustified    635 

Subscription  of  Eequired  Amount  at  Time  of  Issu- 
ance  of   Bonds    635 

Book  of  By-Laws 666 

■By-Laws  of  Corporation 664 

•Can  a  Corporation  Perform  Corporate  Acts,  Such 
as  the  Mortgaging  of  Its  Real  Property,  While 
There  Is  a  Vacancy  in  Its  Board  of  Directors?.   674 

■Capital  Stock    633 

-Certificate  of  Secretary  of  State 622 

-Certificates  of  Stock  Are  Not  Negotiable 639 

-Certificate  of  Increase  or  Decrease  of  Capital  Stock  656 

-Cost    of    Incorporating 623 

-Change  of  Name 624 

-Change  of  Place  of  Business 625 

-Corporations  to  Loan  Money  on  Chattel  Mortgages  633 

-Compromise  With  Subscriber  for  Stock 636 

-Insolvent  and  Irresponsible  Subscriber — Power  of 

Board  of  Directors    637 

-Corporation    Must    Keep    Within    Object    of    Its 

Creation     642 

-Creditor's  Eight  to  Unpaid  Subscriptions 652 

-Deed  Without  Corporate  Seal 641 

-Denial  That  a  Corporation  Exists 646 

-Decrease  of  Capital   Stock 656 

-Directors  for  the  Pirst  Year 667 

-Directors   in  Two   Corporations 676 

-Dividends   677 

-Dissolution  of  Corporation 679 

-Disposition  to  Be  Made  of  Property  Upon  Dissolu- 
tion       680 

-Duty   of   Corporation   Supplying   Gas,   Electricity, 

Steam  or  Heat    683 

-Duplicate  of  Lost  Certificate 633 

-Duties  of  President,  Secretary,  and  Treasurer....  671 

-Election  of  Directors 668 

-Extending  Corporate  Existence 623 

-Extension  of  Time  for  Payment  and  Sale 662 

-Extent  of  Debts  to  Be  Created 677 

-Examination  of  Corporations 679 

-Failure  to  Elect  Oflicers 655 

-False  Reports 680 

-Filing  Articles  of  Incorporation 622 

-For  What  Purpose  Corporations  May  Be  Formed.  .   618 

-Form   of   Articles   of   Incorporation 619 

-Fraudulent  Transfer    651 

-Form  of  Notice  of  Assessment 659 

-Form  of  Notice  of  Sale  661 

—General  Powers  of  Corporations 681 

Section     816. — Holding  Property  in  Other  Counties 653 


Section 

842.- 

Section 

839.- 

Section 

866.- 

Section 

770.- 

Section 

753.- 

Section 

783.- 

Section 

822.- 

Section 

755.- 

Section 

759.- 

Section 

760.- 

Section 

769.- 

Section 

777.- 

(a)- 

Section 

790.- 

Section 

812.- 

Section 

788.- 

Section 

800.- 

Section 

821.- 

Section 

849.- 

Section 

870.- 

Section 

873.- 

Section 

879.- 

Section 

880.- 

Section 

887.- 

Section 

768.- 

Section 

859.- 

Section 

850.- 

Section 

757.- 

Section 

834.- 

Section 

875.- 

Section 

878.- 

Section 

819.- 

Section 

881.- 

Section 

752.- 

Section 

747.- 

Section 

750.- 

Section 

809.- 

Section 

829.- 

Section 

832.- 

Section     884.- 


xliv  CONTENTS. 

PACK 

Section     830. — How  Assessment  May  Be  Enforced 660 

Section     840. — How  By-Laws  Adopted 665 

Section     766. — Income  Tax  on  Corporations 629 

Section     767. — ^Income  Tax  Affirmed   631 

Section     820. — Increase   of   Capital   Stock 655 

Section     794. — Lease  of  Franchise   644 

Section     827. — Levy  of  Assessment 658 

(a) — Levy  Must  Be  Made  at  Kegular  or  Specially  Called 

Meeting     658 

(b) — Adjournment  of  Time  of  Holding  Kegular  Meeting 
by  Minority  of  Directors  to  Future  Day  Not  a 
Regular  Meeting — Assessment  Levied  at  Such 

Meeting  Void    658 

(c) — Directors'    Meetings  —  Adjournment    by    Minority 

Unauthorized   659 

Section     756. — Limit  of  Corporate  Existence 623 

Section     764. — License  Tax  on  Foreign  Corporations  Unconstitu- 
tional      627 

Section     797. — Liability  of  Promoters 645 

Section     803. — Liability  of  Stockholder  for  Furnishing  Informa- 
tion to  Rival  Corporation 648 

Section     805. — Liability  of  Stockholder  for  Corporation  Debts 649 

Section    806. — Liability  of  Member  Where  There  Is  No  Capital 

Stock    650 

S«etiou     815. — Liability  of  Stockholders  in  Distillery  for  Federal 

Taxes   653 

Section     818. — Liability  of  Purchaser  of  Subscription  Stock....   654 

Section     838. — Lien  for  Assessment 664 

Section     868. — Liability  of  Directors  for  Money  Embezzled 675 

Section     886. — Liability  of  Foreign   Corporation  Failing  to  File 

Certified  Copy  of  Articles  of  Incorporation . . .   682 

Section     786. — 'Mortgage  of  Shares  of  Stock 641 

Section     795. — Mortgage  of  Corporation  Property 644 

Section     802. — Motives  of  Stockholders  in  Making  Examination 

of  Books  647 

Section  746. — Nature  of  Corporations 618 

Section  754. — ^Name  of  Corporation  Must  Be  New 622 

Section  793. — Notice   to    Corporation 644 

Section  828. — Notice  of  Assessment 659 

Section  831.— Notice  of  Sale 660 

Section  851. — Notice  of  Meetings 668 

Section  751. — Number  of  Signers 621 

Section  847. — Number   of  Directors 667 

Section     858. — Organization  of  Board  of  Directors 671 

Section     860. — Other  Officers    671 

Section     826. — Order  Levying  Assessment 658 

Section  823. — Paper  in  Which  Notices  Must  Be  Published 657 

Section  807. — Pledgee  or  Trustee  Not  Liable  for  Debts 650 

Section  774. — Preferred  and  Common  Stock 634 

Section  872. — President  May  Employ  Attorney 677 

Section  836. — Purchase  of  Delinquent  Stock  by  the  Corporation.  663 


Section 

864.- 

Section 

848.- 

Section 

861.- 

Section 

765.- 

Section 

782.- 

Section 

785.- 

Section 

804.- 

Section 

844.- 

Section 

845.- 

Section 

863.- 

Section 

876.- 

Section 

877.- 

Section 

761.- 

Section 

835.- 

Section 

787.- 

Section 

867.- 

Section 

773.- 

Section 

772.- 

Section 

801.- 

Section 

810.- 

Section 

776.- 

Section 

837.- 

Section 

885.- 

Section 

846.- 

Section 

883.- 

Section 

882.- 

Section 

778.- 

Section 

779.- 

Section 

780.- 

Section 

762.- 

Section 

865.- 

Section 

781.- 

Section 

791.- 

Section 

857.- 

Section 

862.- 

Section 

748.- 

Section 

784.- 

Section 

789.- 

Section 

792.- 

Section 

798.- 

Section 

799.- 

Section 

808.- 

Section 

814. 

Section 

813. 

CONTENTS.  ^'^ 

PAGE 
-Publicity  Cannot  Make  Illegal  Act  of  Directors 

Valid    673 

-Qualification  of  Directors 667 

-Quorum  of  Directors 672 

-Eevival  of  Corporation  Which  Failed  to  Pay  Tax. .  629 
-Eemedy  Against  Corporation  Eefusing  to  Eegister 

Transfer  of  Stock 639 

-Eemedy  Against  Corporation  for  Eefusing  to  Eec- 

ognize  Stockholder  640 

-Eemedy  of  Stockholder  When  Inspection  of  Books 

Is  Eefused   648 

-Eepealing  Old  and  Adopting  New  By-Laws 666 

-Eecord  of  Amendments 666 

-Eegular  and  Special  Meetings 673 

-Eecords    of    Corporation 678 

-Eemoval    of   Directors    from    Office 678 

-Eemoval  From  One  Location  to  Another  in  Same 

City    625 

-Sale   of   Stock   for   Assessment 662 

-Seal  of  Corporation 641 

-Services  of  Director  Outside  of  His  Duties  as  Such.   675 

-Shares  of  Stock   634 

-Stockholders  and  Members   634 

-Stockholder's  Eight  to  Inspect  Books  and  Eecords.   647 

-Stockholder  May  Sue  Other  Stockholders 651 

-Subscription  for  Stock  636 

-Suit  to  Eecover  Amount  of  Assessment 663 

-Taxation  of  Corporations 682 

-The  Board  of  Directors 667 

-Transfer   of  Foreign   Concessions 681 

-Transfer  of  Franchise 681 

-Transfer  of  Shares  of  Stock  638 

-Transfer  of  Stock  Held  by  Non-resident 638 

-Transfer  of  Stock  held  by  Married  Woman 639 

-Use  of  Word  "Trust" 626 

—Vacancy  in  Board  of  Directors 673 

—Void  Certificates 639 

—Void  Contract  Cannot  Be  Eatified 642 

—Voting  By  Proxy 670 

—Vote    of    Director    on    Matter    in    Which    He    Is 

Interested 672 

—Who  May  Form  a  Corporation 619 

—When   Corporation   Cannot   Claim  Its  Own   Stock 

Invalid     640 

—What  Eeal  Estate  May  Be  Held  by  Corporation 642 

—When  Corporation  Bound  by  Its  Own  Invalid  Act.  .   643 

—What  Is  a  Corporation  De  Facto 646 

—Who  May  Question  the  Validity  of  a  Corporation. .   646 

—When  Liability  for  Stockholder  Begins 650 

—When  Liability  of  Stockholder  Is  Satisfied 653 

—Within  What  Time  Suit  Against  Stockholder  Must 

be  Commenced 652 


zlvi 


CONTENTS. 

PAGE 

Who  Are  Liable  on  Assessments 661 

•What  By-Laws  May  Provide  For 665 

Who  May  Vote  at  Election  of  Directors 669 

■Wno   May   Vote   Stock   in   Hands   of   Pledgee   or 

Trustee    669 

Section     854. — Who  May  Vote  Stock  in  Hands  of  Administrator 

or  Executor   670 

Who  May  Vote  Stock  Belonging  to  Minor 670 

Who  May  Vote  Stock  Belonging  to  Insane  Person.  670 
-Within   What   Time  Corporation   Must  Commence 

Business   653 


Section  833, 

Section  841 

Section  852, 

Section  853 


Section  855. 
Section  856. 
Section    817 


PART   VII. 
Bank  Laws  of  California. 


Section 

Section 
Section 
Section 

Section 
Section 


Section 
Section 
Section 
Section 


Section 
Section 
Section 
Section 
Section 
Section 
Section 

Section 

Section 

Section 

Section 
Section 
Section 


894.— Advertising  by  Banks 687 

891.— Bank  Directors  686 

900. — Bank  Eeserves    691 

890.— Branch    Banks    685 

904.— Change  to  Capital  Stock 697 

929. — Commercial    Banks    715 

(a) — Limit    of    Loans 715 

(b) — Loans  on  Securities  of  Corporations 716 

(c) — Capital  of  Commercial  Bank 717 

(d) — Loans  to  Bank  Directors 717 

(e) — Investments  in  Bank  Premises 718 

895. — deposits  of  Dead  Persons 688 

896. — Deposits  of  Married  Women  or  Minors 689 

899.— Deposit  Liabilities  691 

901. — Departmental  Banking  692 

(a) — Consent  of  Superintendent 692 

(b)— Capital  Stock    693 

(c) — Certificate  for  Each  Department  Required 694 

(d) — Department  Money  Reserve 695 

(e) — Books  of  Account  to  Be  Kept  Separate 695 

(f ) — Security    for    Depositors 696 

(g) — Window    Signs    696 

921. — Deposits  in  Other  Banks 703 

927.— Deposits  by  Order  of  Court 705 

934.— Deposit  of  State  Money  737 

935. — Deposit  of  County  or  City  Money 739 

888. — Division    of    Banks   Into    Classes 684 

903. — Dividends    696 

923. — Duty  as  to   Certified  Checks 704 

925. — Examination  of  National  Banks 705 

889. — Foreign   Corporations    685 

919. — Interest  Unpaid 703 

933.— Lien  of  Bank 737 

897.— List  of  Stockholders 690 

918. — Loans  on  Bank   Stock    703 


CONTENTS.  *^vii 

TAGB 

Section     920. — Loans  on  Bonds 703 

Section     924. — Loans  on  Eealty    704 

Section     892. — Meetings  of  Bank  Directors 686 

Section    936. — National  Bank  Cannot  Deal  in  Stocks 740 

Section     893.— Oath  of  Directors 686 

Section     908.— Officer  May  Not  Borrow  Bank  Funds 699 

Section     910. — Officer   May   Not   Sell   Mortgage    on   Eeal    Estate 

to  Bank  700 

Section     914. — Officer  Overdrawing  Account 701 

Section  898. — Partnership   List    691 

Section  932.— Par  Value  of  Capital  Stock 737 

Section  913. — Penal  Liabilities  of  Directors  and  Employees....  701 

Section  926. — Posting  of  Certificate   705 

Section  909.— Purchase  of  Capital  Stock 699 

Section  911.— Purchase   of  Bonds 700 

Section  916. — Purchase   of   Obligations 702 

Section  917. — Purchase  of  Assets   702 

Section     905. — Safe   Deposit  Department 698 

Section     906.— Sale   of   Assets 698 

Section     928.— Savings   Banks    706 

(a) — Capital  Stock  of  Savings  Banks 706 

(b) — Savings  Banks  Not  to  Trade  in  Eeal  Property. . . .   707 

(e) — Savings  Banks  Borrowing  Money 707 

(d) — Personal  Property    708 

(e) — Bonds  and  Securities    708 

(f )— Eeserve  Fund    710 

(g) — Commercial  Deposits   711 

(h) — Estate   Moneys    711 

(i) — Certificates  of  Deposit  and  Time  Certificates 712 

(j ) — Conditions  of  Payment  to  Depositors 712 

(k) — Directors,  Borrowing   by,  Forbidden 713 

(1)— "Creation  of  Debt"  Defined 713 

(m) — Limit  On,  and  Security  For,  Loans 713 

(n) — What  Property  May  Be  Held  by  Savings  Bank...   714 

Section     912. — Shares   of   Corporations 701 

Section     931. — State  Banking  Department 725 

(a) — Examiner  Must  Not  Be  Indebted  to  Bank 725 

(b)— Doubtful  Securities   725 

( c) — Impairment  of  Capital 726 

(d) — Certificate  Eequired  for  Transaction  of  Business..   726 

(e) — Bank  Eeports 727 

(f)— Publication  of  Statement    729 

(g) — Conduct  of  Business  in  Unsafe  Manner 730 

(h) — When    Superintendent    May    Take    Possession    of 

Bank    730 

(i) — Failure  to   Make   Eeports 735 

(j) — Eeport    of    Directors 736 

Section     937.— Taking  of  Stock  in  Satisfaction  of  Pledge 740 

Section     907.— Trust   Funds    699 

Section     930. — Trust    Companies    718 

(a) — Execution  of  Trusts 718 

(b) — Deposits  by  Order  of  Court 719 

(c) — Deposits  by  Public  Administrator 719 


3tlviii  CONTENTS. 

PAGE 

(d) — Deposits  by  Executors,  Guardians,  and  Others 720 

(e) — Responsibility  of  Trust  Company 720 

(f)— Interest  to  Be  Paid 721 

(g) — Deposits   with   State   Treasurer 721 

(h)— Mortgage  of  Realty  to  State  Treasurer 721 

(i) — Interest  on  State  Deposits 722 

(j)— Abstracts  of  Title 722 

(k) — Paid-up   Capital   Required 723 

(1)— Report  of  Trusts  Held 723 

(m) — 'Retirement  from  Business 723 

(n) — Confidential   Communications    723 

(o)— Use  of  Word  "Trust" 724 

(p) — Investment  of  Capital  and  Trust  Funds 725 

(q) — Requirements  for  Doing  Banking  Business 725 

Section     902. — Unincorporated   Bankers    696 

Section     922, — Unlawfully  Advertising  as  Savings  Bank 704 

Section     915. — Waiver  of  Stockholder's  Liability 702 


PART    VIII. 


Section 

1007.- 

Section 

960.- 

Section 

1000.- 

Section 

1003.- 

Section 

1008.- 

Section 

989.- 

Section 

1004.- 

Section 

1011.- 

(a)- 

(b)- 

(c)- 

(d)- 

(e)- 

(f)- 

(g)- 

(h)- 

(i)- 

(.i)- 

(k)- 

(1) 

Section 

997.- 

Section 

954.- 

Section 

955.- 

Section 

972.- 

Section 

978.- 

Section 

988.- 

Section 

996.- 

Mines  and  Mining. 

-Abandoned  Oil  Wells 781 

-Annual  Labor  and  Assessment  Work 752 

-Authority    of    Mine    Superintendent    to    Purchase 

Supplies     777 

-California    Debris    Commission 779 

-Capping  Gas  Wells 781 

-Character  of  Annual  Assessment  Work 772 

-Consolidation  of  Mining  Corporations 779 

-Conditions  of  Lease  of  Mineral  Lands  Uncovered 

by  Receding  Waters 783 

-Royalty   783 

-Application  to  Lease  Lands 784 

-Survey  of  Lands 784 

-Approval  or  Rejection  of  Application 784 

-Rental    785 

-First   Payment    785 

-Limit  of  Lease   785 

-Reservations  to  State  785 

-Lease  to  Rights  of  Way 786 

-Termination    of    Lease 786 

-Legislature  May  Change  Royalty 786 

—Abandonment  of  Lease 786 

-Damages  for  Trespass  on  Mining  Claim 776 

-Discovery  on  Placer  Ground 749 

-Discovery  of  Oil 749 

-Discovery  of  Vein  Passing  Through  Placer  Claim. .  758 

-Entry  of  Coal  Lands 759 

-Error  in  Description  in  Location  Notice 772 

-Extra  Lateral  Right  or  Right  to  Pursue  the  Vein 
or  Lode  on  its  Dip  Beyond  the  Side  Lines  of 
the  Claim 775 


CONTENTS.  •  xlviii-1 

PAGE 

Section  1009. — Extraction     of     Minerals     from     the     Waters     of 

Streams   or   Lakes 782 

Section  992. — Failure  to  Comply  With  Local  Customs  in  Work- 
ing Mining  Claims 773 

Section  949. — Form  of  Notice  of  Location  of  Lode  Claim 745 

Section  950. — Form  of  Notice  of  Location  of  Placer  Claim....  746 

Section  964. — Form  of  Proof  of  Assessment  Work 754 

Section  985.— Form  of  Mining  Deed 769 

Section  981. — Form  of  Mining  Lease 761 

Section  983.— Form  of  Oil  Lease    765 

Section     756. — Homesteader  and  Oil  Locator 750 

Section     979. — How  to  Obtain  a  Patent  to  a  Mining  Claim 759 

Section  1006. — Hours  of  Work  in  Underground  Mine 781 

Section  1001.— Hydraulic  Mining    778 

Section     994. — Intersecting    Veins 774 

Section  977. — Liens  on   Mining  Claims 759 

Section  940. — Local  Eules  and  Customs    741 

Section  948. — Location    Notice    745 

Section  968. — Location  by  Agents 755 

Section  967. — Location   by  Minors 755 

Section  970. — Location   of  Tunnel   Claim 756 

Section  971. — Lode  and  Placer  Claims  in  the  Same  Ground 757 

Section     947 — Marking    the    Boundaries 745 

Section     966. — Mineral   Entries   Within   Forest   Eeserves 755 

Section     973.— Mill  Sites   758 

Section     976. — Mining    Partnerships     759 

Section     980. — Mining  Lease    761 

Section     984.— Mining  Deeds    769 

Section  1010. — Mineral    Lands    Uncovered    by    Eeceding    Waters 

of  Lakes  782 

Section  1012. — Mortgage  of  Mining  Property 787 

Section     958. — Oil   and  Asphaltum 751 

Section     982. — Oil   and   Gas   Leases 764 

(a) — Eight  to  Bore  for  Oil  Necessarily  Exclusive 764 

(b) Lessee  Must  Begin  Operations  Within  a  Eeasonable 

Time     764 

(c) — Failure  to  Commence  Work  Forfeits  the  Lease.  . . .   765 

(d) — Work  Must  Be  Prosecuted  with  Diligence 765 

(e) — Lease  Must  Be  Literally  Complied  With 765 

(f)— Failure   to   Find   Oil 765 

(g) — Net  Proceeds  765 

(h)— Failure  to  Pay  Eoyalty 765 

Section     993. — Overlapping  Locations   774 

Section     963.— Proof  of  Assessment  Work 753 

Section  951. — Eecording    Location    Notice 747 

Section  965. — Eelocation  of  Claim  After  Forfeiture 755 

Section  991. — Eesumption    of   Work 773 

Section  995.— Eule  That  End  Lines  Shall  Parallel  Each  Other. .  774 

Section     999. — School    Lands    777 

Section     952.— Size   of  Lode   Claim 747 

Section     953. — Size    of    Placer    Claim 748 


xlviii-2  CONTENTS, 

PAGE 

Section     939.— State  Laws 741 

Section    998. — State  Homestead  on  Mining  Claim 777 

Section  1002.— Tailings  and   Debris 778 

•Section     946. — The   Discovery    744 

Section     957. — Time  Within  Which  Location  Must  Be  Made  After 

Discovery    750 

Section     974. — Timber  for  Mining  Purposes 758 

Section     990. — Time  Within  Which  Relocation  Can  be  Made 772 

Section     959. — Transfer  of  Rights  by  Member  of  Association 751 

Section  1005. — Transfer  of  Stock  in  Mining  Corporations 780 

Section     969.— Tunnel    Claims    756 

Section    938,— United  States  Laws 741 

Section     942. — Upon  What  Land  Mining  Claim  May  Be  Located, ,  742 

Section    943. — Valuable  Mineral  Deposit 742 

Section     975. — Water  and  Water  Rights  for  Mining  Purposes 759 

Section     941. — Who  May  Locate  a  Mining  Claim 742 

Section     944,— What  Is  Mining 743 

Section     945. — What  Constitutes  a  Valid  Location 743 

(a) — Appropriation    743 

(b) — Performance  of  Essential  Acts 743 

(c) — Marking   of   Boundaries   Main   Act 743 

(d)— Posting  of  Notice -. 744 

(e) — Completion  of  Location   744 

(f) — Prior  Posting  Unnecessarv  to  Prior  Discovery....  744 

Section     961.— When  First  Work  Must  Be  Done 752 

Section     962.— Where   Work   Should  Be   Done 752 

Section     986. — Working  Mine  on  Shares 771 

Section     987. — When  Boundary  Marks  Are  Sufl&eient 771 


PART    IX. 

Water  and  Water  Rights. 

Section  1013. — Appropriation    of    Water , 788 

Section  1032.— Artesian  Wells   822 

Section  1016. — Change  of  Place  of  Intended  Diversion 788 

Section  1031. — Condemnation  of  Water  for  Public  Use 822 

Section  1019.— Electrical    Power 791 

(a) — Water  Not  Being  Used  Declared  Unappropriated,.  791 

(b)— State   May  Fix   Rates 791 

(c) — Application    for    Permit    to    Make    Appropriation 

of  Water  791 

(d) — Facts  to  Be  Stated  in  Application 792 

(e) — Examination  of  Application  by  Board  of  Control. .  793 

( f ) — Approval  or  Rejection  of  Application 793 

(g) — Construction   Work    794 

(h) — License  to  Use  Water 794 

( i ) — Facts  Stated  in  License 795 

( j) — Rights  Vested  in  Licensee 795 

(k) — Renewal   of   License 795 

(1) — License  Not  Valid  for  Excess 796 


CONTENTS.  xlviii-3 

PAGE 

(m) — License  to  Store  Surplus  Waters 796 

(n) — Appropriations  Subject  to  Fees 796 

(o)— Fees    796 

(p)— Board  of  Control 797 

(q)— Powers  of  Board 798 

(  r) — Annual   Reports  to   Board 798 

(s) — Combinations  in  Restraint  of  Trade  Prohibited.  . .  .  798 

( t) — Violation  of  this  Act  a  Misdemeanor 799 

(u) — Act  Not  Applicable  to  Municipal  Corporations....  799 

(v) — Appropriation  by  Municipal  Corporations 799 

Section  1033.— Flood   Waters    823 

Section  1017. — Form  of  Notice  of  Appropriation 789 

Section  1020.— Forfeiture   of   Claim 800 

Section  1023.— Manner  of  Using  Water 802 

Section  1014. — Notice   of  Appropriation 788 

Section  1015. — Notice  Must  Be  Recorded  788 

Section  1025. — Obtaining  Title  by  Prescription 802 

Section  1030.— Pollution    of    Water 821 

Section  1022. — Protection  of  Riparian  Rights 801 

Section  1021.— Riparian  Rights   800 

Section  1028. — Subterranean  Waters    804 

Section  1024.— Water  Rights  on  Public  Land 802 

Section  1026.— Water  for  Irrigation 803 

Section  1027.— Water    for    Mining    803 

(a)— The  California  Statute 804 

(b) — First   Appropriator  Has  First  Right 804 

( c)— Miner 's  Inch  of  Water 804 

Section  1029. — Water    Companies    818 

(a)— Water  in   Case   of  Fire 819 

(b)— Water  Rates    819 

(  c)— Duty  to  Furnish  Water 819 

(d) — Water  Company  Not  Liable  for  Loss  by  Fire....  819 

( e) — Water   Rates   Must   Be   Reasonable 820 

(f) — Damages  for  Failure  to  Supply  Water 821 

(g) — Duty  to  Fix  Reasonable  Rates  Can  Be  Compelled.  .  821 

Section  1018.— When  Work  Must  Be  Done 790 


PART    X. 

Administration  of  Estates  of  Deceased  Persons. 

Section  1087. — Accounts  of  Executors  and  Administrators 843 

Section  1066. — Administration    When    Estate    Does    Not    Exceed 

Fifteen  Hundred  Dollars 835 

Section  1097. — Advancements 850 

Section  1071. — Allowance  and  Rejection  of  Claims 836 

Section  1075. — Allowance  of  Claim  in  Part 838 

Section  1085. — Attorney   Fees    842 

Section  1052. — Bond  of  Executor  or  Administrator 829 


^viii-4  CONTENTS. 

PAGE 

Section  1067. — Claims  Against  the  Estate 835 

Section  1069. — Claims  Barred  if  Not  Presented  in  Time 836 

Section  1070.— Claims   Must   Be   Verified 836 

Section  1073.— Claim  When  Suit  Pending 837 

Section  1077. — Claim  of  Executor  or  Administrator 838 

Section  1100.— Claims   Paid   Without   Vouchers 851 

Section  1082.— Confirmation    of    Sale 840 

Section  1084. — Compensation  of  Executors  and  Administrators..  841 

Section  1098. — Contract  to   Convey  Real  Estate 850 

Section  1094. — Distribution  of  Community  Property  on  Death  of 

Husband    848 

Section  1095. — Distribution  of  Community  Property  on  Death  of 

Wife 849 

Section  1099. — Discharge   of   Administrator   or   Executor 850 

Section  1101. — Distribution  When  Decedent  Was  Not  a  Eesident 

of  the  State    851 

Section  1089. — Erection  of  Monument 844 

Section  1035. — Executors  and  Administrators 824 

Section  1040. — Executor  May  Decline   to   Act 826 

Section  1064.— Exempt  Property   834 

Section  1065. — Extra   Allowance    834 

Section  1078. — Failure  to  Present  Mortgage  Claim 838 

Section  1091. — Final  Distribution  of  Estate 845 

Section  1059. — Inventory  and  Appraisement 832 

Section  1093. — Inheritance  of  Husband  and  Wife  from  Each  Other  848 

Section  1102. — Inheritance    Tax   Law    852 

(1)— By  Will  of  Resident 852 

(2)— By  Will  of  Non-resident 852 

(3) — Transfer   Without  Adequate   Consideration 853 

(4) — Taxes   to   Be   Lien   Against   Property 853 

(5) — Exercise     of     Power     of     Appointment     Deemed 

Transfer    853  ^ 

(a)— Rates   of    Tax 854 

(1) — rWhen  Beneficiary  Is  Husband,  etc 854 

(2)— When  Brother,  etc 854 

(3)— When  Brother  of  Father,  etc 854 

(4) — When  Brother  of  Grandfather,  etc 855 

(5) — Other  Degrees  of  Consanguinity 855 

(b) — Rates  on  Property  in  Excess  of  $25,000 855 

( c) — Property   Exempt   from   Tax 855 

(d) — Tax    on    Life    Estate    Becomes    Due    Immediately 

After  Death  of  Decedent 856 

(  e) — Bequests  to  Executors 857 

( f )— When  Taxes  Are  Due 858 

(g) — When  Penalty  for  Non-payment  of  Tax  May  Be 

Suspended    858 

(h) — Executor  to  Deduct  Tax  from  Property  Before  De- 
livery to  Legatee 858 

(i) — Executors  to  Sell  Enough  Property  to  Pay  Tax. . .   859 

(j) — Tax  Paid  to  County  Treasurer 859 

(k)— Refund  of  Tax  Paid  Before  Debts  Are  Proven 860 

(1) — When  Stock  Is  Transferred  by  Foreign  Executor 

Tax  Shall  Be  Paid 860 

(m) — Inheritance  Tax  Appraisers 862 

(n) — Superior  Court  to  Order  Valuation  of  Property. . .  862 


CONTENTS.  xlviii-5 

PAGE 
(o) — ^Insurance    Commissioner    to    Determine    Value    of 

Contingent  Estate    863 

(p) — No  Allowance  on  Account  of  Contingent  Incum- 
brance      863 

(q) — Increase  Deemed  a  Transfer  and  Taxable 864 

(r) — Highest  Eate  on  Property  Dependent  on  Variable 

Contingencies     864 

(s) — Estates  in   Expectancy   to   Be   Appraised   at  Full 

Value    865 

(t) — Superior    Court    to    Fix    Value    of    Property    and 

Amount   of   Tax 865 

(u) — Court  May  Fix  Tax  Without  Appointing  Appraiser  866 

(v) — Superior  Court   to   Have  Jurisdiction 866 

(w)  — Court  to  Cite  Persons  to  Appear  When  Transfer 

Has  Been  Made  and  Tax  Not  Paid 866 

(x) — After  Eighteen  Months  District  Attorney  to  Bring 

Suit  to  Collect  Tax 867 

(y) — Actions  Against  State  to  Quiet  Title 867 

(z) — County  Treasurer  to  Notify  District  Attorney  of 

Transfer   Without   Tax  Being  Paid 868 

(aa) — Amounts  County  Treasurers  May  Eetain 869 

(bb)— Definition  of  Terms  Used 869 

Section  1045. — Letters    Testamentary    827 

Section  1048. — Letters    of   Administration 828 

Section  1068. — Notice    to    Creditors 835 

Section  1047. — Married  Woman  or  Corporation  May  Act 828 

Section  1062.— Money  in   Bank 833 

Section  1051. — Oath  of  Executor  or  Administrator 829 

Section  1074. — Payment  of  Judgments 837 

Section  1086 — Partial   Allowance   to   Executor,   Administrator   or 

Attorney     843 

Section  1090. — Partial  Distribution  of  Estate 844 

Section  1088.— Payment   of   Debts    844 

Section  1044.— Proof  of  Foreign  Will 827 

Section  1043.— Proof  of  Lost  or  Destroyed  Will 826 

Section  1037.— Proof  of  Will    825 

Section  1041.— Proof  of  Will 826 

Section  1063. — Probate  Homestead   and  Family  Allowance 833 

Section  1042.— Recording    Will    826 

Section  1046. — Eevocation   of  Letters 828 

Section  1056. — Release    of    Bondsmen 831 

Section  1057. — Resignation    of   Executor   or   Administrator 831 

Section  1096.— Rights   of  Illegitimate   Child 849 

Section  1079. — Sale  or  Mortgage   of  Property 839 

Section  1080. — Sale  of  Personal  Property 839 

Section  1081. — Sale  or  Mortgage  of  Real  Property 840 

Section  1083.— Sale  Under  a  Will 841 

Section  1034. — Settlement    of   Estates 824 

Section  1053. — Separate   Bonds    830 

Section  1055. — Special    Administrator    830 

Section  1076. — Statute  of  Limitations 838 

Section  1058. — Suit    Against    Bondsmen 831 


xIviii-6  CONTENTS, 

PAGE 

Section  1072. — Suit   on   Eejected   Claim 837 

Section  1092. — Succession   to   Property 845 

Section  1054.— When  Executor  May  Act  Without  Bonds 830 

Section  1060. — When  Additional  Inventory  Required 833 

Section  1061. — When  No  Appraisement   Required 833 

Section  1036.— Where   Letters  Will   Be   Granted 824 

Section  1038.— Who  May  Petition  for  Probate  of  Will 825 

Section  1039. — When  Executor  Forfeits  Right  to  Letters 825 

Section  1049. — Who  Are  Entitled  to  Letters  of  Administration 828 

Section  1050. — Who  are  Incompetent  to  Act  as  Executor  or  Ad- 
ministrator     829 


PART    XI. 

United  States  Bankrupt  Laws. 

Section  1104. — Acts  of  Bankruptcy 870 

Section  1119. — Appointment  of  Trustees 881 

Section  1135. — Appraisal  and  Sale  of  Property 895 

Section  1122.— Bonds  of  Trustees   884 

Section  1112. — Compositions  With  Creditors 876 

Section  1114. — Co-debtors    of    Bankrupt 879 

Section  1116. — Compromises  by  Trustees 879 

Section  1121. — Compensation  of  Trustees 883 

Section  1109. — Death  or  Insanity  of  Bankrupts 875 

Section  1115. — Debts  Not  Affected  by  a  Discharge 879 

Section  1129.— Debts  Which  May  Be  Proved 890 

Section  1130.— Debts   Which   Have   Priority 891 

Section  1131. — Declaration  and  Payment  of  Dividends 892 

Section  1108. — Duties  of  Bankrupts 874 

Section  1118. — Duties  of   Referees 881 

Section  1120. — Duties   of   Trustees 882 

Section  1107. — Exemptions  of  Bankrupts 873 

Section  1103. — Jurisdiction  of  Courts 870 

Section  1133.— Liens    893 

Section  1123. — Meetings   of   Creditors 884 

Section  1126. — Notice  to  Creditors 888 

Section  1117. — Offenses    and    Punishments 880 

Section  1106. — Partners    872 

Section  1110. — Protection  and  Detention  of  Bankrupts 875 

Section  1125. — Proof  and  Allowance  of  Claims 886 

Section  1128.— Preferred  Creditors   889 

Section  1134. — Set-offs  and  Counterclaims 895 

Section  1111. — Suits  By  and  Against  Bankrupts 876 

Section  1132.— Unclaimed  Dividends    893 

Section  1124. — ^Voters  at  Meetings  of  Creditors 885 

Section  1105. — ^Who  May  Become  Bankrupts 872 

Section  1113. — When   Discharge   Granted 878 

Section  1127.— Who  May  File  Petitions 889 


CONTENTS.  aiviii-T 


PART    XII. 

Automobile  Law  of  California. 

PAGE 
Section  1138.— Automobile  Defined  897 

Section  1159.— Care  While  Traveling  at  Night 908 

Section  1145.— Chauffeurs    899 

Section  1173.— Children  in  the  Street 916 

Section  1160. — Climbing   or  Hanging  on  Behind 909 

Section  1153. — Conflict  of  Orders  and  Duty 906 

Section  1164.— Collision  With  Other  Vehicles 911 

Section  1169. — Crossing  Streets  and  Turning  Corners 914 

Section  1183. — Criminal  Liability  of  Employer 921 

Section  1150. — Damages  and  Negligence 905 

Section  1155. — Demanding  or  Accepting  a  Commission  or  Bonus. .  907 

Section  1174. — Defense  of  Not  Exceeding  Speed  Limitations....  917 

Section  1141. — Displaying  the  Number   898 

Section  1162. — Driving  on  Wrong  Side  of  Eoad 910 

Section  1148. — Duty  of  Operator  in  Case  of  Accident 904 

Section  1179. — Employer's   Kesponsibility   for   Unauthorized   Use 

of  Car   919 

Section  1175. — Evidence  of  Over-speeding 918 

Section  1161. — Failure  to  Slow  Down  in  Case  of  Accident 910 

Section  1186. — Failure  to  Kedeliver  to  Customer 922 

Section  1196.— Form  of  Notice  of  Sale, 927 

Section  1198. — Franchises  for  Automobile   Eoads 928 

Section  1184. — Garages   and   Garage   Keepers 922 

Section  1137. — General  Law  and  Statutes 896 

Section  1158. — General  Eules  as  to  the  Exercise  of  Care........  907 

Section  1136. — Importance  of  the  Subject 896 

Section  1163. — Intoxication  of  Driver 911 

Section  1171. — Injury  of  Persons  Engaged  at  Work  in  the  Eoad- 

way    915 

Section  1165. — Jumping  from  the  Car 912 

Section  1166. — ^Leaving  Machine  Unguarded  at  Street  Curb 912 

Section  1178. — Liability   of   Corporations 919 

Section  1187. — Liability  for  Theft  of  Articles  Left  in  Garage. . . .  923 

Section  1188. — Liability  of  Garage  Keepers  for  Damage  to  Car 

Taken    Out    Without    Leave 923 

Section  1189. — Liability  for  Loss  of  Car 923 

Section  1190. — Liability  as  a  Eenter  of  Machines 924 

Section  1191. — Liability  of  Lessee  for  Care  of  Hired  Automobile.   925 

Section  1192.— Liability  for  Eepair  Work 925 

Section  1193. — Lien  for   Storage   and  Eepairs 926 

Section  1142. — Manufacturer's  or  Dealer's  Eegistration 898 

Section  1197. — Municipal    Ordinances 927 

Section  1144. — Non-resident  Owners  899 

Section  1156. — Ordering  Supplies  and  Eepairs 907 

Section  1168. — Overtaking   and   Passing 913 

Section  1182. — Owner's  Liability  for  Injury  to  Chauffeur 920 


xlviii-8  CONTENTS. 

PAGE 

Section  1167. — Party  Driving  a  Light  Vehicle  Bound  to  Give  Way 

to  a  Heavy  Loaded  One 913 

Section  1172. — Persons  Under  Disabilities 916 

Section  1157. — Placing  Car  in  Storage 907 

Section  1194. — Possession  Essential  to  Validity  of  Lien 926 

Section  1139. — Registration  of  Automobiles 897 

Section  1140. — Eegistration   Fees    898 

Section  1146. — Eegistration  of  Chauffeurs   899 

Section  1152. — Relation  Between  Employer  and  Chauffeur 905 

Section  1154. — Responsibility  of  Taxicab  Drivers 906 

Section  1176. — Responsibility  of  Owner  for  Negligence  of  Driver. .  918 

Section  1177. — Responsibility  for  an  Operator  Who  Is  Not  Hired. .  919 

Section  1185. — Relation  of  Garage  Keeper  to  His  Customer 922 

Section  1170. — Running  Over   Pedestrians 914 

Section  1195.— Sale  of  Car  to  Satisfy  Lien 926 

Section  1149. — Setting   Aside   Public   Highways  for  Speed   Tests 

or  Races   904 

Section  1147.— -The  Law  of  the  Road 900 

(a) — Statutory  Regulations  901 

(b) — Passing  to  the  Right 901 

(c) — Brakes  and  Other  Appliances 902 

(d) — Speed  Limitations    902 

(  e) — Approaching  or  Running  Over  Bridge 903 

(  f ) — Warning  of  Approach 904 

(g) — Passing   Frightened    Animals 904 

Section  1143. — Unlawful  Use  of  Public  Highways  Prohibited...  898 

Section  1180. — Unlawful  Use  of  Automobiles 920 

Section  1181. — Use  of  Car  by  Borrower 920 

Section  1151. — What  Is  Negligence 905 


PART    XIII. 
Taxes  and  Tax  Titles. 

Section  1236.— Additional  Sum  Collected  to  Defray  Costs 949 

Section  1254. — All  Costs  Must  Be  Paid  Before  Redemption 959 

Section  1210. — Arbitrary    Assessments    935 

Section  1208. — Assessment    of    Property 932 

Section  1211. — Assessment  of  Unknown  or  Absent  Owners 936 

Section  1223. — Assessment  of  Water  Ditches,  Toll  Roads  and  Tele- 
graph   and    Telephone    Lines 941 

Section  1224. — Assessments  of  Railway  Franchises  and  Properties  941 

Section  1204. — Cemetery  Lands  Exempt  from  Taxation 931 

Section  1251. — Clerical  Errors  in  Certificate  of  Sale 958 

Section  1212. — Consigned    Property    936 

Section  1225. — County  Board   of   Equalization 943 

Section  1266.— Corporation  Stock    970 

Section  1268. — Corporation  Taxes   970 

(  1  ) — Public  Service  Corporations   970 

(  2  ) — Insurance    Companies    971 

(  3  )— State  and  National  Banks 972 

(  4  ) — Tax   on   Unincorporated  Banks,   and  on  Branches 

and  Agencies  of  Foreign  Banks 973 

(  5  ) — Tax   on   Franchises 974 


CONTENTS. 


xlviii-9 


(6) 

(7) 

(«) 

(9) 

(10) 

(11) 

(12) 

(13) 

(14) 

(16) 

(15) 

(17) 

(18) 

(19) 

(20) 

(21) 

(22) 

(23) 

(24) 

(25) 

(26) 

(27) 

(28) 

(29) 

(30) 

(31) 

(32) 

(33) 

Section 

1247. 

Section 

1242. 

Section 

1203. 

Section 

1215. 

Section 

1206. 

Section 

1226. 

Section 

1261. 

Section  1208a 

Section 

1205. 

Section 

1240. 

Section 

1267. 

Section 

1235. 

Section 

1227. 

Section 

1220. 

Section 

1234. 

Section 

1222. 

Section 

1231. 

Section 

1256. 

Section 

1257. 

Section 

1221. 

PAGE 

-State  Corporation  License  Tax  Not  Repealed 974 

-Gross  Receipts  from  Operation  Defined 974 

-'  *  Operative  Property ' '  Defined   975 

-Operative  Property  Exempt  from  Local  Taxation..   977 

-Plants  Under  Construction    977 

-When  No  Service  Is  Rendered  to  Public 978 

-Report  of  Public  Service  Companies 978 

-Separate  Reports  of  Certain  Subsidiary  Companies  981 

-Hearings  and  Decision  by  State  Board 981 

-Additional   Statements  by  Insurance  Companies. .   983 

-Insurance  Commissioner  to  Report 982 

-Bank   Reports    983 

-Owners  of  Franchise   Report 984 

-Arbitrary  Assessment   in   Case   of  Failure   or   Re- 
fusal to  Report  986 

-Penalty  for  Failure  or  Refusal  to  Report 987 

-Penalty  for  False  Report 987 

-Extension  of  Time  for  Filing  Report 987 

-Bank  Waiver  of  Assessment  to  Individual  Stock- 
holder      987 

-Correction  of  Assessment    988 

-Taxes,  When  Due  and  When  Delinquent 988 

-Sale  of  Property  for  Taxes  989 

-Taxes   a   Lien 989 

-Taxes    Erroneously   Collected 990 

-Protest  of  Taxes 990 

-Controller  to  Send  Notice  of  Delinquent  Taxes. . . .   991 

-Charter  Forfeited  for  Delinquent  Taxes 991 

-Relief  from  Forfeiture 992 

-State  Board  to  Equalize  Assessments 993 

-Erroneous    Assessments    954 

-Evidence   of   Tax   Deeds 951 

-Exemption  of  Church  Property 931 

-Ferries  and  Toll  Bridges 937 

-Federal  Securities  Not  Taxable  by  the  State 932 

-Fixing  Rate  of  Taxes  945 

-Fraudulent    Assessment    967 

-Franchises  and  Other  Taxable  Property 933 

-Funds  of  Fraternal  Benefit  Society  Exempt 932 

-How  Redemption  Is  Made 950 

-Inheritance  Taxes 970 

-Land  Sold  for  Taxes  Encumbered  by  Trust  Deed 

or  Mortgage  949 

-Lien   of  Taxes    945 

-Notice  of  Meeting  to  Equalize  Assessments 938 

-Notice  of  Sale   948 

-Official  Maps  of  City  Lots  or  Blocks 939 

-Payment  of  Taxes  of  Decedents  and  Insolvents. .  947 

-Partial  Redemption   961 

-Payment  Under  Protest  961 

-Persons   Claiming  Ownership 939 


xlviii-10  CONTENTS. 

PAGE 
Section  1246. — Personal  Property  at  Eisk  of  Owner 954 

Poll  Taxes 962 

Section  1200.— Property  Subject  to  Taxation 929 

Section  1213. — Property  of  Firm  or  Corporation 936 

Section  1217. — Property  and  Money  in  Litigation 938 

Section  1218. — Property  Concealed,  Misrepresented,  etc 938 

Section  1219. — Property  Not  Taxed  in  Previous  Year 938 

Section  1237.— Property  Sold  to  State 949 

Section  1253. — Property  Sold  to  State  Assessed  Subsequently....  959 

Section  1207.— Public  Property  Not  Subject  to  Taxation 932 

Section  1233. — Publication  of  Delinquent  List 948 

Section  1250. — Public   Lands   Upon    Which   Final   Payment   Has 

Been  Made  957 

Section  1263.— Railroad  Bonds  968 

Section  1238.— Eecord  of  Sale  Kept  by  Collector 950 

Section  1258. — Sale  of  Property  Purchased  by  State 963 

Section  1260. — Savings  Bank  Deposits    966 

Section  1244. — Seizure  and  Sale  of  Personal  Property  for  Taxes..  954 

Section  1262. — Seat  in  Stock  Exchange  967 

Section  1201. — Shares  of  Stock  in   Corporations 929 

Section  1202. — Shares  of  National   Banks 930 

Section  1209. — Statement  of  Owners 934 

Section  1243. — State  Lands  Sold  for  Delinquent  Taxes 951 

Section  1190. — ^Tax  Laws  Strictly  Construed 929 

Section  1228.— Tax  Collector  to  Publish   Notice 946 

Section  1229. — Taxes  on  Any  Particular  Parcel  of  Land  May  Be 

Paid  Separately    946 

Section  1241,— Tax  Deeds  Made  After  Five  Years 950 

Section  1248. — Taxes   Erroneously   Collected 955 

Section  1264. — Taxation  of  Ships  on  the  High  Seas 968 

Section  1265. — Taxation  of  Oil  Leases 969 

Section  1230. — Time  and  Place  of  Payment 947 

Section  1239. — Time   for   Redemption   of  Property 950 

Section  1245. — Title  of  Personal  Property  Sold  for  Taxes 954 

Section  1214. — Undistributed  Property  of  Deceased  Persons 937 

Section  1216. — Vessels  and  Boats 937 

Section  1259. — Void  Sale — Failure  to  Mail  Notice  to  Party  Last 

Assessed    965 

Section  1232. — ^When  Taxes  are  Delinquent,  Penalties 947 

Section  1249. — When  Land  Assessed  More  Than  Once 956 

Section  1252. — What  Mistakes  Do   Not   Affect  Sale  of  Property 

for  Taxes   959 

Section  1255. — ^When  Former  Owners  May  Redeem 959 


CONTENTS.  xlviii-11 

PART    XIV. 
Trust  Deeds. 

PAGE 

Section  1275. — Action    by    Trustees 996 

Section  1284. — Appointment  of  Trustee  in  Case  of  Vacancy 999 

Section  1287. — ^Bank  May  Buy  Property  from  Stockholder  Trustee. 1000 
Section  1276.— Beneficiaries  Take  No  Title  by  Deed 996 

Section  1281. — Compensation   of   Trustee    998 

Section  1286. — Creditor  as  Trustee  1000 

Section  1277. — Devise  and  Transfer  of  Trust  Property 997 

Section  1283. — Discharge  of  Trustee    999 

Section  1269.— Extent   of   This   Subject 995 

Section  1294.— Form  of  Trust  Deed    1002 

Section  1292.— Lease  of  Trust  Property 1001 

Section  1280.— Liability  for  Breach  of  Trust 997 

Section  1274. — Number  of  Trustees 996 

Section  1279.— Power  of  Trustee  997 

Section  1290. — Possession  of  Estate  Upon  Termination  of  Trust..  1001 

Section  1273. — Profits  of  Land  Liable  to  Creditors 996 

Section  1272. — Purposes  for  Which  Trust  Deed  May  Be  Made 995 

Section  1288. — Reconveyance  to  Grantor    1000 

Section  1289. — Revocation   by   Deed    1000 

Section  1293.— Sale  of  Trust  Property   1002 

Section  1285. — Survivorship  Between  Co-trustees 999 

Section  1291.— Suit  for  Balance  After  Sale 1001 

Section  1282. — Termination  of  the  Trust   998 

Section  1270. — Trust  Deeds  Defined 995 

Section  1271.— Trust  Deed  Must  Be  in  "Writing 995 

Section  1278. — When  Beneficiary  Cannot  Dispose  of  His  Interest 

in  Trust  Estate  997 


PART    XV. 

Assignment   of    Contracts,    Guaranty    of    Accounts,    and 
Powers  of  Attorney. 

ASSIGNMENT    OF    CONTRACTS. 

Section  1296. — Assignment    Without   Consent    1007 

Section  1299.— Assignment  of  Wife's  Earnings   1008 

Section  1300. — Assignment  of  Wages  1008 

Section  1303. — Assignment  by  Corporation  1009 

Section  1304.— Damages  for  Tort 1009 


xlviii-12  CONTENTS. 

PAGE 

Section  1305. — Form  of  Assignment  of  Contract 1009 

Section  1306. — Form   of  Indorsed   Assignment 1010 

Section  1307. — Form  of  Assignment  of  Debt  Due   1010 

Section  1308. — Form  of  Assignment  of  Account 1010 

Section  1309. — Form  of  Assignment  of  Lease   1011 

Section  1310. — Form  of  Assignment  of  Mortgage   1011 

Section  1311. — Form  of  Assignment  of  Contract  for  Sale  of  Real 

Estate    1011 

Section  1302. — Non-negotiable   Contracts    1009 

Section  1301.— Order  Drawn  on  Debtor 1009 

Section  1298.— Time   of   Assignment    1008 

Section  1207. — Verbal  or  Written  Assignments   1008 

Section  1295.— What   Can    Be   Assigned 1006 

GUARANTY   OF   ACCOUNTS. 

Section  1313. — Consideration     1012 

Section  1319. — Continuing   Guaranty    1013 

Section  1321. — Death   of   Guarantor 1014 

Section  1320. — Exoneration  of  Guarantor  1014 

Section  1324. — Form  of  Guaranty  of  Account 1015 

Section  1312.— Guaranty  Defined  1012 

Section  1314. — Guaranty  Must  Be  in  Writing 1012 

Section  1316. — Guaranty  That  an  Obligation  Is  Good  or  Collect- 
able     1012 

Section  1323. — Guaranty  Must   Be   Certain 1015 

Section  1322. — Judgment  Against  Principal  1015 

Section  1317. — Liability    of    Guarantor 1013 

Section  1318. — Liability  Upon  Guaranty  of  a  Conditional  Obliga- 
tion     1013 

Section  1315. — Offer  to  Become  Guarantor 1012 

POWERS    OF   ATTORNEY. 

Section  1333. — Commercial  Power  of  Attorney,  with  Authority  to 

Sell   Real   Estate    1019 

Section  1331. — Form  of  General  Power  of  Attorney 1017 

Section  1326. — ^Married  Woman's  Power  of  Attorney 1016 

Section  1325. — Power  of  Attorney  Must  Be  in  Writing 1016 

Section  1330. — Power  of  Attorney  Coupled  with  an  Interest 1017 

Section  1328. — Revocation  of  Power  of  Attorney 1016 

Section  1329. — Revocation  of  Power  of  an  Agent 1016 

Section  1327.^Signature  of  Attorney  in  Fact 1016 

Section  1332.— Special  Power  of  Attorney 1018 


PART  I. 

BUSINESS  CONTRACTS  AND  LEGAL 
OBLIGATIONS. 

Making  of   Contracts. 

Section  L— BUSINESS  CONTRACTS.— By  the  above 
heading  is  meant  the  contracts  and  obUgations  which  are 
connected  directly  with  the  usual  business  affairs  of  a 
community.  There  are  many  relations  in  life  which  con- 
stitute or  arise  out  of  contracts,  and  yet  which  are  not 
connected  with  the  ordinary  business  affairs  of  men.  Such 
relations  it  is  not  the  purpose  of  this  book  to  indicate,  but 
only  the  contracts,  the  obligations,  the  rights  and  liabilities 
of  business  men  in  every-day  affairs,  as  defined  by  the  laws 
of  California. 

Section  2.— PARTIES  TO  CONTRACTS.— A  contract 
is  an  agreement  to  do  or  not  to  do  a  certain  thing.  It  is 
essential  to  the  existence  of  a  contract  that  there  should 
be  parties  capable  of  contracting,  their  consent,  a  lawful 
object,  and  a  sufficient  consideration.  With  reference  to 
the  parties  to  a  contract,  the  law  of  California  provides  that 
all  persons  are  capable  of  contracting,  except  minors,  per- 
sons of  unsound  mind,  and  persons  deprived  of  civir  rights^ 
A  minor  in  this  State  cannot,  under. the  age  of  18,  make 
a  contract  relating  to  any  interest  in  real  property,  or 
relating  to  any  personal  property  not  in  his  immediate  pos- 
session or  control.  But  a  minor  may  make  any  other  con- 
tract, and  it  will' be  good,  unless  disaffirmed  and  repudiated. 
The  contract  of  a  minor,  if  made  by  him  before  he  is  eigh- 
teen years  of  age,  may  be  disaffirmed  by  the  minor  himself, 

(49) 


50  BUSINESS   LAWS   FOR  BUSINESS    MEN. 

either  before  his  majority  or  within  a  reasonable  time 
afterwards,  or,  in  case  of  his  death  within  that  period,  by 
his  heirs  or  personal  representatives;  and  if  the  contract 
be  made  by  the  minor  when  he  is  over  the  age  of  18, 
he  can  diasffirm  it,  but  must  restore  the  consideration  to  the 
party  from  whom  it  was  received,  or  pay  its  equivalent. 
There  is  one  exception  to  the  law  above  stated:  A  minor 
cannot  disaffirm  a  contract,  because  he  was  under  age,  to 
pay  the  reasonable  value  of  things  necessary  for  his  support 
or  the  support  of  his  family,  if  the  contract  was  entered  into 
by  him  when  he  was  not  under  the  care  of  a  parent  or 
guardian  able  to  provide  for  him  or  his  family. 

A  minor  in  California  is  a  male  under  the  age  of  21  or  a 
female  under  the  age  of  18. 

A  person  entirely  without  understanding  has  no  power 
to  make  a  contract  of  any  kind,  but  he  is  liable  for  the 
reasonable  value  of  things  furnished  to  him  necessary  for 
his  support  or  the  support  of  his  family.  Where  a  per- 
son is  of  unsound  mind,  and  yet  is  not  entirely  without 
understanding,  he  may  enter  into  a  contract  at  any  time 
before  his  unsoundness  of  mind  has  been  judicially  deter- 
mined, but  such  contract  will  be  voidable,  subject  to 
rescission.  After  his  incapacity  has  been  judicially  deter- 
mined, a  person  of  unsound  mind  cannot  make  any  con- 
veyance or  other  contract,  until  a  court  has  decided  that 
his  reason  is  restored. 

A  person  deprived  of  civil  rights  is  not  capable  of  making 
a  contract  while  in  that  condition.  A  person  is  deprived 
of  civil  rights  when  he  is  sentenced  to  imprisonment  in  the 
State  Prison  for  life,  and  his  civil  rights  are  suspended 
during  the  term  when  he  is  sentenced  for  a  term  less  than 
life.  A  convict  may,  however,  make  and  acknowledge  a 
sale  and  conveyance  of  property. 

With  the  exceptions  above  stated,  all  persons  in  Cali- 
fornia are  capable  of  being  parties  to  contracts. 

Civil  Code,  Sections  33,  34,  38,  39,  40,  1556;    Penal 
Code,  Sections  673,  674,  675. 


BUSINESS    CONTRACTS   AND   LEGAL   OBLIGATIONS.  51 

(a)  Contracts  of  Married  Women. — A  married  woman 
has  all  the  rights  in  respect  to  property,  real  or  personal; 
and  the  acquisition,  use,  enjoyment  and  disposition  thereof; 
and  to  make  contracts  in  respect  thereto  with  any  person, 
including  her  husband;  and  to  carry  on  any  business,  trade 
or  occupation;  and  to  exercise  all  powers  and  enjoy  all 
rights  in  respect  thereto  and  in  respect  to  her  contracts, 
and  be  liable  on  such  contracts,  as  if  she  were  unmarried. 

Judgment  for  or  against  a  married  woman  may  be  ren- 
dered and  enforced  in  any  court,  as  if  she  was  single. 

A  contract  made  by  a  married  woman  does  not  bind  her 
husband  or  his  property. 

Civil  Code,  Sections  158,  162. 

Section  3.— CONSENT  OF  PARTIES  TO  CON- 
TRACT.— To  constitute  a  valid  contract,  the  consent  of 
the  parties  to  it  must  be  freely  given,  and  there  must  be  a 
mutual  consent,  and  their  consent  to  the  agreement  must 
be  communicated  by  each  to  the  other.  The  laws  of  Cali- 
fornia but  follow  the  principles  of  natural  justice  when 
they  provide  that,  when  the  consent  of  a  party  to  a  contract 
is  not  given  freely  and  voluntarily,  but  is  obtained  by 
fraudulent  acts  or  misrepresentations,  the  contract  cannot 
stand,  and  will  be  set  aside  by  the  courts  whenever  the 
facts  are  proved.  Some  of  the  facts  which  will  render  a 
contract  invalid,  by  reason  of  insufficient  consent  of  the 
parties,  are  where  the  consent  of  any  party  has  been  ob- 
tained by  imprisonment  of  the  person,  or  unlawful  deten- 
tion of  his  property,  or  threats  to  injure  his  person,  prop- 
erty, or  character,  or  deceiving  him  by  misrepresenting  or 
concealing  the  truth,  or  by  making  a  promise  without  any 
intention  of  performing  it.  Whenever  any  of  these  facts 
appear,  to  the  injury  of  a  party,  the  courts  of  California 
will  set  aside  the  contract.  Also,  a  contract  will  be  set 
aside,  because  free  consent  was  not  given,  whenever  one 
party  in  whom  another  has  confidence  uses  that  confi- 
dence for  the  purpose  of  taking  an  unfair  advantage  over 
the  latter,  or  whenever  one  party  takes  an  unfair  advantage 


52  BUSINESS  LAWS  FOR  BUSINESS   MEN. 

of  another's  weakness  of  mind,  or  whenever  one  party 
takes  a  grossly  oppressive  and  unfair  advantage  of  an- 
other's necessities  or  distress.  Also,  consent  will  not  be 
considered  mutual  and  free,  whenever  a  mistake  is  made 
in  entering  into  a  contract,  where  either  party,  without 
negligence  on  his  part,  acts  under  an  unconscious  igno- 
rance or  forgetfulness  of  a  fact,  past  or  present,  material 
to  the  contract,  or  acts  in  the  belief  that  a  thing  material 
to  the  contract  exists  or  has  existed  when  in  fact  the  thing 
does  not  exist  and  never  did  exist.  Also,  a  contract  will 
be  set  aside  whenever  all  the  parties  act  under  a  mis- 
apprehension of  the  law,  all  supposing  that  they  know  and 
understand  it;  also,  because  of  misapprehension  of  the  law 
by  one  party  to  a  contract,  of  which  the  other  party  is 
aware  at  the  time  of  contracting,  but  which  he  does  not 
rectify. 

Civil  Code,  Sections  1565,  1567,  1569,  1570,  1572,  1575, 
1577,  1578. 

Section  4.— WHEN  CONSENT  IS  NOT  MUTUAL.— 

Consent  of  the  parties  is  not  mutual  unless  the  parties  all 
agree  upon  the  same  thing  in  the  same  sense. 
Civil  Code,  Section  1580. 

Section  5.— PROPOSAL  OF  CONTRACT,  ACCEPT- 
ANCE, AND  REVOCATION.— One  party  may  propose 
a  thing,  but  the  proposal  must  be  accepted  before  a  con- 
tract is  created.  An  acceptance  must  be  absolute  and  un- 
qualified. If  one  party  makes  a  proposition,  and  the  other 
replies  with  a  proposition  on  his  part,  there  is  no  contract, 
because  the  parties  have  not  mutually  agreed  upon  any- 
thing. The  proposal  may  be  revoked  at  any  time  before 
it  is  accepted.  It  is  revoked  by  giving  notice  of  its  with- 
drawal to  the  person  to  whom  the  proposal  was  made.  It 
is  also  revoked,  where  a  certain  time  was  given  in  which  to 
accept,  by  the  expiration  of  that  time  without  notice  of 
acceptance;  it  is  also  revoked  by  the  failure  of  the  person 
to  whom  the  proposal   is  made  to   do   some   act   which   is 


BUSINESS   CONTRACTS   AND   LEGAL  OBLIGATIONS.  53 

required  of  him  as  a  condition  preceding  the  acceptance; 
and  a  proposal  is  necessarily  considered  revoked  by  the 
death  or  insanity  of  the  proposer.  Any  usual  and  reason- 
able mode  of  giving  notice  of  acceptance  of  a  proposal  may 
be  adopted,  as,  by  mail,  or  in  person,  or  by  messenger,  and 
it  will  be  sufficient  to  constitute  a  contract.  But  the  pro- 
poser may  prescribe  a  certain  mode  in  which  notice  of 
acceptance  must  be  given,  and  the  proposer  will  not  be 
bound  unless  the  mode  prescribed  by  him  is  adopted. 

Civil  Code,  Section  1582,  1583,  1585,  1586,  1587. 

Section  6.— OBJECTS  OF  CONTRACT.— The  object 
of  a  contract  must  be  lawful  when  the  contract  is  made, 
and  possible  of  performance,  and  certain  in  its  terms. 
However,  the  law  considers  everything  possible  except  that 
which  is  impossible  in  the  nature  of  things,  and,  therefore, 
to  render  a  contract  invalid  for  impossibility  of  perform- 
ance, it  must  be  apparent  from  the  nature  of  the  thing 
agreed  upon  that  it  will  not  be  possible  to  perform  it. 
Where  a  contract  has  but  a  single  object,  and  such  object 
is  unlawful,  whether  in  whole  or  in  part,  or  wholly  impos- 
sible of  performance,  or  so  vaguely  expressed  as  to  be 
wholly  unascertainable,  the  entire  contract  is  void.  But 
where  a  contract  has  several  distinct  objects,  of  which  one 
at  least  is  lawful,  in  whole  or  in  part,  the  contract  is  void 
as  to  the  unlawful  object,  and  valid  as  to  the  rest. 

Civil  Code,  Sections  1595,  1596,  1597,  1598,  1599. 

Section  7.— CONSIDERATION    OF    A    CONTRACT. 

— The  consideration  of  a  contract  need  not  necessarily  be 
money.  Of  course,  the  consideration  must  be  lawful,  that 
is,  it  must  not  be  contrary  to  any  express  provision  of  law, 
or  against  the  policy  of  express  law,  or  contrary  to  good 
morals.  But  the  consideration  may  consist  in  any  benefit 
conferred  or  agreed  to  be  conferred  upon  the  promisor  by 
any  other  person,  to  which  the  promisor  is  not  already  law- 
fully entitled,  or  in  any  prejudice  suffered  or  agreed  to  be 
suffered  by  the  person  to  whom  the  promise  is  made,  which 


54  BUSINESS   LAWS   FOR   BUSINESS    MEN. 

he  is  not  already  lawfully  bound  to  suffer.  The  abandon- 
ment of  a  right,  or  forbearing  to  enforce  a  claim,  or  any 
detriment  suffered  by  the  promisee,  will  constitute  suffi- 
cient consideration  for  a  contract,  and  be  as  binding  as 
though  the  payment  of  money  were  agreed  upon. 
Civil  Code,  Sections  1605,  1607,  1667. 

Section  8.— WHAT  CONTRACTS  MAY  BE  VERBAL. 

• — All  contracts  may  be  entered  into  verbally,  except  such 
as  are  specially  required  by  law  to  be  in  writing.  If  the 
contract  is  one  which  the  law  does  not  specially  require 
to  be  in  writing,  the  verbal  agreement  of  the  parties  is 
as  good  as  any  other,  and  as  binding  as  it  would  be  if 
reduced  to  writing. 

Section  9.— WHAT  CONTRACTS  MUST  BE  IN 
WRITING.— The  law  of  California  provides  that  the  fol- 
lowing contracts  are  invalid,  unless  the  contract,  or  some 
note  or  memorandum  describing  its  terms,  is  put  into  writ- 
ing and  subscribed  by  the  party  to  be  charged,  or  by  his 
agent:  (1)  An  agreement  that  by  its  terms  is  not  to  be 
performed  within  a  year  from  the  making  thereof;  (2)  A 
special  promise  to  answer  for  the  debt,  default,  or  mis- 
carriage of  another;  but  there  is  one  exception  to  this  pro- 
vision, where  it  appears  that  the  promise  was  such  as  the 
law  considers  an  original  obligation  on  the  part  of  the 
promisor;  (3)  An  agreement  made  upon  consideration  of 
marriage,  other  than  a  mutual  promise  to  marry;  (4)  An 
agreement  for  the  sale  of  goods,  chattels,  or  things  in  ac- 
tion, at  a  price  not  less  than  two  hundred  dollars,  unless 
the  buyer  accepts  or  receives  part  of  such  goods  and  chat- 
tels, or  the  evidences,  or  some  of  them,  of  such  things  in 
action,  or  pay  at  the  time  some  part  of  the  purchase  money; 
but,  when  a  sale  is  made  at  auction,  an  entry  by  the 
auctioneer  in  his  sale  book,  at  the  time  of  the  sale,  of  the 
kind  of  property  sold,  the  terms  of  the  sale,  the  price,  and 
the  names  of  the  purchaser  and  person  on  whose  account 


BUSINESS    CONTRACTS   AND   LEGAL   OBLIGATIONS.  55 

the  sale  is  made,  is  a  sufficient  memorandum;  (5)  An  agree- 
ment for  the  leasing  for  a  longer  period  than  one  year,  or 
for  the  sale  of  real  property,  or  for  an  interest  therein;  and 
such  agreement,  if  made  by  an  agent  of  the  party  sought 
to  be  charged,  is  invalid,  unless  the  authority  of  the  agent 
is  in  writing,  and  subscribed  by  the  party  sought  to  be 
charged;  (6)  An  agreement  authorizing  or  employing  an 
agent  or  broker  to  purchase  or  sell  real  estate  for  compen- 
sation or  commission;  (7)  An  agreement  which  by  its  terms 
is  not  to  be  performed  during  the  lifetime  of  the  promisor; 
(8)  Or  an  agreement  to  devise  or  bequeath  any  property,  or 
to  make  any  provision  for  any  person  by  will. 
Civil  Code,  Section  1624. 

Section  10.— CONTRACTS  AGAINST  PUBLIC  POL- 
ICY.— There  are  certain  contracts  which  the  law  says  are 
against  public  policy,  and  therefore  invalid.  Generally  any 
contract  which  has  for  its  object  the  violation  of  any  law 
of  the  land  would  be  illegal,  without  reference  to  the  ques- 
tion of  public  policy.  But  the  State  recognizes  the  usual 
and  natural  distinctions  between  morality  and  immorality, 
that  which  is  inherently  right  and  that  which  is  inherently 
wrong,  and  forbids,  on  the  ground  of  public  policy,  cer- 
tain contracts  which  may  not  be  forbidden  by  the  statutes. 
Therefore  it  is  said  that  all  contracts  in  violation  of  moral- 
ity are  void;  that  agreements  to  do  acts  forbidden  by  the 
law  of  God,  or  which  are  manifestly  in  furtherance  of  im- 
morality, and  tend  to  contaminate  the  public  mind,  can 
not  be  enforced  in  the  courts  of  this  State.  Some  illustra- 
tions of  this  rule  are,  where  lodgings  are  leased  for  purposes 
of  prostitution;  where  a  contract  is  made  for  the  printing 
or  sale  of  obscene  or  libelous  books;  so,  also,  contracts  to 
prevent  competition  at  an  auction  sale,  contracts  in  re- 
straint of  trade,  contracts  in  restraint  of  marriage,  marriage 
brokerage  contracts,  wagers,  and  gambling  contracts;  all 
of  these,  or  others  of  like  character,  are  opposed  to  good 
morals,  and  are  void,  whether  expressly  prohibited  by 
statute  or  not. 


SS  BUSINESS  LAWS   FOR  BUSINESS   MEN. 

Section  11.— CONTRACTS  IN  RESTRAINT  OF 
TRADE. — Every  contract  by  which  any  one  is  restrained 
from  exercising  a  lawful  profession,  trade,  or  business  of 
any  kind,  is  to  that  extent  void.  The  courts  have  found 
great  difficulty,  however,  in  determining  what  are  contracts 
in  restraint  of  trade,  within  the  meaning  of  the  law.  ■  It 
is  the  public  policy  to  encourage  trade  and  traffic,  and  any 
contract  which  would  have  the  effect  of  depriving  the 
public  of  the  advantages  of  competition  in  trade  is  void, 
as  opposed  to  public  policy.  Thus,  where  all,  or  nearly 
all,  of  an  article  of  trade  or  commerce  within  a  community 
or  district  is  brought  within  the  hands  of  one  man  or  set 
of  men,  so  as  to  practically  bring  the  handling  or  produc- 
tion of  the  commodity  within  such  single  control,  to  the 
exclusion  of  competition  or  free  traffic  therein,  this  con- 
stitutes a  monopoly,  and  is  in  restraint  of  trade.  Rea- 
sonable combinations  to  regulate  price§  are  valid.  But  if 
one  agrees  with  another  that  he  will  never  again  at  any 
time  or  place  work  at  his  trade,  or  carry  on  his  business, 
or  exercise  his  profession,  such  a  contract,  being  without 
limitation  as  to  time  or  place,  is  considered  to  be  in  restraint 
of  trade,  and  is  void. 

.  Civil  Code,  Section  1673. 

Section  12.— SALE  OF  GOOD  WILL  OF  A  BUSI- 
NESS.— The  sale  of  the  good  will  of  a  business  forms  an 
exception  to  the  law  stated  in  the  last  Section.  One  who 
sells  the  good  will  of  a  business  may  agree  with  the  buyer 
that  he  will  not  carry  on  a  similar  business  within  a  speci- 
fied county  or  city,  so  long  as  the  buyer,  or  any  persCn  to 
whom  the  buyer  shall  dispose  of  the  good  will,  carries  on 
a  like  business  at  .the  same  place.  There  is  an  exception, 
also,  in  the  case  of  partners.  Partners  may,  upon  a  dis- 
solution of  the  partnership,  make  a  valid  contract  that 
none  of  them  will  carry  on  a  similar  business  within  the 
whole  or  a  part  of  the  same  city  or  town  where  the  part- 
nership business  has  been  transacted. 
Civil  Code,  Sections  1674,  1675. 


BUSINESS   CONTRACTS   AND   LEGAL  OBLIGATIONS.  57 

Section  13.— ALTERATION  OF  VERBAL  COI^- 
TRACT. — Contracts,  verbal  or  written,  may  be  subsp- 
quently  altered,  so  as  to  make  the  terms  or  conditions  dif- 
ferent from  what  they  were  at  first.  But  where  the  con- 
tract was  verbal  only,  the  law  provides  that  the  consent 
of  the  parties  to  its  alteration  in  any  respect  must  be  ex- 
pressed in  wrfting,  and  where  the  consent  to  the  alteration 
is  thus  given  and  made,  in  writing,  it  does  not  require  a 
new  consideration. 

Civil  Code,  Section  1697. 

Section  14.— ALTERATION  OF  WRITTEN  CON- 
TRACT.— A  contract  in  writing  may  be  altered  by  a  con- 
tract in  writing,  or  by  an  executed  oral  agreement,  and  not 
otherwise.  The  executed  oral  agreement,  which  will  be 
sufficient  to  alter  a  previous  written  contract,  must  consist 
in  the  doing  or  the  suffering  of  something  not  required  to 
be  done  or  suffered  by  the  terms  of  the  writing.  So,  if 
the  parties  verbally  agree  upon  the  doing  of  something, 
which  one  or  the  other  would  be  bound  to  do  in  the  proper 
fulfilment  of  the  written  contract,  this  does  not  constitute 
an  executed  oral  agreement  to  alter  the  previous  writing. 
Civil  Code,  Section  1698. 

Section  15.— EXPRESS  CONTRACTS.— An  express 
contract  is  one  the  terms  of  which  are  stated  in  words, 
from  which  words,  used  in  a  writing  or  orally  between  the 
parties,   the   agreement   between   the   parties    is    ascertained. 

Section  16.— IMPLIED  CONTRACTS.— An  implied 
contract  is  one  the  existence  and  terms  of  which  are  mani- 
fested by  the  conduct  of  the  parties.  The  conduct  of  the 
parties  toward  each  other,  the  circumstances  surround- 
ing the  transaction,  may  be  such  that  the  law  will  imply 
that  certain  agreements  were  entered  into,  although  no 
evidence  other  than  such  circumstances  or  conduct  may 
exist  as  proof  of  the  contracts.     The   law   will   imply   that 


58  BUSINESS   LAWS   FOR   BUSINESS    MEN. 

a  party  did  make  such  a  stipulation  as,  under  the  circum- 
stances disclosed,  he  ought,  upon  the  principles  of  honesty, 
justice,  and  fairness,  to  have  made.  Thus,  if  one  party 
accepts  the  services  of  another,  or  receives  his  goods,  hav- 
ing reaped  the  benefit  of  such  services  or  goods,  the  law 
implies  a  promise  on  his  part  to  pay  for  them. 
Civil  Code,  Section  1621. 

Section  17.— TERMINATION     OF    CONTRACTS.— 

A  contract  is  terminated,  of  course,  when  it  has  been  fully 
performed,  but  it  may  also  be  rescinded  or  canceled  under 
certain  circumstances. 

Section  18.— RESCISSION  OF  CONTRACT.— A  party 
to  a  contract  may  rescind  it,  if  his  consent  to  it,  or  the 
consent  of  any  party  jointly  contracting  with  him,  was 
g^ven  by  mistake,  or  obtained  through  duress,  menace, 
fraud,  or  undue  influence  on  the  part  of  the  party  as  to 
whom  he  rescinds,  or  on  the  part  of  any  other  party  to  the 
contract  jointly  interested  with  the  latter.  A  party  to  a 
contract  may  also  rescind  it  if,  through  the  fault  of  the 
party  as  to  whom  he  rescinds,  the  consideration  for  his 
obligation  fails,  in  whole  or  in  part;  or  if  the  consideration 
becomes  entirely  void,  for  any  cause;  or  if  the  considera- 
tion, before  it  is  rendered  to  him,  fails  in  a  material  respect, 
from  any  cause.  A  party  to  a  contract  may  also  rescind  it 
by  consent  of  all  the  other  parties. 
Civil  Code,  Section  1689. 

Section  19.— EXTINCTION  OF  WRITTEN  CON- 
TRACT BY  CANCELLATION.— The  destruction  or  can- 
cellation of  a  written  contract,  or  of  the  signature  of  the 
parties,  with  the  intent  to  extinguish  the  obligation,  does 
extinguish  it  as  to  all  the  parties  consenting  to  the  act.  But 
where  a  contract  is  executed  in  duplicate,  the  destruction 
of  one  copy,  while  the  other  exists,  will  not  have  the  effect 
of  extinguishing  the  contract. 

Civil  Code,  Section  1699,  1701. 


BUSINESS   CONTRACTS   AND   LEGAL   OBLIGATIONS.  59 

Section  20.— INTERPRETATION  OF  CONTRACTS. 

■ — The  essential  thing  in  the  interpretation  of  a  contract, 
in  ascertaining  what  is  meant  by  it,  is  to  find  the  intention 
of  the  parties.  The  law  of  California  provides  that  a  con- 
tract must  be  so  interpreted  as  to  give  effect  to  the  mutual 
intention  of  the  parties  at  the  time  of  contracting,  so  far 
as  that  intention  is  ascertainable  and  lawful.  The  language 
of  a  contract  is  to  govern  its  interpretation,  if  the  lan- 
guage is  clear  and  explicit,  and  does  not  involve  an  ab- 
surdity. When  a  contract  has  been  reduced  to  writing,  the 
intention  of  the  parties  is  to  be  ascertained  from  the  writ- 
ing alone,  if  possible.  When,  through  fraud,  mistake,  or 
accident,  a  written  contract  fails  to  express  the  real  inten- 
tion of  the  parties,  oral  evidence  will  be  received  in  the 
courts  to  show  what  the  intention  of  the  parties  really 
was,  and,  when  ascertained,  the  real  intention  will  govern, 
and  the  erroneous  parts  of  the  writing  will  be  disregarded. 
The  whole  of  a  contract  is  to  be  taken  together,  so  as  to 
give  effect  to  every  part,  if  reasonably  practicable.  The 
whole  contract  is  to  be  considered,  in  arriving  at  the  inten- 
tion of  the  parties.  A  contract  must  be  given  such  an 
interpretation  as  will  make  it  lawful,  operative,  definite, 
reasonable,  and  capable  of  being  carried  into  effect,  if  this 
can  be  done  without  a  violation  of  the  intention  of  the 
parties.  Words  used  in  a  contract  are  to  be  understood 
in  their  ordinary  and  popular  sense,  unless  used  by  the 
parties  in  a  technical  sense,  or  unless  a  special  meaning 
is  given  to  the  words  by  usage  or  custom.  A  contract  may 
be  explained  by  reference  to  the  circumstances  under  which 
it  was  made  and  the  matter  to  which  it  relates.  However 
broad  may  be  the  terms  of  a  contract,  it  extends  only  to 
those  things  which  it  appears  the  parties  really  intended  to 
include  in  it. 

Civil    Code,    Sections    1636,    1638,    1639,    1640,    1641 
1643,  1644,  1647,  1648. 


60  BUSINESS   LAWS   FOR  BUSINESS    MEN. 

Section  21.— PRINTED  AND  WRITTEN  PARTS  OF 
CONTRACT.— Where    a    contract    is    partly    written    and 
partly  printed,  the  written  parts  control  the  printed  parts. 
Civil  Code,  Section  1651. 

Section  22.— TIME  OF  PERFORMANCE  OF  CON- 
TRACT.— If  the  time  is  specified  in  the  contract  for  its 
performance,  the  stipulation  of  the  parties  will  control.  If 
no  time  is  specified,  the  law  allows  a  reasonable  time. 
What  is  a  reasonable  time  for  the  performance  of  a  con- 
tract depends  upon  the  circumstances  and  the  nature  of  the 
thing-  to  be  done. 

Section  22a.— PLACE  OF  PERFORMANCE.— A  con- 
tract is  supposed  to  be  made  at  some  place,  and  the  place 
where  it  becomes  complete  is  the  place  where  it  is  made. 
If  a  contract  is  made  by  exchange  of  letters,  or  telegrams, 
it  is  held  to  have  been  made  at  the  place  where  the  letter 
is  mailed  or  telegram  filed,  containing  an  unconditional 
acceptance  by  one  party  of  the  oflfer  of  the  other.  If  the 
communications  are  oral,  either  with  or  without  telephone, 
between  parties  on  opposite  sides  of  a  county  line,  the  law 
deems  the  contract  to  have  been  made  in  the  county  where 
the  offer  of  one  is  accepted  by  the  other.  (Decided  by  the 
Supreme  Court  of  California,  in  the  case  of  Bank  of  Yolo 
vs.  The  Sperry  Flour  Company,  which  decision  is  printed 
in  Volume  XXVI,  California  Decisions,  page  936.) 

Section    22aa.— CONTRACTS      BY      LETTER      OR 

TELEGRAPH.— Contracts  may  lawfully  be  made  by  tele- 
graph. And  where  a  person  telegraphs  a  proposal  to  another, 
who  accepts  it  by  telegraph,  these  telegraphic  communications 
constitute  a  contract  in  writing  which  the  law  will  enforce. 
Where  parties  have  exchanged  letters  and  telegrams  with 
a  view  to  an  agreement,  and  have  arrived  at  a  point  where 
a  clear  and  definite  proposition  is  made  on  one  side  and 
accepted    on    the    other,    with    an    understanding    that    the 


BUSINESS   CONTRACTS   AND   LEGAL   OBLIGATIONS.  61 

agreement  shall  be  reduced  to  a  formal  writing,  the  contract 
is  complete,  though  no  formal  writing  is  ever  executed. 

Section  22b.— THE  ANTI-TRUST  LAW.— The  State 
of  California  has  passed  laws  intended  to  prevent  the 
formation  of  trusts  or  combinations  whereby  monopolies 
may  be  created  or  maintained.  What  is  known  as  the 
Cartwright  Law  was  intended  to  be  a  rigid  anti-trust  law. 
The  law  provides: 

"A  trust  is  a  combination  of  capital,  skill  or  acts  by  two 
or  more  persons,  firms,  partnerships,  corporations  or  asso- 
ciations of  persons,  or  of  any  two  or  more  of  them  for 
either,  any  or  all  of  the  following  purposes : — 

"1.  To  create  or  carry  out  restrictions  in  trade  or  com- 
merce. 

"2.  To  limit  or  reduce  the  production,  or  increase  the 
price  of  merchandise  or  of  any  commodity. 

"3.  To  prevent  competition  in  manufacturing,  making, 
transportation,  sale  or  purchase  of  merchandise,  produce 
or  any  commodity. 

"4.  To  fix  at  any  standard  or  figure,  whereby  its  price  to 
the  public  or  consumer  shall  be  in  any  manner  controlled 
or  established,  any  article  or  commodity  of  merchandise, 
produce  or  commerce  intended  for  sale,  barter,  use  or  con- 
sumption in  this  state. 

"5.  To  make  or  enter  into  or  execute  or  carry  out  any 
contracts,  obligations,  or  agreements  of  any  kind  or  de- 
scription, by  which  they  shall  bind  or  have  bound  them- 
selves not  to  sell,  dispose  of  or  transport  any  article  or 
any  commodity  or  any  article  of  trade,  use,  merchandise, 
commerce  or  consumption  below  a  common  standard  figure, 
or  fixed  value,  or  by  which  they  shall  agree  in  any  manner 
to  keep  the  price  of  such  article,  commodity  or  trans- 
portation at  a  fixed  or  graduated  figure,  or  by  which  they 
shall  in  any  manner  establish  or  settle  the  price  of  any 
article,  commodity  or  transportation  between  them  or  them- 
selves and  others,  so  as  to  directly  or  indirectly  preclude  a 
free  and  unrestricted  competition  among  themselves,  or  any 


62  BUSINESS   LAWS   FOR  BUSINESS    MEN. 

purchasers  or  consumers  in  the  sale  or  transportation  of  any 
such  article  or  commodity,  or  by  which  they  shall  agree 
to  pool,  combine  or  directly  or  indirectly  unite  any  inter- 
ests that  they  may  have  connected  with  the  sale  or  trans- 
portation of  any  such  article  or  commodity,  that  its  price 
might  in  any  manner  be  affected.  Every  such  trust  as  is 
defined  herein  is  declared  to  be  unlawful,  against  public 
policy  and  void." 

The  remainder  of  the  act  is  taken  up  with  provisions  for 
punishment  of  those,  who  violate  the  law.  It  is  made  the 
duty  of  the  attorney-general  to  bring  suit  for  a  forfeiture 
of  the  charter  of  any  corporation  violating  the  law,  and 
to  enjoin  any  foreign  corporation  from  further  doing  busi- 
ness in  this  state;  any  person  guilty  of  violating  the  law 
is  punishable  by  a  fine  of  not  less  than  fifty  dollars  nor 
more  than  five  thousand  dollars,  or  by  imprisonment  not 
less  than  six  months  nor  more  than  one  year,  or  both  such 
fine  and  imprisonment;  and  each  day's  violation  of  the 
provisions  of  the  act  constitutes  a  separate  oflfense.  For 
each  day's  violation  of  the  law,  in  any  particular,  the  guilty 
person,  firm,  or  corporation  forfeits  fifty  dollars,  the  pay- 
ment of  which  may  be  compelled  by  the  attorney-general 
or  the  district  attorney.  Any  person  injured  in  his  business 
or  property  by  a  violation  of  the  law,  may  sue  for  damages, 
and  when  his  damages  are  ascertained,  may  be  given  judg- 
ment for  double  the  amount. 

The  intention  of  the  law  is  evident  on  its  face.  It  was 
intended  to  prohibit  combinations  of  persons,  firms,  partner- 
ships, corporations  or  associations  by  which  trade  or  com- 
merce shall  be  restrained  or  production  limited,  or  competi- 
tion prevented,  or  the  price  fixed  of  an  article  of  merchandise 
or  produce,  to  the  injury  of  the  public  at  large.  If  all  the 
manufacturers  of  salt,  or  flour,  for  instance,  should  enter 
into  a  combination  and  arbitrarily  fix  the  selling  price,  so  as 
to  deprive  the  public  of  the  advantages  of  competition,  this 
would  be  in  restraint  of  trade,  and  a  violation  of  the  law. 
Or,  if  all  the  manufacturers  of  lumber  in  California  should 
enter  into  an  agreement  that  they  would  shut   down  their 


BUSINESS    CONTRACTS   AND    LEGAL   OBLIGATIONS.  63 

mills  for  six  months  in  the  year,  and  thus  bring  up  the 
price  of  lumber  to  a  figure  which  would  be  oppressive  and 
ruinous  to  the  public  in  its  effects  upon  building  operations, 
this  would  be  a  violation  of  the  intent  and  spirit  of  the  law. 
But  the  law  does  not  intend,  nor  would  the  legislature  have 
the  power  to  enact,  that  a  person  can  no  longer  do  with  his 
own  property  as  he  pleases.  Notwithstanding  the  Cartwright 
Law,  the  manufacturer  may  still  prescribe  the  price  at 
which  his  own  brand  of  a  particular  commodity  shall  be 
sold,  the  wholesaler  may  still  protect  the  standing  and 
trademark  of  any  particular  article  distributed  by  him  by 
fixing  the  retail  price,  the  producer  may  still  fix  the  price 
of  his  own  product,  and  any  owner  of  property  may  still 
have  the  right  to  select  his  own  customers. 

(a)  Amendments  of  1909. — The  Legislature  of  1909 
adopted  an  amendment  to  the  Cartwright  law,  providing 
"that  no  agreement,  combination  or  association  shall  be 
deemed  to  be  unlawful  or  within  the  provisions  of  this  act, 
the  object  and  business  of  which  are  to  conduct  its  opera- 
tions at  a  reasonable  profit  or  to  market  at  a  reasonable 
profit  those  products  which  can  not  otherwise  be  so  mar- 
keted; provided,  further,  that  it  shall  not  be  deemed  to  be 
unlawful,  or  within  the  provisions  of  this  act,  for  persons, 
firms  or  corporations,  engaged  in  the  business  of  selling  or 
manufacturing  commodities  of  a  similar  or  like  character, 
to  employ,  form,  organize  or  own  any  interest  in  any  associ- 
ation, firm  or  corporation,  having  as  its  object  or  purpose 
the  transportation,  marketing  or  delivery  of  such  commod- 
ities." 

Two  new  sections  were  also  added  to  the  Cartwright  law, 
reading  as  follows :  "It  shall  be  lawful  to  enter  into 
agreements  or  form  associations  or  combinations,  the  pur- 
pose and  effect  of  which  shall  be  to  promote,  encourage  or 
increase  competition  in  any  trade  or  industry,  or  which  are 
in  furtherance  of  trade."  "Labor,  whether  skilled  or  un- 
skilled, is  not  a  commodity  within  the  meaning  of  this 
Act." 

Act  of  the  Legislature,  approved  March  20,  1909. 


64  BUSINESS  LAWS   FOR   BUSINESS    MEN. 

(b)  Decision  Under  the  Cartwright  Law. — A  contract 
for  the  sale  of  olive  oil  by  the  manufacturer,  in  which  he 
exacts,  as  part  of  the  consideration  for  the  sale,  a  promise 
by  the  purchaser  that  he  will  not  sell  the  oil  for  less  than 
a  stipulated  price,  does  not  tend  to  create  a  monopoly  and 
is  not  in  restraint  of  trade.  There  is  no  provision  of  the 
Cartwright  Act  which  prohibits  the  making  of  such  a  con- 
tract. There  is  nothing  either  unreasonable  or  unlawful  in 
the  effort  by  a  manufacturer  to  maintain  a  standard  price 
for  his  goods,  but  it  is  simply  a  means  of  securing  the 
legitimate  benefits  of  the  reputation  which  his  product  may 
have  attained.  A  monopoly  exists  where  all,  or  so  nearly 
all,  of  an  article  of  trade  or  commerce  within  a  community 
or  district  is  brought  within  the  hands  of  one  man  or  several 
men,  as  to  practically  bring  the  handling  or  production  of 
the  commodity  within  such  control  to  the  exclusion  of  free 
traffic  therein.  The  producer  is,  in  the  first  instance,  under 
no  obligation  to  sell  his  product;  and  when  he  does  sell  it, 
he  has  the  right  to  exact,  as  part  of  the  consideration  for 
the  sale,  a  promise  by  the  purchaser  that  he  will  not  sell 
it  at  less  than  a  stipulated  price.  (Decided  by  the  Supreme 
Court  of  California,  in  the  case  of  Grogan  vs.  Chaffee, 
which  decision  is  printed  in  Volume  XXXVII,  California 
Decisions,  page  522.) 

Section  22c.— CONTRACTS  COMING  DUE  ON  A 
HOLIDAY. — Where  a  contract  by  its  terms  requires  the 
payment  of  money,  or  the  performance  of  a  condition,  on  sl 
legal  holiday,  such  payment  may  be  made  or  condition 
performed  on  the  next  business  day  succeeding  such  holi- 
day, with  the  same  force  and  effect  as  if  made  or  performed 
on  the  day  named  in  the  contract. 

(a)  What  Are  Holidays. — The  following  are  legal  holi- 
days in  the  State  of  California:  Every  Sunday,  the  first 
day  of  January,  twelfth  day  of  February,  to  be  known 
as  Lincoln  Day,  twenty-second  day  of  February,  thirtieth 
day  of  May,  fourth  of  July,  ninth  day  of  September,  first 
Monday  in  September,  twelfth  day  of  October,  to  be  known 


BUSINESS   CONTRACTS   AND   LEGAL  OBLIGATIONS.  65 

as  Columbus  Day,  twenty-fifth  day  of  December,  every  day 
on  which  an  election  is  held  throughout  the  state,  and 
every  day  appointed  by  the  president'  of  the  United  States 
or  by  the  governor  of  this  state  for  a  public  fast,  thanks- 
giving or  holiday. 

If  the  first  day  of  January,  twelfth  day  of  February, 
twenty-second  day  of  February,  the  thirtieth  day  of  May, 
the  fourth  day  of  July,  the  ninth  day  of  September,  the 
twelfth  day  of  October  or  the  twenty-fifth  day  of  December 
falls  upon  a  Sunday,  the   Monday   following  is   a   holiday. 

Every  Saturday  from  twelve  o'clock  noon  until  twelve 
o'clock  midnight  is  a  holiday  as  regards  the  transaction  of 
business  in  the  public  offices  of  this  state,  and  also  in  political 
divisions  thereof  where  laws,  ordinances  or  charters  provide 
that  public  offices  shall  be  closed  on  holidays;  provided, 
this  shall  not  be  construed  to  prevent  or  invalidate  the  issu- 
ance, filing,  service,  execution  or  recording  of  any  legal 
process  or  written  instrument  whatever  on  such  Saturday 
afternoons. 

Act  of  the  Legislature,  approved  April  26,  1911. 

Agreements  for  Sale. 

Section  23.— KINDS  OF  AGREEMENTS  FOR  SALE. 

• — An  agreement  for  sale  is  either  (1)  an  agreement  to  sell, 
(2)  an  agreement  to  buy,  or  (3)  a  mutual  agreement  to 
sell  and  buy.  The  difference  between  a  sale  and  an  agree- 
ment for  sale  is,  that  in  sl  sale  the  subject  of  the  contract 
becomes  the  property  of  the  buyer  as  soon  as  the  contract 
is  concluded,  while  in  an  agreement  for  sale  the  title  to 
the  property  remains  in  the  vendor  until  the  contract  is 
executed.  An  agreement  to  buy  is  a  contract  by  which 
one  engages  to  accept  from  another  and  pay  a  price  for 
the  title  to  a  certain  thing.  An  agreement  to  sell  is  a 
contract  by  which  one  engages,  for  a  price,  to  transfer  to 
another  the  title  to  a  certain  thing.  An  agreement  to  sell 
and  buy  is  a  contract  by  which  one  engages  to  transfer 
the   title   to    a   certain   thing   to    another,    who    engages    to 


66  BUSINESS   LAWS   FOR   BUSINESS    MEN. 

accept  the  same  from  him  and  to  pay  a  price  therefor.  Any 
property  which,  if  in  existence,  might  be  the  subject  of  sale, 
may  be  the  subject  of  an  agreement  for  sale,  whether  the 
property  itself  is  then  in  existence  or  not. 

Civil  Code,  Sections  1726,  1727,  1728,  1729,  1730. 

Section  24.— AGREEMENT  TO  SELL  REAL  PROP- 
ERTY.— An  agreement  to  sell  real  property  binds  the  seller 
to  execute  a  conveyance  in  form  sufficient  to  pass  the  title 
to  the  property.  No  agreement  for  the  sale  of  real  prop- 
erty, or  any  interest  in  real  property,  is  valid,  unless  the 
agreement,  or  some  note  or  memorandum  of  its  terms,  be 
in  writing  and  subscribed  by  the  party  to  be  charged  or 
his  agent.  If  the  agreement,  or  the  note  or  memorandum 
of  it,  is  subscribed  by  the  agent  of  the  party,  it  is  necessary 
to  the  validity  of  the  instrument  that  the  agent's  authority 
from  his  principal  shall  be  in  writing,  also. 
Civil  Code,  Sections  1731,  1741. 

Section  24a.— FORM  OF  AGREEMENT  TO  SELL 
REAL  PROPERTY.— Agreements  to  sell  real  property 
are  usually  prepared  in  the  form  of  a  bond  for  a  deed. 
The  following  form  will  be  sufficient  under  the  laws  of 
California : 

AGREEMENT    FOR    SALE    OF    REAL    ESTATE.— 

This  Agreement,  made  and  entered  into  the 

day  of ,  191 .. ,  between 

,  of  the  County  of 

,  State  of  California,  the  party  of  the  first 

part,   and    

of  the  same  place,  the  party  of  the  second  part,  witnesseth: 

That  the  said  party  of  the  first  part,  in  consideration  of 
the  covenants  and  agreements  on  the  part  of  the  said  party 
of  the  second  part  hereinafter  contained,  agrees  to  sell  and 
convey  unto  the  said  party  of  the  second  part,  and  said 
second  party  agrees  to  buy,  all  those  certain  lots  or  parcels 

of  land,  situate  in  the  County  of 

State  of  California,  bounded  and  described  as  follows,  to- 
wit :    


BUSINESS   CONTRACTS   AND   LEGAL  OBLIGATIONS.  67 

(Here  insert  description  of  property.) 

for  the  sum  of Dollars,  lawful  money 

of  the  United  States ;  and  the  said  party  of  the  second  part, 
in  consideration  of  the  premises,  agrees  to  pay  to  the  said 

party  of  the  first  part,  the  said  sum  of 

Dollars,    in   gold   coin   of   the   United    States,    at    the   times 
and  in  the  amounts  as  follows,  to-wit : 

(Here  insert  terms  of  payments  agreed  upon.) 

It  is  agreed  that  all  deferred  payments  shall  bear  interest 

at  the  rate  of   per  cent  per  annum,  payable 

semi-annually. 

And  the  said  party  of  the  second  part  agrees  to  pay  all 
State,  City,  and  County  taxes,  or  assessments  of  whatso- 
ever nature,  which  are  or  may  become  due  on  the  premises 
above  described. 

In  the  event  of  a  failure  to  comply  with  the  terms  hereof 
by  the  said  party  of  the  second  part,  the  said  party  of  the 
first  part  shall  be  released  from  all  obligation  in  law  or 
equity  to  convey  said  property,  and  the  said  party  of  the 
second  part  shall  forfeit  all  right  thereto. 

Time  is  of  the  essence  of  this  contract. 

And  the  said  party  of  the  first  part,  on  receiving  such 
payment,  at  the  time  and  in  the  manner  above  mentioned, 
agrees  to  execute  and  deliver  to  the  said  party  of  the  second 
part,  or  to  his  assigns,  a  good  and  sufficient  deed  to  the 
premises  herein  described,   free  and  clear  of  encumbrances. 

And  it  is  understood  that  the  stipulations  aforesaid  are 
to  apply  to  and  bind  the  heirs,  executors,  administrators, 
and  assigns  of  the  respective  parties  hereto. 

IN  WITNESS  WHEREOF,  we  have  hereunto  set  our 
hands  and  seals  the  day  and  year  first  above  written. 

(Seal.) 

(Seal.) 

(If  the  above  agreement  is  intended  to  be  recorded,  it  must 
be  acknowledged.) 

Section  24b.— OPTION  TO  BUY  REAL  PROP- 
ERTY.— The  owner  may  give  another  person  an  option  to 
buy  his  property,  the  purchase  then  depending  upon  the 
mere  will  of  the  person  receiving  the  option.     The  holder  of 


68  BUSINESS   LAWS   FOR  BUSINESS    MEN. 

an  option  is  not  bound  to  take  the  property,  but  the  owner 
who  signed  the  option  is  bound  to  sell,  if  he  is  notified, 
before  the  option  expires,  of  the  intention  of  the  holder  to 
accept  the  condition  of  the  option.  If  the  holder  of  the 
option  elects  to  take  the  property,  he  must  notify  the  owner, 
before  the  time  stated  in  the  option  expires,  that  he  will  pay 
the  price  fixed  and  demand  a  deed  to  the  property.  Before 
the  time  expires,  the  option  holder  should  tender  the  price 
and  demand  his  deed.  If  the  owner  refuses  to  make  a 
deed,  when  the  money  is  tendered,  the  courts  can  be  called 
upon  to  enforce  the  option  and  compel  the  execution  of  a 
good  and  sufficient  conveyance. 

^. 

Section  24c.— FORM   OF   OPTION.— The  following  is 
a  form  of  an  option  to  be  used  in  this  State: 

AGREEMENT    FOR    SALE    OF    REAL    ESTATE.— 

For  the  consideration  of Dollars, 

to  me  in  hand  paid,  the  receipt  of  which  is  hereby  acknowl- 
edged, I  hereby  agree  to  sell  to 

or  assigns,  at  any  time  within days 

from   the   date   hereof,    the    following-described    real    estate, 

situate  in  the  County  of .^ State  of  California, 

to   wit :    '. 

(Here  describe  the  property.) 

for  the  sum  of Dollars,   payable 

as    follows,    to-wit :    

(Here  insert  terms  agreed  upon.) 

I  will  furnish  the  said ^ 

within. days  from  date,  a  complete  and  accu- 
rate Abstract  of  Title  to  said  land. 

Time  is  of  the  essence  of  this  agreement. 

I  have  received  from  said 

the  sum  of Dollars 

as  a  deposit,  which  I  will  credit  him  with  on  the  purchase 
price,    should   he    complete   the    purchase;    otherwise,    I    am 


BUSINESS   CONTRACTS   AND   LEGAL  OBLIGATIONS.  69 

to  retain  the  said '. Dollars,  for 

my  own  use,  as  liquidated  damages.  

In  witness  whereof  I  have  hereunto  set  my  hand  and  seal 
this day  of .  .      191.. 

(Seal.) 

Section  25.— AGREEMENT  TO  SELL  PERSONAL 
PROPERTY. — If  an  agreement  is  made  to  buy  or  sell  per- 
sonal property,  and  the  price  is  two  hundred  dollars  or 
over,  the  agreement  is  not  valid  unless  the  agreement  itself, 
or  some  note  or  memorandum  giving  its  terms,  is  in  writ- 
ing, and  subscribed  by  the  party  to  be  charged  or  his  agent. 
There  is  an  exception  to  the  law,  which  is  where  an  agree- 
ment is  made  to  manufacture  a  thing,  from  materials  to 
be  furnished  by  the  manufacturer  to  another  person. 
Civil  Code,  Sections  1739,  1740. 

Section  25a!— FORM  OF  AGREEMENT  TO  SELL 
PERSONAL  PROPERTY.— The  following  is  a  sufficient 
form  of  agreement  to  sell  personal  property: 

AGREEMENT  FOR  SALE  OF  PERSONAL  PROP- 
ERTY.— This  Agreement,  made  the .• day  of 

,  191 . . ,  between 

,  of  the  County  of 

State  of  California,  the  party  of  the  first  part,  and 

,  of  the  same 

place,  the  party  of  the  second  part,  witnesseth: 

That   the   said 

the  party  of  the  first  part,  for  the  consideration  hereinafter 

mentioned,  agrees  to  sell  to  the  said. 

,  the  party  of  the  second 

part,    the    following-described    personal    property,    situate    in 

the  County  of ,  State  of  California, 

to-wit :     

(Here  describe  the  property.) 

said  property  to  be  delivered  to   said  party  of  the   second 
part,  at on  or  before  the 

day  of 191.  . 


70  BUSINESS   LAWS   FOR  BUSINESS    MEN. 

In  consideration  whereof,  the   said. 


,,  the  party  of  the 
second  part,  agrees  to  pay  to  the  party  of  the  first  part  the 

sum  of Dollars,  gold  coin  of  the 

United  States,  on  the  said day  of 

,  191 .  .,  or  sooner  on  the  delivery  of  said  prop- 
erty as  aforesaid. 

IN  WITNESS  WHEREOF,  we  have  hereunto  set  our 
hands  and  seals  the  day  and  year  first  above  written. 

(Seal.) 

(Seal.) 

(If  agreement  is  to  be  recorded,  it  must  be  acknowledged.) 

Sale  of  Personal  Property. 

Section  26.— WHEN  GOODS  SOLD  MUST  BE  DE- 
LIVERED.— One  who  sells  personal  property,  whether  it 
was  in  his  possession  at  the  time  of  sale  or  not,  must  put  it 
into  a  condition  fit  for  delivery,  and  deliver  it  to  the  buyer 
within  a  reasonable  time  after  demand.  This  rule  will  not 
apply  in  some  cases,  however,  where  the  seller  has  a  lien 
on  the  property.  Until  the  seller  does  put  the  goods  into 
a  condition  fit  for  delivery,  the  title  does  not  pass.  Title 
does  not  pass  when  the  property  sold  has  not  been  identi- 
fied, nor  when  something  remains  to  be  done  for  the  pur- 
pose of  ascertaining  the  price,  as  by  weighing,  measuring, 
or  testing  the  goods,  where  the  price  is  to  depend  upon 
the  quantity  or  quality  of  the  goods.  The  property  must 
be  delivered  within  a  reasonable  time  after  demand.  What 
is  a  reasonable  time  depends  upon  all  the  circumstances 
of  the  particular  transaction. 

Civil  Code,  Section  1753. 

Section  27.— WHERE  DELIVERY  MUST  BE  MADE. 

— In  the  absence  of  an  agreement  to  the  contrary,  the  place 
where  the  property  is  at  the  time  of  the  agreement  of  sale 
is  the  place  of  delivery;  or  if  the  article  is  not  then  in  ex- 
istence, it  is  deliverable  at  the  place  where  it  is  manufac- 
tured or  produced. 

Civil  Code,  Section  1754. 


BUSINESS    CONTRACTS   AND   LEGAL   OBLIGATIONS.  71 

Section  28.— WHEN  PRICE  OF  GOODS  BOUGHT 
MUST  BE  PAID. — Unless  by  agreement  the  price  is  stip- 
ulated to  be  paid  at  a  different  time,  the  law  is  that  the 
buyer  must  pay  the  price  of  the  thing  sold  on  its  delivery, 
and  must  take  it  away  within  a  reasonable  time  after  the 
seller  offers  to  deliver  it.  Of  course,  the  buyer  and  seller 
may  agree  upon  any  terms  of  payment,  contrary  to  the 
provisions  of  the  law  stated  above.  After  personal  property 
has  been  sold,  and  until  the  delivery  is  completed,  the 
seller  must  keep  the  property  without  charge  until  the 
buyer  has  had  a  reasonable  opportunity  to  remove  it. 

Section  29.— RIGHT  TO  INSPECT  GOODS  BEFORE 
ACCEPTANCE. — On  an  agreement  for  sale  with  warranty 
the  buyer  has  a  right  to  inspect  the  thing  sold,  at  a  reason- 
able time,  before  accepting  it,  and  if  the  seller  refuse  to 
permit  the  buyer  to  make  a  reasonable  inspection  of  the 
thing  sold,  in  a  proper  manner  and  at  a  proper  time,  the 
buyer  may  rescind  the  contract  and  refuse  to  take  the  goods. 
Civil  Code,  Section  1785. 

Section  30.— EXPENSE  OF  TRANSPORTATION.— 

One  who  sells  personal  property  must  bring  it  to  his  own 
door,  or  to  some  other  convenient  place,  for  its  acceptance 
by  the  buyer,  but  further  transportation  is  at  the  risk  and 
expense  of  the  buyer. 

Civil  Code,  Section  1755. 

Section  31.— BUYER'S  DIRECTIONS  AS  TO  MAN- 
NER OF  SENDING  THINGS  SOLD.— If  a  seller  agrees 
to  send  the  thing  sold  to  the  buyer,  he  must  follow  the 
directions  of  the  latter  as  to  the  manner  of  sending,  or  it 
will  be  at  his  own  risk  during  its  transportation.  There- 
fore, if  the  buyer  directs  that  the  goods  be  shipped  by  a 
certain  line  or  lines  of  carriers,  the  seller,  if  he  desires  to 
avoid  the  risk  of  transportation,  must  obey  the  buyer's 
directions.  If  he  follows  such  directions,  the  transporta- 
tion is  at  the  risk  of  the  buyer.    Also,  if  there  are  no  special 


72  BUSINESS  LAWS   FOR   BUSINESS   MEN. 

directions  by  the  buyer  as  to  the  manner  of  shipment,  and 
the  seller  uses  ordinary  care  in   forwarding  the  goods,  the 
transportation  is  at  the  buyer's  own  risk. 
Civil  Code,  Section  1757. 

Section  31a.— THE  BULK  LAW.— The  Legislature  of 
1903  passed  an  Act,  approved  by  the  Governor,  March  10, 
1903,  intended  to  prevent  the  fraudulent  sale  of  a  stock  in 
trade.  This  law  provides  that  the  sale,  transfer,  or  assign- 
ment of  a  stock  in  trade  (or  of  such  a  quantity  of  a  stock  in 
trade  as  to  be  substantially  the  whole  thereof),  in  bulk,  is  to 
be  conclusively  presumed  fraudulent  and  void,  as  against 
the  existing  creditors  of  the  vendor,  unless  notice  is  first 
given  by  the  vendor.  The  notice  must  be  in  writing,  and 
must  be  recorded  in  the  county  where  the  stock  of  goods  is 
located,  at  least  five  days  prior  to  the  sale  or  transfer.  If  the 
stock  is  located  in  two  or  more  counties,  the  notice  must  be 
recorded  in  each  county;  for  instance,  if  the  vendor  has  a 
store  in  Sonoma  County  and  a  store  in  Mendocino  County, 
and  intends  to  sell  or  transfer  the  stock  in  both,  he  must 
file  his  notice  in  the  office  of  the  County  Recorder  in  each 
county.  The  required  notice  must,  to  be  legal,  be  in  writing, 
and  must  state  the  name  and  address  of  the  vendor, 
transferrer,  or  assignor;  the  name  and  address  of  the  in- 
tended vendee,  transferee,  or  assignee ;  a  general  statement 
of  the  character  of  the  property  or  merchandise  intended 
to  be  sold,  transferred,  or  assigned ;  the  time  and  place 
of  the  payment  of  the  purchase  price  agreed  upon ;  or, 
if  the  intended  sale  is  to  be  at  public  auction,  the  notice 
must  state  that  fact  in  addition,  with  the  time,  terms,  and 
place  of  such  sale.  The  sale  shall  in  no  event  occur  within 
five  days  of  the  date  when  the  notice  is  recorded.  The 
above  law  does  not  apply  to  the  sale  of  goods  in  the  ordi- 
nary course  of  trade  and  in  the  usual  method  of  business. 
It  is  intended  only  to  protect  the  wholesaler  against  the 
sale  or  transfer  or  assignment  by  the  retailer  of  his  stock 
of  goods  before  they  are  paid  for  by  him.  The  effect  of 
the  law  is  this:     If  a  stock  is  sold  without  the  notice,  the 


BUSINESS   CONTRACTS    AND   LEGAL   OBLIGATIONS.  73 

wholesaler  can  follow  the  goods,  and  recover  from  the 
vendee  whatever  damages  he  has  sustained  by  reason  of 
the  fraudulent  sale,  transfer,  or  assignment;  and  if  the 
notice  is  given,  the  wholesaler  will  have  an  opportunity  to 
protect  himself  by  suit  and  attachment  of  the  property 
within  the  five  days.  The  law  does  not  apply  to  a  case 
where  the  debtor  makes  an  assignment  of  the  property  for 
the  benefit  of  creditors  generally,  nor  does  it  apply  to  any 
sale,  transfer,  or  assignment  of  any  property  which  is  by 
law  exempt  from  execution.  For  a  list  of  property  exempt 
from  execution,  see  under  the  head  of  "Attachments." 
Statutes  of  1903,  p.  111.    ' 


FORM  OF  NOTICE  OF  SALE  OF  STOCK  OF 
GOODS:— 

Notice  is  hereby  given  that , 

residing  at ..... , ....../  vendor, 

has  sold  to ,  vendee, 

residing  at -. ,  all  that 

property  or  merchandise  belonging  to  the  vendor  now  located 

at    ,  and  particularly 

described  as  follows,  to-wit:     A  stock  of  groceries  (or  other 

merchandise,  describing  it)  now  in  the  store  at  No 

Howard  Street,  in  the  City  and  County  of  San  Francisco, 
State  of  Cahfornia;  that  the  purchase  price  agreed  upon  is 

the  sum  of   Dollars,  and  that 

the  said  agreed  purchase  price  will  be  paid  by  the  vendee  to 

the  vendor  on  the day  of ,  191. ., 

at  No Street,  City  and  County  of  San  Francisco, 

State  of  California;  that  the  name  of  the  vendor  is 

,   and  that  he 

resides  at ^  and  that  the 

name  of  the  vendee  is , 

and  he  resides  at 

Vendor. 

Subscribed  and  sworn  to  before  me  this day 

of ,191.. 

Notary  Public  in  and  for  the  City  and  County 
of  San  Francisco,  State  of  California. 


74  BUSINESS    LAWS    FOR   BUSINESS    MEN. 

Section  31b.— BILL  OF  SALE.— A  bill  of  sale  need 
not  be  in  any  particular  form  to  be  valid.  It  is  not  essential 
to  its  validity  that  it  be  recorded,  although  it  may  be  for 
the  best  interests  of  all  parties  that  it  should  be  filed  for 
record.  A  bill  of  sale  is  not  required  to  be  acknowledged, 
if  it  is  not  to  be  recorded;  but  it  must  be  acknowledged,  if 
it  is  to  be  recorded. 

Section  31c.— FORM  OF  BILL  OF  SALE.~The  fol- 
lowing is  a  form  of  bill  of  sale: — 

KNOW  ALL  MEN  BY  THESE  PRESENTS,  That  I, 

of  the  County  of ,  State  of  California,  the 

party  of  the  first  part,  for  and  in  consideration  of  the  sum 

of Dollars,   gold   coin   of  the   United 

States  of  America,  to  me  in  hand  paid  by 

,  of ,  the  party 

of  the  second  part,  the  receipt  whereof  is  hereby  acknowl- 
edged, do  by  these  presents  grant,  bargain,  sell,  and  convey 
unto  the  said  party  of  the  second  part,  his  executors,  ad- 
ministrators, and  assigns,  the  following  described  personal 
property :     

(Here  describe  property  sold.) 

To  have  and  to  hold  the  same  to  the  said  party  of  the  sec- 
ond part,  his  executors,  administrators,  and  assigns  forever. 
And  I  do  for  myself,  my  heirs,  executors,  and  adminis- 
trators, covenant  and  agree  to  and  with  the  said  party  of  the 
second  part,  his  executors,  administrators,  and  assigns,  to 
warrant  and  defend  the  sale  of  said  property,  goods,  and 
chattels  hereby  made,  unto  the  said  party  of  the  second 
part,  his  executors,  administrators,  and  assigns,  against  all 
and  every  person  and  persons,  whomsoever,  lawfully  claim- 
ing or  to  claim  the  same. 

In  witness  whereof,  the  said  party  of  the  first  part  has 

hereunto  set  his  hand  and  seal,  the day  of 

191.. 

(Seal.) 


BUSINESS    CONTRACTS   AND   LEGAL   OBLIGATIONS.  75 

Section  31d.— ADULTERATED,  MISLABELED  OR 
MISBRANDED  FOODS  AND  LIQUORS.— It  is  unlaw- 
ful to  brand  or  label  an  imitation  under  the  distinctive  name 
of  another  article  of  food ;  or,  to  label,  brand,  or  color,  so  as 
to  deceive  or  mislead  a  purchaser;  or,  to  put  up  a  domestic 
product  and  label  it  as  a  foreign  product;  or,  to  fail  to  state 
on  packages  the  weight  or  measure,  plainly  and  correctly, 
when  goods  are  so  put  up  or  offered  for  sale;  or,  if  the  label 
on  package  goods  contains  a  false  or  misleading  statement 
regarding  the  ingredients  or  the  substance  contained  therein; 
or,  if  the  goods  put  up  are  an  imitation  or  adulteration, 
or  offered  for  sale  under  a  false  name  or  designation. 

Act  of  the  Legislature,  approved  February  22d,  1909. 

The  law  provides  a  penalty  for  its  violation,  a  fine  of  not 
less  than  five  nor  more  than  five  hundred  dollars,  or  im- 
prisonment in  the  county  jail  not  exceeding  six  months,  or 
both  such  fine  and  imprisonment. 

Food  found  to  be  adulterated,  mislabeled  or  misbranded 
may  be  ordered  destroyed  by  any  court  or  judge. 

No  dealer  can  be  prosecuted  under  the  provisions  of  this 
act,  when  he  can  establish  a  guaranty  signed  by  the  whole- 
saler, jobber,  manufacturer  or  other  party  residing  in  the 
United  States  from  whom  he  purchased  such  article,  to 
the  effect  that  the  same  is  not  adulterated,  mislabeled  or 
misbranded  within  the  meaning  of  the  law,  and  can  also 
establish  by  satisfactory  evidence  that  the  article  sold  by 
him  was  mislabeled  and  that  at  the  time  of  making  such 
sale  he  was  not  aware  of  that  fact.  Said  guaranty  to 
afford  protection,  must  contain  the  name  and  address  of 
the  party  or  parties  making  the  sales  of  such  article  to 
said  dealer,  and  an  itemized  statement  showing  the  articles 
purchased;  or  a  general  guaranty  may  be  filed  with  the 
secretary  of  the  United  States  Department  of  Agriculture 
by  the  manufacturer,  wholesaler,  jobber  or  other  party 
in  the  United  States  and  be  given  a  serial  number,  which 
number  shall  appear  on  each  and  every  package  of  goods 


76  BUSINESS   LAWS   FOR   BUSINESS   MEN. 

sold  under  such  guaranty  with  the  words  "guaranteed  under 
the  food  and  drugs  act  June  30,  1906." 

Act  of  the  Legislature,  approved  April  26,  1911. 

Section  31e.— COLD  STORAGE  EGGS  AND  BUT- 
TER.—  Every  person,  firm,  company  or  corporation,  who 
sells  or  offers  to  sell  any  cold  storage  eggs  or  butter  as 
fresh  eggs  or  butter,  or  by  any  means  whatever  represents 
the  same  to  be  fresh  eggs  or  butter,  is  guilty  of  a  mis- 
demeanor. 

Cold  storage  eggs  or  butter,  that  have  been  in  storage  for 
a  longer  period  than  three  months,  must  have  stamped, 
marked  or  branded  upon  all  sides  of  the  receptacle  holding 
the  same,  in  black  face  letters  two  inches  in  length,  the 
period  of  time  during  which  the  same  have  been  in  cold 
storage.  Any  person,  firm,  company  or  corporation  selling 
or  offering  for  sale  any  cold  storage  eggs  or  butter  must 
display  in  a  conspicuous  place  in  the  sales  room  the  sign, 
in  black  face  letters  not  less  than  six  inches  in  length 
upon  a  white  ground,  "Cold  Storage  Eggs  or  Butter  Sold 
Here."  The  penalty  for  violation  of  this  provision  is  im- 
prisonment in  the  county  jail  for  a  term  not  exceeding  six 
months  or  a  fine  of  two  hundred  and  fifty  dollars  or  both. 

All  butter  sold  as  certified  butter  must  be  conspicuously 
marked  with  the  name  of  the  commission  certifying  it. 

Statutes  and  Amendments,  1911,  pages  285,  356,  382. 

(a)  Marking  Oleomargarine. — It  is  unlawful  to  sell  or 
offer  for  sale  any  oleomargarine  or  any  renovated  butter 
unless  the  same  shall  have  printed  upon  each  and  every 
package,  roll,  print,  square,  and  upon  any  container  of 
such  renovated  butter  or  oleomargarine,  the  words  "Reno- 
vated Butter"  or  the  word  "Oleomargarine,"  as  the  case 
may  be,  in  letters  not  less  than  one-half  inch  in  height.  And 
every  dealer  in  oleomargarine  or  renovated  butter  must 
have  a  license  to  sell  it  from  the  State  Dairy  Bureau- 
Statutes  and  Amendments,  1911.  page  966. 


BUSINESS   CONTRACTS   AND   LEGAL  OBLIGATIONS.  77 

Section  31f.— SANITARY  REGULATION  OF  FOOD 
PRODUCING  ESTABLISHMENTS.— The  law  provides 
as  follows : 

"Every  building,  room,  basement  or  cellar,  occupied,  or 
used  as  a  bakery,  confectionery,  cannery,  packinghouse, 
slaughterhouse,  restaurant,  hotel,  grocery,  meat  market,  or 
other  place  or  apartment,  used  for  the  production,  prepara- 
tion for  sale,  manufacture,  packing,  storage,  sale  or  dis- 
tribution of  any  food,  shall  be  properly  lighted,  drained, 
plumbed  and  ventilated,  and  conducted  with  strict  regard 
to  the  influence  of  such  conditions  upon  the  health  of  the 
operatives,  employees,  clerks  or  other  persons  therein  em- 
ployed, and  the  purity  and  wholesomeness  of  the  food 
therein  produced,  kept,  handled  or  sold;  and  for  the  purpose 
of  this  act  the  term  "food"  shall  include  all  articles  used  for 
food,  drink,  confectionery  or  condiment,  whether  simple  or 
compound,  and  all  substances  and  ingredients  used  in  the 
preparation  thereof. 

"The  floors,  sidewalls,  ceilings,  furniture,  receptacles, 
utensils,  implements  and  machinery  of  every  establishment 
or  place  where  food  is  manufactured,  packed,  stored,  sold  or 
distributed,  shall  at  no  time  be  kept  in  an  unclean,  unhealth- 
ful  or  unsanitary  condition;  and  for  the  purposes  of  this  act, 
unclean,  unhealthful  and  unsanitary  conditions  shall  be 
deemed  to  exist  if  food  in  the  process  of  manufacture, 
preparation,  packing,  storing,  sale  or  distribution  is  not 
securely  protected  from  flies,  dust,  dirt,  unsanitary  condi- 
tions, and  as  far  as  may  be  necessary,  by  all  reasonable 
means  from  all  other  foreign  or  injurious  contamination; 
and  if  the  refuse,  dirt,  and  the  waste  products  subject  to 
decomposition  and  fermentation  incident  to  the  manufac- 
ture, preparation,  packing,  storing,  selling  and  distributing 
of  food,  are  not  removed  daily;  and  if  all  trucks,  trays, 
boxes,  baskets,  buckets,  and  other  receptacles,  chutes,  plat- 
forms, racks,  tables,  shelves,  and  all  knives,  saws,  cleavers, 
and  all  other  utensils,  receptacles,  and  machinery,  used  in 
moving,  handling,  cutting,  chopping,  mixing,  canning,  and 
all  other  processes  used  in  the  preparation  of  food,  are  not 


78  BUSINESS   LAWS   FOR   BUSINESS   MEN. 

thoroughly  cleaned  daily;  and  if  the  clothing  of  operatives, 
employees,  clerks,  and  other  persons  therein  employed,  is 
unclean,  or  if  they  dress  or  undress,  or  leave  or  store  their 
clothing  therein. 

"The  side  walls  and  ceilings  of  every  bakery,  confection- 
ery, hotel  and  restaurant  kitchen,  shall  be  well  plastered,  or 
ceiled,  with  metal  or  lumber,  or  shall  be  oil  painted  or  kept 
well  lime  washed,  or  otherwise  kept  in  good  sanitary  con- 
dition; and  all  interior  woodwork  of  every  bakery,  confec- 
tionery, hotel  and  restaurant  kitchen,  shall  be  kept  well 
oiled  or  painted  with  oil  paint,  and  be  kept  washed  clean 
with  soap  and  water  or  otherwise  kept  in  a  good  sanitary 
condition;  and  every  building,  room,  basement  or  cellar, 
occupied  or  used  for  the  preparation,  manufacture,  packing, 
storage,  sale  or  distribution  of  food,  shall  have  an  imper- 
meable floor,  made  of  cement  or  tile  laid  in  cement,  brick, 
wood  or  other  suitable,  non-absorbent  material  which  can  be 
flushed  and  washed  clean  with  water. 

"The  doors,  windows  and  other  openings  of  every  food 
producing  or  distributing  establishment,  where  practicable, 
shall  be  fitted  with  stationary  or  self-closing  screen  doors 
and  wire  window  screens,  of  not  coarser  than  fourteen  mesh 
wire  gauze. 

"Every  building,  room,  basement  or  cellar,  occupied  or 
used  for  the  preparation,  manufacture,  packing,  canning, 
sale  or  distribution  of  food,  shall  have  convenient  toilet  or 
toilet  rooms,  separate  and  apart  from  the  room  or  rooms 
where  the  process  of  production,  manufacture,  packing,  can- 
ning, selling  or  distributing,  is  conducted.  The  floors  of 
such  toilet  rooms  shall  be  of  cement,  tile  laid  in  cement, 
wood,  brick  or  other  non-absorbent  material,  and  shall  be 
washed  and  scoured  daily.  Such  toilets  shall  be  furnished 
with  separate  ventilating  pipes  or  flues,  discharging  into 
soil  pipes,  or  on  the  outside  of  the  building  in  which  they  are 
situated.  Lavatories  and  washrooms  shall  be  adjacent  to 
toilet  rooms,  and  shall  be  supplied  with  soap,  running  water 
and  towels,  and  shall  be  maintained  in  a  clean  and  sanitary 
condition.      Operatives,    employees,    clerks    and    all    persons 


BUSINESS    CONTRACTS   AND   LEGAL   OBLIGATIONS.  79 

who  handle  the  material  from  which  food  is  prepared,  or  the 
finished  product,  before  beginning  work  and  immediately 
after  visiting  a  toilet  or  lavatory  shall  wash  their  hands  and 
arms  thoroughly  in  clean  water. 

"Cuspidors,  for  the  use  of  operatives,  employees,  clerks 
and  other  persons,  shall  be  provided,  and  each  cuspidor  shall 
be  emptied  and  washed  out  daily  with  disinfectant  solution, 
and  not  less  than  five  ounces  of  such  solution  shall  be  left 
in  each  cuspidor  while  in  use.  No  operative,  employee, 
clerk  or  other  person,  shall  expectorate  or  discharge  any 
substance  from  his  nose  or  mouth,  on  the  floor  or  interior 
side  wall  of  any  building,  room,  basement,  or  cellar  where 
the  production,  manufacture,  packing,  storing,  preparation 
or  sale  of  any  food  is  conducted. 

"No  person  shall  be  allowed  to,  nor  shall  be,  reside  or 
sleep  in  any  room  of  a  bake  shop,  public  dining-room,  hotel 
or  restaurant  kitchen,  confectionery,  or  other  place  where 
food  is  prepared,  produced,  manufactured,  served  or  sold. 

"No  employer  shall  require,  permit  or  suffer  any  person  to 
work,  nor  shall  any  person  work,  in  a  building,  room,  base- 
ment, cellar,  place  or  vehicle,  occupied  or  used  for  the  pro- 
duction, preparation,  manufacture,  packing,  storage,  sale, 
distribution  or  transportation  of  food,  who  is  afflicted  or 
affected  with  any  venereal  disease,  small  pox,  diphtheria, 
scarlet  fever,  yellow  fever,  tuberculosis,  consumption,  bu- 
bonic plague,  Asiatic  cholera,  leprosy,  trachoma,  typhoid 
fever,  epidemic  dysentery,  measles,  mumps,  German  mea- 
sles, whooping-cough,  chicken  pox,  or  any  other  infectious 
or  contagious  disease. 

"The  members  of  the  State  Board  of  Health,  inspectors 
and  agents,  appointed  by  said  board,  and  all  local  health 
officers  and  inspectors,  shall  have  full  power  at  all  times  to 
enter  every  building,  room,  basement,  cellar,  or  any  place 
occupied  or  used,  or  suspected  of  being  occupied  or  used, 
for  the  production,  manufacture,  preparation,  storage,  sale 
or  distribution  of  food,  and  to  inspect  the  premises  and  all 
utensils,  implements,  receptacles,  fixtures,  furniture  and  ma- 
chinery used  as  aforesaid,  and  if.,  upon  inspection,  any  such 


80  BUSINESS  LAWS   FOB  BUSINESS  MEN, 

building,  room,  basement,  cellar,  or  arty  such  place,  vehicle, 
employer,  operative,  employee,  clerk,  driver,  or  other  per- 
son, is  found  to  be  in  violation  or  violating  any  of  the  pro- 
visions of  this  act,  or  if  the.  production,  preparation,  manu- 
facture, packing,  storing,  sale  or  distribution  of  food  is  be- 
ing conducted  in  a  manner  detrimental  to  the  health  of  the 
employees  or  operatives  or  to  the  character  or  quality  of  the 
food  therein  being  produced,  manufactured,  packed,  stored, 
sold,  distributed  or  conveyed,  the  officer  or  inspector  mak- 
ing the  examination  shall  at  once  make  a  written  report  of 
the  same  to  the  District  Attorney  of  the  county,  who  shall 
prosecute  all  persons  violating  any  of  the  provisions  of  this 
act,  and  also  to  the  State  Board  of  Health.  The  State  Board 
of  Health,  from  time  to  time,  as  in  its  discretion  it  may  de- 
termine, may  publish  such  reports  in  its  monthly  bulletin. 

"All  buildings,  rooms,  basements,  cellars,  and  other  places 
and  things,  kept,  maintained,  or  operated,  or  which  are,  in 
violation  of  the  provisions  of  this  act  or  any  of  them,  and  all 
food  produced,  prepared,  manufactured,  packed,  stored,  kept, 
sold,  distributed  or  transported,  in  violation  of  the  pro- 
visions of  this  act  or  any  of  them,  are  hereby  declared  to  be 
public  nuisances,  dangerous  to  health.  Such  nuisances  may 
be  abated  or  enjoined,  in  an  action  brought  for  that  purpose 
by  the  local  or  State  Board  of  Health,  or  they  may  be  sum- 
marily abated  in  the  manner  provided  by  law  for  the  sum- 
mary abatement  of  public  nuisances  dangerous  to  health. 

"Any  person,  firm  or  corporation,  whether  as  principal  or 
agent,  employer  or  employee,  who  violates  any  of  the  pro- 
visions of  this  act  shall  be  guilty  of  a  misdemeanor,  and 
each  day  that  conditions  or  actions,  in  violation  of  this  act, 
shall  continue,  shall  be  deemed  to  be  a  separate  and  distinct 
offense,  and  for  each  offense,  upon  conviction,  he  shall  be 
punished  by  a  fine  of  not  less  than  twenty-five  dollars,  nor 
more  than  five  hundred  dollars,  or  shall  be  imprisoned  in  the 
county  jail  for  a  term  not  exceeding  six  months,  or  by  both 
such  fine  and  imprisonment." 

Act  of  the  Legislature,  approved  March  6th,  1909 


BUSINESS    CONTRACTS   AND   LEGAL   OBLIGATIONS.  81 

Section   31g.— POISONOUS    CONFECTIONERY.— It 

is  unlawful  to  manufacture  or  offer  for  sale  any  confectionery 
containing  terra  alba,  barytes,  talc,  chrome  yellow,  or  other 
mineral  substance  or  poisonous  color  or  flavor,  or  other  in- 
gredient deleterious  or  detrimental  to  health,  or  any  vinous, 
malt,  or  spirituous  liquor  or  compound  or  narcotic  drug. 

Act  of  the  Legislature,  approved  March  13th,  1909. 

Section  31h.— MANUFACTURE  OR  SALE  OF 
STUFFED  FURNITURE.— All  persons  manufacturing  in 
this  State,  in  whole  or  in  part,  any  article  of  hotel,  boarding 
house,  lodging  house  or  domestic  or  office  furniture,  or  beds 
or  mattresses,  or  cushions,  used  or  intended  to  be  or  that 
could  be  used  by  human  beings,  that  are  stuffed  or  made  in 
whole  or  in  part,  with  material  composed  in  whole  or  in  part 
from  secondhand  or  cast  off  clothing,  rags,  or  secondhand, 
or  cast  off  material  of  any  character  whatever,  or  with  shod- 
dy, must  at  the  time  of  the  completion  of  such  manufacture 
attach  to  a  conspicuous  place  upon  each  of  such  articles  so 
manufactured  by  him,  a  label  or  stamp  showing  the  correct 
character  of  the  materials  with  which  the  cushion  portion  of 
such  articles  of  furniture  or  beds  or  cushions  or  mattresses 
are  stuffed;  and  no  person  so  manufacturing  any  such 
articles  shall  allow  the  same  or  any  thereof  to  leave  his  pos- 
session in  the  course  of  trade  or  business  unless  such  label  or 
stamp  is  so  affixed ;  and  no  person  shall  sell,  or,  offer  for  sale, 
in  this  State  any  of  such  articles  of  furniture,  or  beds,  or 
mattresses,  or  cushions,  whether  the  same  are  manufactured 
in  this  State  or  not,  unless  such  a  label  or  stamp  is  so  affixed. 

Any  person  violating  any  of  the  provisions  of  this  law  will 
be  guilty  of  a  misdemeanor,  and  upon  conviction  may  be 
punished  by  a  fine  of  not  less  than  fifty,  nor  more  than  five 
hundred  dollars,  or  imprisoned  not  more  than  six  months,  or 
by  both  such  fine  and  imprisonment. 

Act  of  the  Legislature,  approved  March  18th,  1909. 

Section  311.— ADULTERATION  OF  DAIRY  PRO- 
DUCTS.— It    is    unlawful    to    sell    or    offer    for    sale    any 


82  BUSINESS   LAWS   FOR  BUSINESS   MEN. 

adulterated  milk  or  other  dairy  products.  To  remove  all 
doubt  as  to  what  is  meant  by  the  term  "adulteration,"  the 
Legislature  has  prescribed  the  following  definitions: 

Milk  and  the  products  of  milk  shall  be  deemed  adulterated 
if  it  or  they  shall  not  conform  with  the  following  definitions 
and  standards: 

1.  Milk  is  the  fresh,  clean,  lacteal  secretion  obtained  by  the 
complete  milking  of  one  or  more  healthy  cows,  properly  fed 
and  kept,  excluding  that  obtained  within  fifteen  (15)  days 
before  and  five  (5)  days  after  calving,  and  contains  not  less 
than  three  (3.0)  per  cent  of  milk  fat,  and  not  less  than  eight 
and  five-tenths  (8.5)  per  cent  of  solids — not  fat. 

2.  Skim  milk  is  milk  from  which  a  part  or  all  of  the  cream 
has  been  removed  and  contains  not  less  than  eight  and  eight- 
tenths  (8.8)  per  cent  of  milk  solids. 

3.  Condensed  milk  or  evaporated  milk  is  whole  milk  from 
which  a  considerable  portion  of  water  has  been  evaporated 
and  contains  not  less  than  twenty-four  and  five-tenths  (24.5) 
per  cent  of  milk  solids,  including  not  less  than  seven  and 
seventh-tenths  (7.7)  per  cent  milk  fat. 

4.  Sweetened  condensed  milk  is  whole  milk  from  which  a 
considerable  portion  of  water  has  been  evaporated  and  to 
which  sugar  (sucrose)  has  been  added,  and  contains  not  less 
than  twenty- four  and  five-tenths  (24.5)  per  cent  of  total 
milk  solids,  including  not  less  than  seven  and  seven-tenths 
{7!7^  per  cent  milk  fat. 

5.  Condensed  skim  milk  is  skim  milk  from  which  a  con- 
siderable portion  of  water  has  been  evaporated,  and  con- 
tains not  less  than  eighteen  (18)  per  cent  of  milk  solid. 

6.  Cream  is  that  portion  of  milk,  rich  in  milk  fat,  which 
rises  to  the  surface  of  milk  on  standing,  or  is  separated  from 
it  by  centrifugal  force,  is  fresh  and  clean,  and  contains  not 
less  than  eighteen  (18)  per  cent  of  milk  fat. 

7.  Evaporated  cream,  or  clotted  cream,  is  cream  from 
which  a  considerable  portion  of  water  has  been  evaporated. 

8.  Milk  fat,  or  butter  fat,  is  the  fat  of  milk  and  has  a 
Reichert-Meissel  number  not  less  than  24  and  a  specific 
gravity  not  less  ihan  .905   (40  degrees  C). 


BUSINESS    CONTRACTS   AND   LEGAL   OBLIGATIONS.  83 

9.  Butter  is  the  clean,  non-rancid  product  made  by  gather- 
ing in  any  manner  the  fat  of  fresh  ripened  milk  or  cream 
into  a  mass,  which  also  contains  a  small  portion  of  the  other 
milk  constituents,  with  or  without  salt,  and  contains  not  less 
than  80  per  cent  of  milk  fat. 

Act  of  the  Legislature,  approved  April  22d,  1909. 
Act  of  the  Legislature,  approved  April  21st,   1911. 

10.  Unsanitary  Dairies. — A  dairy  must  be  kept  in  a  sani- 
tary condition,  and  it  will  be  deemed  unsanitary,  if  drink- 
ing water  is  stagnant  or  otherwise  impure;  if  manure  in 
yards  is  allowed  to  ferment  and  decay;  if  the  milk  house  or 
milk  room  is  not  properly  screened  to  exclude  flies  and 
insects — and  the  milk  room  or  milk  house  must  not  be 
located  in  or  be  a  part  of  any  residence  or  barn  or  poultry 
house;  if  the  milk  is  not  cooled  to  as  low  a  temperature 
as  practicable  within  one  hour  after  it  is  drawn  from  the 
cows. 

Stagnant  water,  manure,  privy,  vault,  urinal,  horse  stable, 
open  cesspool,  pig  pen,  shall  not  be  permitted  within  100 
feet  of  any  milk  house  or  room,  or  within  fifty  feet  of  any 
cow  stalls  or  stanchions  or  other  place  where  milking  is 
done. 

Walls  must  be  kept  clean,  and  the  interior  of  cattle 
stables,  barns,  milking  sheds,  milk  houses  or  milk  rooms, 
must  be  whitewashed  with  lime  at  least  once  in  two  years. 

Pails,  cans,  bottles,  or  other  containers  of  milk,  and 
strainers,  coolers,  and  other  utensils,  must  be  sterilized  by 
boiling  water  or  superheated  steam  each  and  every  time 
the  same  are  used. 

11.  Unsanitary  Creamery  or  Factory. — A  creamery  or 
any  factory  of  diary  products,  or  any  store,  depot  or  other 
place  where  milk  is  handled  or  kept  for  sale,  shall  be 
deemed  unsanitary  under  the  meaning  of  this  act,  among 
other  causes  that  render  milk,  or  products  made  therefrom, 
unclean,  unwholesome,  impure,  stale  or  of  low  grade  or 
inferior  quality,  in  the  following  cases: 


8i  BUSINESS  LAWS  FOR  BUSINESS   MEN. 

(a)  If  milk  or  cream  is  received  that  has  reached  an 
advanced  stage  of  fermentation,  or  that  shows  a  state  of 
putrifactive  fermentation,  or  if  it  is  received  in  cans  or  other 
containers  that  have  not  been  steriHzed  by  means  of  boiling 
water  or  superheated  steam  after  each  delivery. 

(b)  If  the  utensils  and  apparatus  that  come  in  contact  with 
milk  or  its  products  in  the  process  of  manufacture  are  not 
thoroughly  washed  and  sterilized  •  by  means  of  boiling  water 
or  superheated  steam,  after  each  using. 

(c)  If  the  floor  is  so  constructed  as  to  permit  the  flow- 
ing or  soaking  of  water,  milk  or  other  liquid  underneath 
or  among  the  interstices  of  such  floor,  where  fermentation 
and  decay  may  take  place,  or  if  such  floor  may  not  be 
readily  kept  free  from  dirt. 

(d)  If  drains  are  not  provided  that  will  convey  refuse 
milk,  water  and  sewage  away  to  a  point  at  least  fifty  yards 
distant  from  such  creamery  or  factory  of  dairy  products,  or 
if  any  cesspool,  privy  vaults,  hog  yard,  slaughter  house, 
manure  or  any  decaying  vegetables  or  animal  matter,  shall 
be  within  a  distance  that  will  permit  foul  odors  to  reach  any 
such  creamery  or  other  factory  of  dairy  products  or  store 
or  depot  where  milk  or  its  products  are  sold  or  handled. 

(e)  If  such  creamery  or  factory  of  dairy  products,  does 
not  permit  access  of  light  and  air  sufficient  to  secure  good 
ventilation. 

(f)  If  in  any  building  or  buildings  used  in  connection 
with  any  creamery,  or  factory  of  dairy  products,  any  insects 
or  other  species  of  animal  life  are  permitted,  or  if  upon  the 
floor,  the  sides  or  the  walls,  any  milk  or  its  products,  or 
any  other  filth  is  allowed  to  accumulate,  or  ferment,  or 
decay,  or  if  the  bodies  or  wearing  apparel  of  persons  em- 
ployed, or  coming  in  contact  with  any  milk  or  its  products, 
in  any  creamery,  or  factory  of  any  dairy  products,  shall  be 
unclean  and  not  washed  from  time  to  time  with  reason- 
able frequency. 

12.  Liquid  Measurements. — No  person,  firm  or  corpora- 
tion shall  hereafter  sell,  offer  for  sale,  or  receive  for  the  purpose 


BUSINESS   CONTRACTS   AND   LEGAL  OBLIGATIONS.  85 

of  sale,  any  milk,  skim  milk  or  cream,  except  such  sale, 
offer,  or  receipt,  shall,  as  to  quantity,  be  based  upon  the  liquid 
gallon,  containing  two  hundred  and  thirty-one  cubic  inches,  or 
the  liquid  quart  containing  fifty-seven  and  seventy-five  one- 
hundredths  cubic  inches  or  the  proper  and  complete  liquid 
subdivision  thereof.  Provided,  that  nothing  in  this  act  shall 
be  construed  as  prohibiting  the  buying  and  selling  of  milk  or 
cream  either  by  weight  or  on  the  basis  of  its  butter  fat  con- 
tents. And  provided  further  that  in  any  hotel,  restaurant,  or 
other  eating  place,  where  milk  is  sold  with  meals,  or  where 
it  is  sold  to  be  drunk  immediately,  it  may  be  sold  by  the 
glass. 

13.  Pasteurized  Butter. — No  person  or  persons,  firm  or 
corporation,  by  themselves  or  their  agents  or  employees,  shall 
manufacture  for  sale,  offer  for  sale,  expose  for  sale,  or 
have  in  his,  its  or  their  possession  for  sale,  any  package  of 
butter  upon  which,  or  upon  the  wrapper  or  container  of 
which  there  shall  be  printed  or  otherwise  marked  the 
word  pasteurize  or  any  of  its  derivatives,  unless  in 
the  process  of  the  manufacture  of  the  butter  contained 
therein  either  the  milk  or  cream  from  which  the  same  was 
made  shall  have  been  exposed  to  a  temperature  exceeding 
one  hundred  and  fifty  degrees  Fahrenheit,  or  unless  in  the 
process  of  pasteurization  such  milk  or  cream  be  heated  to  a 
temperature  not  less  than  140  degrees  Fahrenheit  and  re- 
tarded at  least  twenty  minutes  in  the  heat  at  said  tem- 
perature. 

14.  Weight. — It  shall  be  unlawful  for  any  person,  firm 
or  corporation  to  sell,  offer  for  sale,  or  to  cause  or  permit 
to  be  sold  or  offered  for  sale,  any  butter  in  prints  or  packages 
or  otherwise  other  than  by  or  in  terms  of  pounds  and  ounces, 
avoirdupois,  or  for  a  greater  weight  than  the  true  net  weight 
thereof. 

15.  Registration  of  Dairies. — Every  person,  firm  or  cor- 
poration operating  any  dairy,  where  more  than  four  cows  are 
milked,  and  every  creamery,  cheese  factory,  receiving  station. 


86  BUSINESS   LAWS   FOR  BUSINESS   MEN. 

skimming  station,  ice  cream  or  ice  milk  manufacturer,  or  milk 
condensary,  shall  on  or  before  the  first  day  of  November  of 
each  year,  cause  to  be  registered  with  the  secretary  of  the 
state  dairy  bureau  a  statement  showing  the  full  name  and  ad- 
dress of  such  person,  firm  or  corporation  so  operating  the 
same,  and  also  the  full  name  and  address  of  the  owner  or 
owners  of  the  business  so  being  operated,  in  case  the  person 
operating  the  same  is  not  the  owner,  together  with  a  statement 
of  the  class  of  such  business  carried  on  by  such  person  or 
corporation,  and  the  number  of  cows  then  being  milked,  in 
case  of  a  dairy. 

16.  Packages  or  Wrappers. — In  case  any  butter  is  sold, 
or  offered  for  sale,  in  a  package  or  wrapper  purporting  to 
designate  the  producer  of  such  butter,  such  producer  must 
be  correctly  designated;  and  if  under  a  label  purporting  or 
calculated  to  designate  the  place  of  production,  it  must  cor- 
rectly designate  the  place  where  made.  No  person,  firm  or 
corporation  shall  put  up  in  package  or  wrapper,  or  other- 
wise prepare  for  shipment  or  sale,  any  butter  under  a  label 
purporting  to  designate  the  producer  or  place  of  production, 
except  in  accordance  with  the  provisions  hereof;  nor  shall 
any  person  sell  or  offer  for  sale  any  butter  in  a  package 
or  wrapper  purporting  to  designate  the  name  of  the  pro- 
ducer or  the  place  of  production,  except  in  accordance  with 
the  provisions  hereof. 

17.  Imitation  Butter  or  Cheese. — For  the  purposes  of 
this  act,  every  article,  substance,  or  compound,  other  than 
that  produced  from  pure  milk,  or  cream  from  the  same, 
made  in  the  semblance  of  butter,  and  of  a  color  resembling 
butter,  by  whatever  means  the  coloring  is  accomplished,  and 
designed  to  be  used  as  a  substitute  for  butter  made  from 
pure  milk  or  cream,  is  hereby  declared  to  be  imitation  butter; 
and  for  the  purposes  of  this  act,  every  article,  substance,  or 
compound,  other  than  that  produced  from  pure  milk,  or 
cream  from  the  same,  made  in  the  semblance  of  cheese, 
and  designed  to  be  used  as  a  substitute  for  cheese  made 
from  pure  milk  or  cream,  is  hereby  declared  to  be  imitation 


BUSINESS    CONTRACTS   AND   LEGAL   OBLIGATIONS.  87 

cheese;  provided,  that  the  use  of  salt,  rennet,  and  harmless 
coloring  matter  for  coloring  the  product  of  pure  milk  or 
cream,  shall  not  be  construed  to  render  such  product  an 
imitation;  and  provided  that  nothing  in  this  section  shall 
prevent  the  use  of  pure  skimmed  milk  in  the  manufacture 
of  cheese. 

18.  Marks  on  Imitation  Butter  or  Cheese. — Each  per- 
son, who,  by  himself  or  another,  lawfully  manufactures  any 
oleomargarine,  or  any  substance  designed  to  be  used  as 
a  substitute  for  butter  or  cheese,  shall  mark  the  same  by 
branding,  stamping,  or  stenciling  upon  the  top  and  sides  of 
each  tub,  firkin,  box,  or  other  package  in  which  such  article 
or  substance  shall  be  kept,  and  in  which  it  shall  be  removed 
from  the  place  where  it  is  produced  or  put  up,  in  a  clear 
and  durable  manner,  in  the  English  language,  the  words 
"oleomargarine,"  or  "substitute  for  butter,"  or  "substitute 
for  cheese,"  as  the  case  may  be,  in  printed  letters  in  plain 
roman  type,  each  of  which  shall  not  be  less  than  one  inch  in 
height  by  one-half  inch  in  width,  and  in  addition  to  the 
above  shall  prepare  a  statement,  printed  in  plain  roman  type, 
of  a  size  not  smaller  than  pica,  stating  in  the  English  lan- 
guage its  name,  and  the  name  and  address  of  the  manufac- 
turer, the  name  of  the  place  where  manufactured  or  put  up, 
and  also  the  names  and  actual  percentages  of  the  various 
ingredients  used  in  the  manufacture  of  such  oleomargarine, 
imitation  butter  or  imitation  cheese;  and  shall  place  a  copy 
of  said  statement  within  and  upon  the  contents  of  each  tub, 
firkin,  box,  or  other  package,  and  next  to  that  portion  of 
each  tub,  firkin,  box,  or  other  package,  as  is  commonly  and 
most  conveniently  opened,  and  shall  label  the  top  and  sides 
of  each  tub,  firkin,  box,  or  other  package  by  affixing  thereto 
a  copy  of  said  statement,  in  such  manner,  however,  as  not  to 
cover  the  whole  or  any  part  of  said  mark  of  "oleomargarine," 
"substitute  for  butter,"  or  "substitute  for  cheese." 

19.  Possession  and  Transportation. — No  person,  by  him- 
self or  another,  shall  knowingly  ship,  consign,  or  forward  by  any 
common  carrier,  whether  public  or  private,  any  oleomargarine, 


88  BUSINESS  LAWS   FOR   BUSINESS   MEN. 

or  any  substance  designed  to  be  used  as  a  substitute 
for  butter  or  cheese,  unless  the  same  be  marked  and  con- 
tain a  copy  of  the  statement,  and  be  labeled  as  provided 
by  this  act;  and  no  carrier  shall  knowingly  receive  the  same 
for  the  purpose  of  forwarding  or  transporting,  unless  it 
shall  be  manufactured,  marked,  and  labeled  as  hereinbefore 
provided,  and  unless  it  is  consigned  and  by  the  carrier  re- 
ceipted for  by  its  true  name;  provided,  that  this  act  shall  not 
apply  to  any  goods  in  transit  between  foreign  states  across 
the  State  of  California. 

No  person  or  his  agent  shall  knowingly  have  in  his  posses- 
sion or  under  his  control  any  oleomargarine,  or  any  sub- 
stance designed  to  be  used  as  a  substitute  for  butter  or 
cheese,  unless  the  tub,  firkin,  box,  or  other  package  contain- 
ing the  same,  shall  be  clearly  and  durably  marked  and  labeled 
as  provided  by  this  act,  and  also  contain  a  copy  of  the 
statement  required  by  this  act;  and  if  the  tub,  firkin,  box, 
or  other  package  be  opened,  then  a  copy  of  the  statement 
described  in  this  act,  shall  be  kept  with  its  face  up,  upon 
the  exposed  contents  of  said  tub,  firkin,  box,  or  other 
package;  provided,  that  this  section  shall  not  be  deemed 
to  apply  to  persons  who  have  the  same  in  their  possession 
for  the  actual  consumption  of  themselves  or  family,  and  for 
no  other  purpose. 

20.  Sale  of  Imitation  Butter  or  Cheese. — No  person,  by 
himself  or  another,  shall  sell,  or  offer  for  sale,  or  take 
orders  for  the  future  delivery  of  any  oleomargarine,  or  any 
substance  designed  to  be  used  as  a  substitute  for  butter  or 
cheese,  under  the  name  of  butter,  or  under  the  pretense  that 
the  same  is  butter  or  cheese;  and  no  person,  by  himself  or 
another,  shall  sell  any  substance  designed  to  be  used  as  a 
substitute  for  butter  or  cheese,  unless  he  shall  inform  the 
purchaser  distinctly,  at  the  time  of  the  sale,  of  its  true  name 
and  character,  and  that  the  same  is  a  substitute  for  butter 
or  cheese,  as  the  case  may  be,  and  shall  deliver  to  the 
purchaser,  at  the  time  of  the  sale,  a  separate  and  distinct 
copy  of  the  statement  described  in  this  act;  and  no  person 


BUSINESS    CONTRACTS   AND   LEGAL   OBLIGATIONS.  89 

shall  use  in  any  way  in  connection  or  association  with  the 
sale,  or  exposure  for  sale,  or  advertisement  of  any  oleo- 
margarine or  any  substance  designed  to  be  used  as  a  sub- 
stitute for  butter  or  cheese,  the  words  "butterine,"  "cream- 
ery," or  "dairy,"  or  the  representation  of  a  cow  or  any 
breed  of  dairy  cattle,  or  any  combination  of  such  words  and 
representations,  or  any  other  words  or  symbols,  or  combina- 
tions thereof,  commonly  used  by  the  dairy  industry  in  the 
sale  of  butter  or  cheese. 

No  keeper  or  proprietor  of  any  'bakery,  hotel,  boarding 
house,  restaurant,  saloon,  lunch-counter,  or  other  place  of 
public  entertainment,  and  no  person  having  charge  thereof 
or  employed  thereat,  and  no  person  furnishing  board,  for 
others  than  members  of  his  own  family,  and  no  employee 
where  such  board  is  furnished  as  the  compensation  or  as  a 
part  of  the  compensation  of  any  employee,  shall  place  before 
any  patron  or  employee,  for  use  as  food,  any  oleomargarine, 
or  any  substance  designed  to  be  used  as  a  substitute  for 
butter  or  cheese,  unless  the  same  be  accompanied  by  a  copy 
of  the  statement  described  in  this  act,  and  by  a  verbal  noti- 
fication to  said  patron  that  such  substance  is  a  substitute  for 
butter  or  cheese. 

No  action  can  be  maintained  on  account  of  any  sale  or  other 
contract  made  in  violation  of,  or  with  intent  to  violate,  this 
act,  by  or  through  any  person,  who  was  knowingly  a  party 
to  such  wrongful  sale  or  other  contract. 

Every  person  having  possession  or  control  of  any  oleo- 
margarine, or  any  substance  designed  to  be  used  as  a  sub- 
stitute for  butter  or  cheese,  which  is  not  marked  as  re- 
quired by  the  provisions  of  this  act  shall  be  presumed  to 
have  known,  during  the  time  of  such  possession  or  control, 
that  the  same  was  imitation  butter,  or  imitation  cheese,  as 
the  case  may  be. 

No  butter  or  cheese  not  made  wholly  from  pure  milk  or 
cream,  salt,  and  harmless  coloring  matter,  shall  be  used  in 
any  of  the  charitable  or  penal  institutions  that  receive  assist- 
ance from  the  state. 


90  BUSINESS    LAWS    FOR   BUSINESS    MEN, 

21.  License  to  Sell. — No  person,  firm  or  corporation,  by 
themselves  or  their  agents  or  employees,  shall  sell,  offer  for 
sale,  or  expose  for  sale,  or  have  in  his,  its,  or  their  possession 
for  sale,  any  oleomargarine  or  any  renovated  butter,  unless 
the  same  shall  have  printed  upon  each  and  every  package,  roll, 
print,  square,  and  upon  any  container  of  such  renovated 
butter,  or  oleomargarine,  the  words  "renovated  butter,"  or 
the  word  "oleomargarine,"  as  the  case  may  be  in  letters  not 
less  than  one-half  inch  in  height,  and  who  shall  not  have 
secured  from  the  State  Dairy  Bureau,  now  existing  under 
the  laws  of  this  state,  a  license  to  sell. 

The  term  renovated  butter  as  used  in  this  act  is  hereby 
defined  to  mean  and  include  butter  that  has  been  reduced 
to  a  liquid  state  by  melting  and  drawing  off  such  liquid  or 
butter  oil  and  churning  or  otherwise  manipulating  it  in  con- 
nection with  milk  or  any  product  thereof. 

No  person,  firm  or  corporation,  shall  engage  in  the  busi- 
ness or  occupation  of  manufacturing,  selling,  dealing  in,  or 
furnishing  renovated  butter,  oleomargarine,  or  any  substance 
designed  to  be  used  as  a  substitute  for  butter,  without  first 
having  applied  for  and  obtained  a  license  so  to  do.  Any 
person,  firm  or  corporation,  desiring  to  engage  in  the  busi- 
ness or  occupation  of  manufacturing,  selling,  dealing  in  or 
furnishing  to  his,  its  or  their  patrons,  oleomargarine,  or  any 
substance  designed  to  be  used  as  a  substitute  for  butter,  or 
imitation  butter,  or  adulterated  butter,  or  renovated  butter, 
as  in  this  act  defined,  shall  first  make  application  each  year 
to  the  State  Dairy  Bureau  for  a  license,  and  upon  payment 
of  a  license  fee  to  the  State  Dairy  Bureau,  said  bureau  shall 
issue  to  the  applicant  a  license.  All  such  licenses  shall  con- 
tain the  following  proviso:  Provided,  that  this  license  does 
not  authorize  the  holder  hereof  to  manufacture,  sell,  deal  in 
or  furnish  any  oleomargarine,  or  similar  substances  designed 
to  be  used  as  a  substitute  for  butter,  which  contain  any  color- 
ing matter  or  which  resemble  yellow  butter  in  appearance. 
All  said  licenses  shall  expire  on  June  30th  of  each  year,  and 
may  be  issued  in  periods  of  one  year,  or  less  than  one  year, 
upon  payment  of  a  proportionate  part  of  the  license  fee.   The 


BUSINESS   CONTRACTS  AND  LEGAL  OBLIGATIONS.  91 

fees  for  issuing  said  license  are  hereby  fixed  at  the  amounts 
below  named,  annually.  The  fee  for  issuing  said  license  to 
manufacturers  of  any  of  said  substances  within  this  state 
shall  be  one  hundred  dollars,  and  if  issued  to  wholesale 
dealers  in,  or  importers  or  agents  for  importers  of  any  of 
said  substances  the  fee  shall  be  fifty  dollars,  and  if  issued  to 
retail  dealers  in  any  of  said  substances  the  fee  shall  be  five 
dollars,  and  if  issued  to  the  keeper  of  any  hotel,  restaurant, 
boarding  house  or  other  place  where  meals  are  served  and 
payment  is  received  therefor,  either  immediately  or  by  the 
day,  week  or  month,  the  fee  shall  be  two  dollars.  The  term 
wholesale  dealer  includes  all  persons,  firms  or  corporations, 
who  sell  any  of  said  substances  in  quantities  of  ten  pounds 
or  more  at  a  time  or  in  the  same  transaction.  The  term 
retail  dealer  includes  all  persons  who  sell  only  in  quantities 
of  less  than  ten  pounds.  All  licenses,  while  in  force,  shall 
be  kept  conspicuously  displayed  in  the  place  of  business  of 
the  party  or  parties  to  whom  they  have  been  issued. 

It  shall  be  unlawful  for  any  person,  firm  or  corporation,  to 
manufacture,  buy,  sell,  deal  in,  or  furnish  to  his,  its  or  their 
patrons,  or  to  have  in  possession,  for  any  purpose  whatsoever 
other  than  for  consumption  in  his  own  family,  or  for  trans- 
portation in  case  of  a  boat  or  railroad  company,  or  for  the 
purpose  of  storage  in  case  of  a  warehouse  or  cold  storage 
company,  any  oleomargarine,  or  similar  substance  designed 
to  be  used  as  a  substitute  for  butter,  or  any  substance  re- 
sembling butter,  but  not  made  wholly  from  pure  milk  or 
cream,  or  any  imitation  butter,  or  adulterated  butter,  or 
renovated  butter,  as  in  this  act  defined,  without  first  having 
applied  for  and  obtained  from  the  State  Dairy  Bureau  of 
the  State  of  California,  the  license  herein  required. 

22.  Record  of  Sales. — Every  person,  firm  or  corporation 
who  is  required  to  obtain  and  hold  a  manufacturer's  or  a 
wholesaler's  or  importer's  license  shall  keep  a  correct  record 
in  a  form  separate  from  all  other  business  in  which  every  sale 
and  purchase  of  renovated  butter,  imitation  butter,  oleo- 
margarine, or  any  substitute  for  butter  or  substance  designed 


92  BUSINESS   LAWS   FOR  BUSINESS   MEN. 

to  be  used  as  a  substitute  for  butter,  or  resembling  butter, 
which  substance  is  not  made  wholly  from  pure  milk  or 
cream,  or  any  imitation  cheese  or  imitation  dairy  products 
of  any  kind,  shall  be  recorded  at  the  time  of  the  transaction, 
giving  in  detail  the  quantity  sold  or  purchased,  the  name 
and  location  of  the  buyer  or  seller,  the  date,  and  the  place 
to  which  it  was  shipped  or  delivered,  and  by  whom  the  order 
or  sale  was  put  up  and  delivered.  Every  warehouse,  cold 
storage  company,  boat,  railroad  or  other  transportation  com- 
pany shall  keep  a  correct  record  of  all  oleomargarine,  imita- 
tion butter,  renovated  butter,  substitute  for  butter,  imitation 
cheese,  or  other  imitation  dairy  products,  which  at  any  time 
may  be  in  their  possession,  or  which  may  be  transported  or 
stored  by  them,  showing  the  owner,  the  quantity  and  kind 
of  goods,  the  date  when  stored,  and  when  removed,  in  case 
of  warehouses  and  cold  storage  companies,  and  showing  the 
character  of  goods  billed,  the  quantity,  the  name  and  address 
of  consignor  and  consignee,  and  the  date  ot  transportation, 
in  case  of  boats  and  railroad  companies. 

All  said  records  herein  required  to  be  kept,  shall  at  all 
times  during  business  hours,  be  open  to  the  inspection  of  the 
agents  and  inspectors  of  the  State  Dairy  Bureau,  and  of  any 
officer  of  any  city  or  county  board  of  health,  and  of  any 
peace  officer  of  any  city  or  any  county  of  the  state. 

A  failure  to  keep  any  of  the  records  herein  required  to 
be  kept  or  to  permit  the  inspection  of  such  records,  by  any 
inspector  or  agent  of  the  State  Dairy  Bureau,  or  of  any 
city  or  county  board  of  health,  or  by  any  peace  officer  of  any 
city  or  county,  as  herein  required,  is  hereby  declared  to  be 
a  misdemeanor. 

23.  False  Tests  or  Statements. — Any  person,  firm  or 
corporation,  whether  as  principal,  agent,  manager  or  other- 
wise, who  buys  or  sells  dairy  products,  or  deals  in  milk, 
cream,  or  butter,  and  who  buys  or  sells  the  same  upon  the 
basis  of  their  richness  or  weight,  or  the  percentage  of  cream 
or  butter  fat  contained  therein,  who  gives  or  reports  to  any 
dairyman  or  patron  a  false  test,  or  who  uses  any  apparatus, 


BUSINESS   CONTRACTS  AND  LEGAL  OBLIGATIONS.  93 

test  bottle,  or  other  appliance,  or  who  uses  the  "Babcock 
test,"  or  machine  of  like  character,  for  testing  such  dairy 
products,  cream,  or  butter,  which  is  not  accurate  and  correct, 
or  which  gives  wrong  or  false  percentages,  or  which  is  cal- 
culated in  any  way  to  defraud  or  injure  the  person  with  whom 
he  deals,  and  any  owner,  manager,  agent,  or  employee  of  any 
creamery,  condensary,  cheese  factory,  or  other  person  who 
falsely  manipulates,  underreads,  or  overreads  the  Babcock 
test,  or  any  other  contrivance,  used  for  determining  the 
quality  or  value  of  milk  or  cream,  is  guilty  of  a  misdemeanor. 

24.  Inspection  by  State  Dairy  Bureau. — The  State  Dairy 
Bureau  shall  from  time  to  time  inspect  and  examine  as  to 
their  accuracy,  or  their  adaptability  to  give  accurate  results, 
all  glassware,  measures,  scales,  weights  and  other  apparatus 
used  in  creameries,  and  factories  of  dairy  products,   where 
milk  and  cream  are  purchased,  to  determine  the  amount  or 
percentage    of    fat    in    milk    or    cream.      Said    State    Dairy 
Bureau  shall   supply   at  cost,   and  not  oftener   than   once   a 
year,  to  every  creamery,  or  other  factory  of  dairy  products 
where  milk  and  cream,  or  either,  are  purchased,  on  application 
not  more  than  two  tubes  or  bottles  and  one  pipette  of  the 
forms  used  with  the  Babcock  test,   which  it  shall   first  ex- 
amine as  to  accuracy,  and  if  accurate,   or  adapted  to  give 
accurate   results   under  the   usual   method   of   operating   the 
Babcock  test,  said  State  Dairy  Bureau  shall  certify  to  this 
by  marking  durably  and  permanently  upon  each  and  every 
piece  of  apparatus  supplied  the  letters  "D.  B."     Said  State 
Dairy  Bureau  shall  also,  upon  payment  at  the  rate  of  one 
dollar  for  each  dozen,  test  or  examine  into  the  accuracy  of 
all  test  bottles  or  tubes  and  pipettes  sent  to  it  direct  from 
any  creamery,  or  other  factory  of  dairy  products,  where  milk 
or  cream  are  purchased,  and  if  found  accurate,  or  adapted 
to  give  accurate  results,  the  letters  "D.  B."  shall  be  marked 
upon  each  piece  of  apparatus  examined. 

25.  Standard  Measure. — The  state's  standard  measure,  or 
pipette,  shall  have  a  capacity  of  seventeen  and  six-tenths 
cubic  centimeters,  and  the  standard  test  tubes  or  bottles  for 


94  BUSINESS   LAWS   FOR  BUSINESS   MEN. 

milk  shall  have  a  capacity  of  one  cubic  centimeter  of  mercury 
at  a  temperature  of  65  degrees  Fahrenheit  between  "zero"  and 
"five"  on  the  graduated  scale  on  the  neck  thereof;  the  scale 
to  have  a  length  of  not  less  than  six  and  five-tenths  (6.5) 
millimeters  for  each  per  cent,  or  six  and  five-tenths  centi- 
meters between  zero  and  ten  on  the  graduated  scale  on  the 
neck  thereof.  Said  scale  to  be  graduated  to  at  least  two- 
tenths  of  one  per  cent.  The  milk  fat  in  the  neck  of  said 
bottle  to  be  read  from  the  lower  line  of  separation  between 
the  fat  and  the  water  to  the  top  of  the  fat  column  at  a 
temperature  not  lower  than  130  degrees  Fahrenheit  and 
not  higher  than  140  degrees  Fahrenheit. 

26.  The  Babcock  Test. — All  cream  sold  in  the  State  of 
California  on  the  basis  of  the  richness  or  the  percentage 
of  milk  fat  contained  therein,  shall  be  tested  by  the  Babcock 
test,  using  a  weighed  sample  of  eighteen  grams,  or  a  weighed 
sample  of  nine  grams  (results  to  be  doubled),  weighed  on 
a  balance  sensitive  to  10  milligrams,  and  tested  in  a  test 
bottle  with  a  scale  graduated  to  at  least  five-tenths  of  one 
per  cent.  Said  scale  to  be  of  a  length  of  at  least  one  centi- 
meter to  every  five  per  cent  where  an  eighteen  gram  sample 
is  used.  Where  a  nine  gram  sample  is  used  in  a  bottle  grad- 
uated for  eighteen  grams,  the  test  bottle  must  have  a  scale 
graduated  to  at  least  two-tenths  of  one  per  cent.  Said  scale 
to  be  of  a  length  of  at  least  two  centimeters  to  every  five 
per  cent.  Where  a  nine  gram  sample  is  used  in  a  bottle 
graduated  for  nine  grams,  the  test  bottle  shall  have  a  scale 
graduated  to  five-tenths  of  one  per  cent  and  shall  be  of  a 
length  not  less  than  seven  centimeters  for  every  fifty  per 
cent.  The  milk  fat  in  the  test  bottle  shall  be  read  at  a  tem- 
perature not  lower  than  130  degrees  Fahrenheit  and  not 
higher  than  140  degrees  Fahrenheit.  The  fat  column  must 
be  read  from  the  bottom  of  the  lower  meniscus  to  the 
bottom  of  the  upper  meniscus. 

Provided,  however,  that  no  test  bottles  now  in  use  in  any 
creamery  or  other  factory  of  dairy  products  or  by  any  private 
party  in  this  state  shall  be  condemned  or  declared  unfit  for 


BUSINESS    CONTRACTS   AND   LEGAL   OBLIGATIONS.  95 

use  prior  to  the  expiration  of  one  year  from  the  taking  effect 
of  this  act,  if  the  scale  thereof  is  correctly  calibrated. 

27.  Meaning  of  "Product  of  Milk." — It  shall  be  unlawful 
for  any  person  to  produce,  manufacture  or  prepare  for  sale, 
or  to  sell  or  offer  for  sale,  or  have  on  hand  for  sale,  any 
milk,  including  condensed  or  evaporated  milk,  or  any  pro- 
duct   of    milk,    that    is    adulterated    within    the    meaning    of 
this  act.     The  words  "product  of  milk"  as  used  in  this  act, 
shall  not  apply  to  any  product  into  which  milk,  or  a  product 
of  milk,  may  enter  as  an  ingredient  or  component  of  a  food 
product  that  does  not  consist  of  milk,  or  milk  products  alone, 
such  as  pastry,  and  confectionery;  provided,  that  this  section 
shall  not  be  construed  to  prevent  the  use  of  common   salt 
(chloride  of  sodium)   in  dairy  products.     Any  label,  printed 
matter,  or  advertising  or  descriptive  matter  appearing  upon, 
or  in  connection  with  any  package,  parcel  or  quantity  of  milk 
or  milk  products  when  being  sold,  offered  for  sale,  or  having 
on  hand  for  sale,  and  having  reference  to  the  article  being 
sold,   offered   for  sale,  or  on  hand   for   sale,   shall   conform 
to  the  provisions  of  this  act,  and  if  it  fails  to  conform  to 
the  provisions  of  this  act,  such  article  shall  be  deemed  adul- 
terated within  the  meaning  of  this  act.     It  shall  be  unlawful 
for   any   person   under   this    act,    when    selling,    or    offering 
for  sale,  or  having  on  hand  for  sale,  milk  or  any  product  of 
milk  to  use  the  words  "milk,"  "condensed  milk,"  "sweetened 
condensed  milk,"   "skim  milk,"   "condensed   skimmed   milk," 
"evaporated    cream,"    "cream,"    "butter,"    "cheese,"    "butter- 
milk," "ice  cream,"  or  "ice  milk,"  either  verbally,  or  printed 
or     written     on     any     label     or     printed     matter,     in     con- 
nection  with   the   sale,   or   offering   for   sale,   or   having   on 
hand   for   sale,   of   milk   or   any   product   of   milk,    or   upon 
any  bill  of  fare  used  in  any  hotel,  restaurant  or  other  places 
where  meals  are  served,  when  the  article  shall  not  conform 
to  the  standards  and  provisions  of  this  act. 

28.  Cheese  and  Its  Marks. — Cheese  is  the  sound,  solid, 
and  ripened  product  made  from  milk  or  cream,  by  coagulating 
the  casein  thereof  with  rennet  or  lactic  acid,  with  or  without 


96  BUSINESS  LAWS   FOR  BUSINESS   MEN. 

the  addition  of  ripening  ferments  and  seasoning,  and  with  or 
without  salt  and  harmless  coloring  matter.  All  cheese  marked 
"Full  cream  cheese,"  or  "Full  milk  cheese,"  must  contain  in 
the  water- free  substance,  not  less  than  fifty  per  cent  (50%) 
of  milk  fat.  All  cheese  marked  "Half  skim  cheese,"  must 
contain  in  the  water-free  substance  not  less  than  twenty-five 
(25)  per  cent  of  milk  fat.  All  cheese  not  plainly  marked 
or  branded  as  to  its  quality  must  contain  in  the  water-free 
substance  not  less  than  fifty  (50)  per  cent  of  milk  fat. 

29.  Ice  Cream. — Ice  cream  is  the  frozen  product,  made 
from  pure  sweet  cream  and  sugar  with  or  without  a  harm- 
less flavoring  or  coloring,  and  contains  not  less  than  twelve 
(12)  per  cent  of  milk  fat,  and  not  more  than  six-tenths  (.6) 
of  one  per  cent  of 'pure  and  harmless  vegetable  gum  or 
gelatin. 

Fruit  ice  cream  is  the  frozen  product  made  from  pure, 
sweet  cream,  sugar,  and  sound,  clean,  mature  fruits,  and 
contains  not  less  than  ten  (10)  per  cent  of  milk  fat,  and  not 
more  than  six-tenths  (.6)  of  one  per  cent  of  pure  and  harm- 
less vegetable  gum  or  gelatin. 

Nut  ice  cream  is  the  frozen  product  made  from  pure, 
sweet  cream,  sugar,  and  sound,  non-rancid  nuts,  and  contains 
not  less  than  ten  (10)  per  cent  of  milk  fat,  and  not  more 
than  six-tenths  (.6)  of  one  per  cent  of  pure  and  harmless 
vegetable  gum  and  gelatin. 

Ice  milk  is  the  frozen  product,  containing  less  fat  than 
ice  cream,  and  made  from  pure,  sweet  milk  and  sugar,  with 
or  without  a  harmless  flavoring  or  coloring,  and  contains 
not  less  than  two  and  four-tenths  (2.4)  per  cent  of  milk 
fat,  and  not  more  than  six-tenths  (.6)  of  one  per  cent  of 
pure  and  harmless  vegetable  gum  or  gelatin. 

30.  Skimmed  Milk. — It  shall  be  unlawful  for  any  person, 
firm  or  corporation  to  sell,  exchange  or  deliver,  or  to  offer 
for  sale,  exchange  or  delivery,  or  to  cause  or  permit  to  be 
sold,  exchanged  or  delivered,  or  to  be  offered  for  sale,  ex- 
change or  delivery,  or  to  have  in  possession  for  sale,  ex- 
change or  delivery,  any  milk   from  which  any  part  of  the 


BUSINESS   CONTRACTS   AND  LEGAL  OBLIGATIONS.  97 

cream  shall  have  been  removed,  or  any  skimmed  milk,  unless 
the  same  be  offered  for  sale  and  sold  as  skimmed  milk,  or 
unless  there  shall  be  attached  to  the  outside  of  every  vessel, 
can  or  package  from  or  in  which  such  skimmed  milk  is  sold 
or  held  for  exchange  or  delivery,  a  tag  upon  which  shall 
be  printed  in  black  letters  at  least  one  inch  in  height  the 
word  "skim"  or  the  words  "skimmed  milk." 

31.  Name  on  Wagons. — All  wagons,  vehicles,  or  carts 
from  which  market  milk,  cream,  butter,  ice  cream,  buttermilk, 
or  ice  milk  are  sold,  marketed,  delivered,  or  peddled,  shall 
have  the  name  and  address  of  the  owner  plainly  painted 
thereon,  in  letters  at  least  three  inches  high,  and  one  and 
one-half  inches  wide,  on  both  sides  of  such  vehicle. 

32.  Use  of  Chemical  Substances. — It  shall  be  unlawful 
for  any  person  to  produce,  manufacture  or  prepare  for  sale, 
or  to  sell,  or  to  offer  for  sale,  or  to  have  on  hand  for  sale, 
any  milk,  or  product  of  milk,  to  which  has  been  added,  or 
that  may  contain,  any  compound  of  boron,  salicylic  acid, 
formaldehyde,  or  other  chemical  or  substance  for  the  pur- 
pose of  preventing  or  delaying  fermentation  or  souring.  It 
shall  be  unlawful  for  any  person  to  produce,  manufacture 
or  prepare  for  sale,  or  to  sell,  or  to  offer  for  sale,  or  to 
have  on  hand  for  sale,  any  milk,  cream  or  condensed  milk 
to  which  any  coloring  matter  has  been  added  by  any  person, 
or  to  which  any  gelatin  or  other  substance  has  been  added 
by  any  person  to  increase  the  consistency  of  such  milk, 
cream  or  condensed  milk,  so  as  to  make  such  milk,  cream 
or  condensed  milk  appear  richer  or  of  better  quality;  pro- 
vided, that  this  section  shall  not  be  construed  to  prohibit 
the  use  of  harmless  coloring  matter  and  common  salt 
(chloride  of  sodium)  in  butter  and  cheese. 

33.  Sale  of  Ice  Milk. — It  shall  be  unlawful  for  any 
person,  firm  or  corporation,  manufacturing  any  frozen  goods, 
which  do  not  conform  to  the  standards  and  provisions  of 
this  act  for  ice  cream,  to  sell,  or  offer  to  sell,  or  represent 
the   same  as  ice  cream,   or  under  the   name   of  ice  cream; 


98  BUSINESS   LAWS   FOR   BUSINESS    MEN. 

and  all  frozen  goods  which  do  not  conform  to  the  standards 
and  requirements  of  this  act  for  "ice  cream,"  but  which  do 
conform  to  the  standards  and  requirements  for  "ice  milk" 
herein,  for  the  purpose  of  this  act,  shall  be  known  as  "ice 
milk,"  and  shall  be  sold  and  designated  as  "ice  milk,"  and 
not  otherwise,  and  shall  be  billed  as  "ice  milk,"  and  every 
person,  firm  or  corporation  selling,  furnishing  or  delivering 
to  any  person  any  such  "ice  milk"  shall  distinctly  inform  the 
purchaser  at  the  time  in  each  and  every  instance  that  the 
said  goods  are  "ice  milk."  The  absence  of  such  declaration 
shall  always  be  construed  as  a  representation  on  the  part 
of  the  vendor  that  the  goods  are  ice  cream. 

Every  tub,  receptacle  or  packer  in  which  there  shall  be 
kept,  sold,  or  delivered,  at  any  time,  any  "ice  milk,"  as  herein 
defined,  shall  have  conspicuously  and  securely  attached  thereto 
a  durable  tag,  giving  the  name  and  address  of  the  manu- 
facturer or  vendor  of  the  same,  and  containing  the  words 
"ice  milk"  in  letters  at  least  one  inch  high  and  one-half  inch 
wide,  and  containing  no  other  reference  to  the  name  or 
character  of  the  goods  therein  contained.  The  absence  of  such 
tag  or  label  shall  always  be  construed  as  a  representation  on 
the  part  of  the  maker  or  vendor  that  said  goods  are  ice 
cream. 

Every  wagon,  vehicle  or  cart,  in  or  from  which  any  "ice 
milk"  shall  be  sold,  furnished,  delivered  or  peddled,  shall 
have  plainly  and  durably  painted  on  both  sides  thereof,  the 
name  and  address  of  the  owner,  in  letters  at  least  three  inches 
high  and  one  and  a  half  inches  wide,  and  also  the  words  "ice 
milk"  on  each  side  thereof,  in  letters  at  least  four  inches  high, 
and  two  inches  wide,  and  there  shall  be  no  other  reference  to 
the  name  or  character  of  the  goods  being  sold  or  delivered. 
The  absence  of  such  words  and  letters  shall  always  be  con- 
strued as  a  representation  on  the  part  of  the  owner  or  vendor 
that  said  goods  are  ice  cream. 

Every  person,  firm  or  corporation,  who  sells,  keeps  for 
sale,  delivers,  or  furnishes  in  connection  with  meals,  or  in 
connection  with  drinks,  or  otherwise,  any  ice  milk,  within 
the  meaning  of  this  act,  to  be  used  or  eaten  on  the  premises 


BUSINESS   CONTRACTS   AND   LEGAL  OBLIGATIONS.  99 

where  sold,  shall  keep  at  all  times  posted  or  hung  in  at  least 
two  conspicuous  places  within  the  premises,  and  in  plain 
view  of  the  public,  durable  signs  having  printed  or  painted 
thereon  the  words  "we  sell  ice  milk,"  or  "we  serve  ice  milk," 
in  letters  at  least  four  inches  high  and  two  inches  wide.  The 
absence  of  such  signs,  words  and  letters,  as  herein  required 
shall  always  be  construed  as  a  representation  on  the  part  of 
the  owner,  or  person  selling  or  serving  the  goods  that  they 
are  ice  cream. 

It  shall  be  unlawful  for  any  person,  firm  or  corporation  to 
manufacture,  sell,  deliver,  furnish,  serve,  or  keep  on  hand  any 
ice  milk,  within  the  meaning  of  this  act,  unless  the  same  is 
done  in  compliance  with  all  the  requirements  hereof. 

34.  Cheese  Brands  and  Grades. — Every  person,  firm  or 
corporation,  who  shall  at  any  creamery,  cheese  factory,  or 
private  dairy,  manufacture  cheese  in  the  State  of  California, 
shall  at  the  place  of  manufacture,  brand  distinctly  and  dur- 
ably on  the  bandage  of  each  and  every  cheese  manufactured, 
and  upon  the  package  or  box,  when  shipped,  the  grade  of 
cheese  manufactured,  as  follows :  "California  full-cream 
cheese,"  "California  half-skim  cheese,"  and  "CalifoKnia  skim 
cheese," 

All  brands  for  branding  the  different  grades  of  cheese  shall 
be  procured  from  the  State  Dairy  Bureau,  and  said  bureau  is 
hereby  directed  and  authorized  to  issue  to  all  persons,  firms,  or 
corporations,  upon  application  therefor,  uniform  brands,  con- 
secutively numbered,  of  the  different  grades  herein  specified. 
The  State  Dairy  Bureau  shall  keep  a  record  of  each  and 
every  brand  issued,  and  the  name  and  location  of  the  manu- 
facturer receiving  the  same.  No  manufacturer  of  cheese  in 
the  State  of  California,  other  than  the  one  to  whom  such 
brand  is  issued,  shall  use  the  same,  and  in  case  of  a  change 
of  location,  the  party  shall  notify  the  bureau  of  such  change. 

The  different  grades  of  cheese  are  hereby  defined  as  fol- 
lows :  Such  cheese  only  as  shall  have  been  manufactured 
from  pure  milk,  and  from  which  no  portion  of  the  butter  fat 
has  been  removed  by  skimming  or  other  process,  and  having 


100  BUSINESS   LAWS   FOR  BUSINESS   MEN. 

not  less  than  fifty  per  cent  of  butter  fat  in  the  water-free 
substance,  shall  be  branded  as  "California  full-cream 
cheese;"  and  such  cheese  only  as  shall  be  made  from  pure 
milk,  and  having  not  less  than  twenty-five  per  cent  of 
butter  fat  in  the  water-free  substance,  shall  be  branded 
"California  half-skim  cheese;"  and  such  cheese  only  as  shall 
be  made  from  pure  skim  milk  shall  be  branded  "California 
skim  cheese:"  provided,  that  nothing  in  this  section  shall 
be  construed  to  apply  to  "Edam,"  "Brickstein,"  "Pineapple," 
"Limburger,"  "Swiss,"  or  hand-made  cheese,  not  made  by 
the  ordinary  Cheddar  process. 

No  person,  firm  or  corporation  shall  sell,  or  offer  for 
sale,  any  cheese,  manufactured  in  the  State  of  California, 
not  branded  by  an  official  brand  and  of  the  grade  herein 
defined. 

35.  Acts  of  Agents. — The  word  "persons"  as  used  in 
this  act  shall  be  construed  to  import  both  the  singular  and 
plural,  as  the  case  demands,  and  shall  include  individuals, 
corporations,  companies,  societies  and  associations.  When 
construing  and  enforcing  the  provisions  of  this  act,  the  act, 
omission  or  failure  of  any  employee,  officer,  agent  or  other 
person,  acting  for  or  employed  by  any  individual,  corpora- 
tion, company,  society  or  association,  within  the  scope  of 
his  employment  or  office,  shall  in  every  case  also  be  deemed  to 
be  the  act,  omission  or  failure  of  such  individual,  corpora- 
tion, company,  society  or  association,  as  well  as  that  of  the 
person.  The  provisions  of  this  act  shall  be  construed  to 
apply  to  hotel  keepers,  restaurant  keepers  and  boarding- 
house  keepers,  or  any  person  who  shall  serve  meals  and 
accept  money  therefor. 

36.  Penalties  for  Violating  the  Law. — Any  violation  of 
the  law  about  the  manufacture,  sale  or  shipment  of  imitation 
butter  or  cheese  is  punishable  by  a  fine  of  not  less  than 
$50  nor  more  than  $150,  or  imprisonment  in  the  county 
jail  for  not  exceeding  thirty  days  for  the  first  oflFense;  and 
for  each  subsequent  offense,  a  fine  of  not  less  than  $150 
nor   more  than   $300,    or   imprisonment   in   the   county   jail 


BUSINESS   CONTRACTS   AND  LEGAL  OBLIGATIONS.  101 

not  less  than  thirty  days  nor  more  than  six  months,  or  by 
both  such  fine  and  imprisonment,  in  the  discretion  of  the 
court. 

For  any  violation  of  the  provisions  of  the  law  about  re- 
ports, tests,  measures,  adulterated  milk,  labels,  cream,  cheese, 
ice  cream,  ice  milk,  fruit  ice,  nut  ice,  skimmed  milk,  milk 
wagons,  or  grades  and  brands  of  cheese,  the  penalty  is  a 
fine  of  not  less  than  $25  nor  more  than  $200,  or  imprison- 
ment in  the  county  jail  not  less  than  ten  days  nor  more 
than  sixty  days;  or  both  such  fine  and  imprisonment,  in 
the  discretion  of  the  court. 

For  any  violation  of  any  other  provisions  of  the  law,  the 
penalty  is  a  fine  of  not  less  than  $10  nor  more  than  $200, 
or  imprisonment  in  the  county  jail  not  less  than  ten  days 
nor  more  than  one  hundred  days ;  or  both  such  fine  and 
imprisonment,  in  the  discretion  of  the  court. 

37.  Notice     to     Change     Unsanitary     Conditions. — In 

cases  where  any  dairy,  creamery  or  other  factory  of  milk 
products,  or  store  or  depot  where  milk  and  its  products  are 
handled  and  sold,  is  found  to  be  in  an  unsanitary  condition, 
the  agent  and  secretary,  or  the  inspector,  for  the  district 
in  which  the  violation  occurred,  shall  serve  upon  the  owner, 
or  owners,  or  person  in  charge  of  the  dairy,  creamery  or 
other  factory  of  milk  products  so  found  to  be  in  an  unsan- 
itary condition,  a  written  notice  specifying  in  detail  the 
changes  required  to  be  made  to  place  such  dairy,  creamery, 
or  other  factory  of  milk  products  or  store  or  depot  in  a 
sanitary  condition  as  defined  in  this  act.  Should  such 
changes  not  have  been  made  at  the  expiration  of  thirty  days 
after  the  date  when  the  notice  was  served,  the  state  dairy 
bureau,  through  its  agent  and  secretary,  or  its  inspectors, 
shall  enter  complaint  against  the  person  or  persons  respons- 
ible for  such  unsanitary  conditions  and  cause  them  to  be 
prosecuted  for  violating  this   act. 

Act  of  the  Legislature,  approved  April  21st,   1911. 


102  BUSINESS   LAWS   FOR   BUSINESS    MEN. 

Section  31ii.— PRODUCTION  AND  SALE  OF 
CERTIFIED  BUTTER.— No  person  shall  sell  or  ex- 
change, or  offer  or  expose  for  sale  or  exchange,  as  and 
for  certified  butter,  any  butter  which  does  not  conform  to 
the  regulations  prescribed  by,  and  bear  the  certification  of, 
a  milk  commission  appointed  by  a  county  medical  society 
organized  under  and  chartered  by  the  medical  society  of 
the  State  of  California,  and  which  has  not  been  pronounced 
by  such  authority  to  be  free  from  antiseptics,  added  pre- 
servatives and  pathogenic  bacteria.  All  butter  sold  as 
certified  butter  shall  be  conspicuously  marked  with  the 
name  of  the  commission  certifying  it;  provided,  that  such 
milk  commission  shall  make  all  requirements  for  the  pro- 
duction and  handling  of  certified  butter  uniform  and  fair, 
and  shall  not  refuse  to  certify  butter  for  any  applicant  for 
certification  who  shall  comply  with  the  provisions  of  this 
act,  and  the  requirements  of  the  milk  commission  whose 
certificate  is  sought.  Any  person  who  shall  violate  any  of 
the  provisions  of  this  act  shall  be  guilty  of  a  misdemeanor, 
and,  upon  conviction,  shall  be  punished  by  a  fine  of  not 
less  than  twenty-five  dollars  nor  more  than  two  hundred 
dollars,  or  by  imprisonment  in  the  county  jail  for  not  less 
than  ten   days  nor  more  than   sixty   days. 

Act  of  the  Legislature,  approved  March  17th,  IQIL 

Section  31j.— FALSE  ADVERTISEMENTS.— It  is  a 

misdemeanor  to  publish  false  advertisements  in  newspapers, 
concerning  the  quantity,  quality,  value,  price,  or  the  method 
of  production  or  manufacture,  of  any  merchandise  in  this 
state. 

Act  of  the  Legislature,  approved  April  22d,   1909. 

(a)  False  Labels,  etc. — It  is  a  misdemeanor  to  falsely 
represent,  by  means  of  imprints,  labels,  trade-marks,  tags, 
or  stamps  on  casks,  boxes,  cases  or  packages,  the  kind 
of  labor  employed  in  the  production  or  manufacture  of  any 
article  of  merchandise.  Thus,  if  a  label  represents  that 
the  article  was  manufactured  by  white  labor  only,  when 
in  fact  it  was  made  by  Chinese,  the  false  representation  is  a 


BUSINESS   CONTRACTS   AND   LEGAL   OBLIGATIONS.  103 

misdemeanor.  The  penalty  is  a  fine  of  not  less  than  one 
hundred  dollars  nor  more  than  five  hundred  dollars,  or 
imprisonment  in  the  county  jail  for  not  less  than  twenty 
nor  more  than  ninety  days,  or  both. 

Act  of  the  Legislature,  approved   March   14th,   1911. 

Section  31ja.— SELLING  FISH  AND  WILD  GAME 
BY  WHOLESALE. — Every  person  who  carries  on  the 
business  of  purchasing,  selling,  and  dealing  in  fish  or  in 
wild  game  or  wild  animals  by  wholesale  in  this  state,  ex- 
cept by  authority  of  a  license,  is  guilty  of  a  misdemeanor. 

Every  wholesale  dealer  in  fish  or  in  wild  game  or  wild 
animals  who  buys  or  deals  in  the  fish  or  in  the  wild  game 
or  animals  of  this  state  for  profit,  shall  upon  receipt  or 
purchase  of  any  fish  or  of  any  wild  game  or  wild  animals 
in  this  state,  enter  at  the  time  of  the  transaction,  in  a 
register  kept  by  him  for  that  purpose,  in  the  English  lan- 
guage, the  date,  the  kind  and  weight  of  fish  so  received 
or  bought,  and  the  date,  the  kind  and  number  of  wild  game 
or  animals  so  received,  or  bought,  and  the  name  and  the 
residence  of  the  person  or  persons  from  whom  the  same 
was  received,  or  purchased.  Every  person  who  violates 
any  of  the  provisions  of  this  section  is  guilty  of  a  mis- 
demeanor. 

Every  wholesale  dealer  for  profit  in  any  of  the  fish  or 
wild  game  or  animals  of  this  state  who  fails,  refuses,  or 
neglects  to  produce  for  inspection  his  register  to  any  fish 
and  game  commissioner  of  this  state,  or  any  duly  appointed, 
qualified,  and  acting  assistant  thereof,  is  guilty  of  a  mis- 
demeanor. 

Act  of  the  Legislature,  approved  April  14th,  1911. 

Section  31jb.— SELLING  TOBACCO  OR  CIGAR- 
ETTES TO  MINORS.— Every  person,  firm  or  corporation 
who  sells  or  gives  or  in  any  way  furnishes  to  another 
person  who  is  in  fact  under  the  age  of  eighteen  years  any 
tobacco,  cigarette  or  cigarette  papers,  or  any  other  pre- 
paration of  tobacco,  is  guilty  of  a  misdemeanor  and  upon 


104  BUSINESS   LAWS   FOR   BUSINESS    MEN. 

conviction  thereof  shall  be  punished  for  the  first  offense  by 
a  fine  of  not  less  than  twenty-five  dollars  nor  more  than 
one  hundred  dollars,  or  by  imprisonment  for  not  more  than 
sixty  days;  and  for  the  second  offense  by  a  fine  of  not 
less  than  fifty  dollars  nor  more  than  two  hundred  dollars, 
or  by  imprisonment  for  not  more  than  ninety  days;  and 
for  each  subsequent  offense  by  a  fine  of  not  less  than  one 
hundred  dollars  and  not  more  than  three  hundred  dollars, 
or  by  imprisonment  for  not  less  than  ninety  days  nor  more 
than  six  months,  or  by  both  such  fine  and  imprisonment 

Every  person,  firm  or  corporation  which  sells,  or  deals  in 
tobacco  or  any  preparation  thereof  shall,  within  ninety  days 
after  this  act  becomes  effective,  post  conspicuously  and  keep 
so  posted  in  his  or  their  place  of  business  a  copy  of  this 
act,  and  any  such  person  failing  to  do  so  shall  upon  con- 
viction be  punished  by  a  fine  of  five  dollars  for  the  first 
offense,  and  twenty-five  dollars  for  each  succeeding  viola- 
tion of  this  provision,  or  by  imprisonment  for  not  more 
than  thirty  days. 

Act  of  the  Legislature,  approved  March  24th,   1911. 

SectionSljc— EXPLOSIVES— TRANSPORTATION, 
STORAGE  AND  SALE.— An  Act  relating  to  explosives, 
regulating  their  transportation,  storage  and  sale,  was  passed 
by  the  Legislature  in  1911.  The  term  "explosive"  or 
"explosives,"  whenever  used  in  this  act,  shall  include  gun- 
powder,blasting  powder,  dynamite,  guncotton,  nitroglycerine 
or  any  compound  thereof,  fulminate,  and  every  explosive 
substance  having  an  explosive  power  equal  to  or  greater 
than  black  blasting  powder,  and  any  substance  intended  to 
be  used  by  exploding  or  igniting  the  same  to  produce  a 
force  to  propel  missiles,  or  rend  apart  substances,  but  does 
not  include  said  substances,  or  any  of  them,  in  the  form 
of  fixed  ammunition  for  small  arms. 

1.  Storage. — Except  only  at  an  explosive  manufacturing 
plant,  no  person  shall  have,  keep  or  store,  at  any  place  within 
this  state,  any  explosive,  unless  such  explosives  are  com- 
pletely enclosed  and  encased  in  tight  metal,  wooden  or  fibre 


BUSINESS    CONTRACTS   AND   LEGAL   OBLIGATIONS.  105 

containers;  and,  except  while  being  transported,  or  within 
the  cijstody  of  a  common  carrier  pending  delivery  to  con- 
signee, shall  be  kept  and  stored  in  a  magazine  constructed 
and  operated  as  hereinafter  described,  and  no  person  having 
in  his  possession  or  control,  any  explosives,  shall  under  any 
circumstances  permit  or  allow  any  grains  or  particles  thereof 
to  be  or  remain  on  the  outside  of  or  about  the  containers, 
in  which  such  explosives  are  contained. 

2.  Magazines. — Magazines  in  which  explosives  may  law- 
fully be  stored  or  kept  shall  be  two  classes,  as  follows: — 

Magazines  of  the  first  class  shall  consist  of  those  con- 
taining explosives  exceeding  fifty  pounds,  and  shall  be 
constructed  wholly  of  brick,  wood  covered  with  iron,  or 
other  fireproof  material,  and  must  be  fireproof,  and,  except 
magazines  where  gunpowder  or  black  blasting  powder  only 
is  Stored,  must  be  bullet  proof,  and  shall  have  no  openings 
except  for  ventilation  and  entrance.  The  doors  of  such 
magazine  must  be  fireproof  and  bullet  proof,  and  at  all 
times  kept  closed  and  locked,  except  when  necessarily 
opened  for  the  purpose  of  storing  or  removing  explosives 
therein  or  therefrom,  by  persons  lawfully  entitled  to  enter 
the  same.  Every  such  magazine  shall  have  sufficient  open- 
ings for  ventilation  thereof,  which  must  be  screened  in 
such  manner  as  to  prevent  the  entrance  of  sparks  or  fire 
through  the  same.  Upon  each  side  of  such  magazine  there 
shall  at  all  times  be  kept  conspicuously  posted  a  sign,  with 
the  words,  "Magazine  explosives  dangerous"  legibly  printed 
thereon  in  letters  not  less  than  six  inches  high.  No  matches, 
fire  or  lighting  device  of  any  kind,  shall  at  any  time  be 
permitted  in  any  such  magazine.  No  package  of  explosives 
shall  at  any  time  be  opened  in  any  magazine,  nor  shall 
any  open  package  of  explosives  be  kept  therein.  No 
blasting  caps,  or  other  detonating  or  fulminating  caps, 
or  detonators,  or  electric  fuzees,  shall  be  kept  or  stored 
in  any  magazine  in  which  explosives  are  kept  or  stored, 
but  such  caps,  detonators  or  fuzees  may  be  kept  or  stored 
in  a  magazine  constructed   as   above   provided,   which  must 


106  BUSINESS   LAWS   FOR   BUSINESS   MEN. 

be  located  at  least  one  hundred  feet  from  any  magazine 
in  which  explosives  are  kept  or  stored.  Magazines  in  which 
explosives  are  kept  or  stored  must  be  detached,  and  must 
be  located  at  least  one  hundred  feet  from  any  other 
structure. 

Magazines  of  the  second  class  shall  consist  of  a  stout 
wooden  box,  covered  with  sheet  iron,  and  not  more  than 
fifty  pounds  of  explosives  shall  at  any  time  be  kept  or 
stored  therein,  and,  except  when  necessarily  opened  for  use 
by  authorized  persons,  shall  at  all  times  be  kept  securely 
locked.  Upon  each  such  magazine  there  shall  at  all  times 
be  kept  conspicuously  posted  a  sign  with  the  words,  "Maga- 
zine explosives  dangerous"  legibly  printed  thereon. 

3.  Storing  in  Tunnels. — Nothing  in  this  act  contained 
shall  be  held  to  prohibit  the  keeping  or  storing  of  explosives 
in  any  tunnel,  where  no  person  or  persons  are  employed, 
provided  always,  that  any  tunnel  so  used  for  the  storage  of 
explosives  shall  have  fireproof  doors,  which  must  at  all 
times  be  kept  closed  and  locked,  except  when  necessarily 
opened  for  the  purpose  of  storing  or  removing  explosives 
therein  or  therefrom,  by  persons  lawfully  entitled  to  enter  the 
same.  The  door  of  such  tunnel  magazine  shall  at  all  times 
have  legibly  printed  thereon  the  words,  "Magazine  explosives 
dangerous." 

4.  Penalties. — Any  person  violating  or  failing  to  comply 
with  the  above  provisions  of  this  act,  shall  be  guilty  of  a 
misdemeanor,  and  upon  conviction  thereof,  shall  be  punished 
by  a  fine  of  not  less  than  twenty-five  dollars,  and  not  more 
than  one  thousand  dollars,  or  by  imprisonment  not  exceed- 
ing six  months,  or  by  both  such  fine  and  imprisonment. 

5.  Transportation. — It  shall  be  unlawful  to  transport, 
carry  or  convey,  any  explosives  between  any  places  within 
this  state,  on  any  vessel,  car  or  other  vehicle  of  any  descrip- 
tion, operated  by  common  carrier,  which  vessel,  car  or 
vehicle  is  carrying  passengers  for  hire;  provided,  that  it 
shall   be    lawful   to   transport    on   any    such    vessel,    car    or 


BUSINESS   CONTRACTS   AND  LEGAL  OBLIGATIONS.  107 

vehicle,  small  arms  ammunition  in  any  quantity,  and  such 
fuses,  torpedoes,  rockets  or  other  signal  devices,  as  may 
be  essential  to  promote  safety  in  operation,  and  properly 
packed  and  marked  samples  for  laboratory  examination, 
not  exceeding  a  net  weight  of  one-half  pound  each,  and 
not  exceeding  twenty  samples  at  one  time,  in  a  single 
vessel,  car  or  vehicle,  but  such  samples  shall  not  be  carried 
in  that  part  of  the  vessel,  car  or  vehicle,  which  is  intended 
for  the  transportation  of  passengers  for  hire;  provided 
further,  that  nothing  in  this  act  shall  be  construed  to  pre- 
vent the  transportation  of  military  or  naval  forces  with 
their  accompanying  munitions  of  war  on  passenger  equip- 
ment vessels,  cars  or  vehicles;  provided  further,  that  the 
transportation  of  explosives  on  any  freight  train  in  this 
state  that  carries  passengers  for  hire  in  a  car  or  caboose 
attached  to  the  rear  of  such  train,  shall  not  be  held  or 
construed  to  violate  the  provisions  of  this  act. 

It  shall  be  unlawful  to  transport,  carry  or  convey  liquid 
nitroglycerine,  fulminate  in  bulk,  in  dry  condition,  or  other 
like  explosives,  between  any  places  within  this  state,  on 
any  vessel,  car  or  vehicle  of  any  description,  operated  by 
common  carrier  in  the  transportation  of  passengers,  or 
articles  of  commerce  by  land  or  water. 

Every  package  containing  explosives  or  other  dangerous 
articles  when  presented  to  a  common  carrier  for  shipment 
shall  have  plainly  marked  on  the  outside  thereof,  the  con- 
tents therein,  and  it  shall  be  unlawful  for  any  person  to 
deliver  for  transportation  to  any  common  carrier  engaged 
in  commerce  by  land  or  water,  or  to  cause  to  be  delivered 
or  to  carry  any  explosive  or  other  dangerous  article,  under 
any  false  or  deceptive  marking,  description,  invoice,  shipping 
order  or  other  declaration,  or  without  informing  the  agent 
of  such  carrier  of  the  true  character  thereof,  at,  or  before 
the  time  of  such  delivery  or  carriage  is  made. 

Any  person  who  wilfully  violates  or  causes  to  be  violated 
any  of  the  foregoing  provisions  shall  be  deemed  guilty 
of   a   misdemeanor,    and   upon   conviction   thereof,    shall    be 


108  BUSINESS    LAWS   FOR   BUSINESS    MEN. 

punished  for  each  offense  by  fine  not  exceeding  two  thous- 
and dollars,  or  by  imprisonment  not  exceeding  eighteen 
months,  or  by  both  such  fine  and  imprisonment  in  the  dis- 
cretion  of  the  court. 

6.  Record  of  Sales. — Every  person  selling,  giving  away, 
or  delivering  explosives  within  this  state,  shall  keep  at  all 
times  an  accurate  journal  or  book  of  record,  in  which  must 
be  entered  from  time  to  time,  as  it  is  made,  each  and 
every  sale,  delivery,  gift,  or  other  disposition  made  by  such 
person  in  the  course  of  business,  or  otherwise,  of  any 
quantity  of  such  explosive  substance.  Such  journal  or 
record  book  must  show  in  a  legible  handwriting,  to  be 
entered  therein  at  the  time,  a  complete  history  of  each 
transaction,  stating  name  and  quantity  of  explosives  sold, 
delivered,  given  away,  or  otherwise  disposed  of;  name, 
place  of  residence,  and  business  of  the  purchaser  or  trans- 
feree, name  of  individual  to  whom  delivered,  with  his  or 
her  address.  Such  journal  or  record  book  must  be  kept 
by  the  person  so  selling,  delivering  or  otherwise  disposing 
of  such  explosives,  in  his  or  their  principal  office  or  place 
of  business,  at  all  times  subject  to  the  inspection  and  ex- 
amination of  the  police  authorities  of  the  state,  county  or 
municipality  where  same  is  situated,  on  proper  demand 
therefor.  In  addition  to  keeping  the  record  above  provided, 
it  shall  be  unlawful  for  any  person  to  sell,  give  away  or 
deliver  any  explosives  within  this  state,  without  taking 
from  the  person  to  whom  such  explosives  are  sold,  given 
away  or  delivered  within  this  state,  a  statement  in  writing, 
showing  the  name  and  address  of  the  person  to  whom 
such  explosives  are  sold,  given  away  or  delivered,  and 
the  place  where  and  the  purpose  for  which  such  explosives 
are  intended  for  use,  which  statement  shall  be  signed  by  the 
person  to  whom  such  explosives  are  sold,  given  away  or 
delivered,  or  his  agent,  and  be  witnessed  by  two  witnesses, 
known  to  the  person  selling,  giving  away  or  delivering  such 
explosives,  to  be  residents  of  the  county  where  such  ex- 
plosives, as  shown  by  such  statement,  are  intended  for  use, 


BUSINESS   CONTRACTS   AND   LEGAL  OBLIGATIONS,  109 

who  shall  certify  that  the  person  to  whom  such  explosives 
are  to  be  sold,  given  away  or  delivered  is  personally  known 
to  each  of  said  witnesses,  and  that  to  the  best  of  his 
knowledge  and  belief,  the  explosives  are  required  by  such 
person  for  the  uses  and  purposes  set  forth  in  the  statement. 
Said  statement  shall  at  all  times  be  kept  on  file  in  the 
principal  office  or  place  of  business  of  the  person  so  sell- 
ing, giving  away  or  delivering  such  explosives,  subject  to 
the  inspection  of  the  police  authorities  of  the  state,  county 
or  municipality  where  the  same  is  situated,  on  proper 
demand  made  therefor;  provided,  that  nothing  in  this 
section  shall  be  held  to  apply  to  the  delivery  of  explosives 
to  any  person  or  carrier  for  the  purpose  of  being  trans- 
ported from  a  place  within  this  state  to  any  other  place 
within  this  state;  and,  provided  further,  that  nothing  in 
this  section  contained  shall  apply  to  interstate  commerce. 

Every  person  selling,  giving  away  or  delivering  any 
explosives  without  complying  with  all  the  provisions  of  this 
section  shall  be  deemed  guilty  of  a  misdemeanor,  and  upon 
conviction  shall  be  fined  not  less  than  one  hundred  dollars, 
and  not  more  than  two  thousand  dollars,  or  by  imprison- 
ment of  not  less  than  six  months,  or  by  both  such  fine 
and  imprisonment  in   the   discretion   of  the   court. 

In  addition  to  such  imprisonment  and  as  cumulative 
penalty  such  person  so  offending  shall  forfeit  for  each 
offense,  the  sum  of  two  hundred  and  fifty  dollars,  to  be 
recovered  in  any  court  of  competent  jurisdiction,  and  the 
party  instituting  the  action  for  such  forfeiture  shall  not 
be  entitled  to  dismiss  it,  without  the  consent  of  the  court 
before  which  the  suit  has  been  instituted;  nor  shall  any 
judgment  recovered  be  set  aside,  satisfied  or  discharged 
save  by  order  of  such  court,  after  full  payment  into  court, 
and  all  moneys  so  collected  must  be  paid  to  the  party  bring- 
ing suit. 

7.  Mining  Operations. — No  explosives  in  excess  of  an 
amount  sufficient  for  one  day's  operations  shall  be  taken 
into  any  mine  or  underground  workings   in  this  state,   and 


110  BUSINESS   LAWS   FOR   BUSINESS    MEN. 

any  person  violating  any  of  the  provisions  of  this  section 
shall  be  deemed  guilty  of  a  misdemeanor,  and  upon  con- 
viction thereof,  shall  be  fined  in  an  amount  not  exceeding 
five   hundred   dollars. 

8.  Other  Regulations. — No  person,  except  a  peace  officer 
or  a  person  authorized  so  to  do  by  the  owner  thereof, 
or  his  agent,  shall  enter  any  explosive  manufacturing 
plant,  magazine  or  car  containing  explosives  in  this  state, 
and  any  person  violating  any  of  the  provisions  of  this 
section  shall  be  deemed  guilty  of  a  misdemeanor,  and  upon 
conviction  thereof,  shall  be  fined  in  an  amount  not  ex- 
ceeding one  thousand  dollars  or  by  imprisonment  not  ex- 
ceeding three  months,  or  by  both  such  fine  and  imprison- 
ment. 

No  person  shall  discharge  any  firearms  within  five  hun- 
dred feet  of  any  magazine  or  of  any  explosive  manufacturing 
plant,  and  any  person  wilfully  violating  any  of  the  pro- 
visions of  this  section  shall  be  deemed  guilty  of  a  mis- 
demeanor and  fined  not  exceeding  one  thousand  dollars, 
or  by  imprisonment  not  exceeding  one  year,  or  by  both 
such  fine  and  imprisonment. 

No  person  shall  wilfully  carry  any  explosive  on  his 
person  within  this  state  in  any  car,  vessel  or  vehicle  that 
carries  passengers  for  hire,  or  place  or  carry  any  explosive 
while  on  board  any  such  car,  vessel  or  vehicle,  in  any 
hand  baggage,  roll  or  container,  or  place  any  explosive  in 
any  baggage  thereafter  checked  with  any  common  carrier; 
and  any  person  violating  any  of  the  provisions  of  this 
section  shall  be  deemed  guilty  of  a  felony,  and  upon  con- 
viction thereof  shall  be  punished  by  imprisonment  in  the 
penitentiary  not  exceeding  two  years. 

Nothing  in  this  act  contained  shall  prevent  the  operation 
of,  or  modify,  alter,  set  aside  or  supersede  the  provisions 
of  any  municipal  ordinance  respecting  the  delivery,  storing 
and  handling  of  explosives. 

Nothing  in  this  act  contained  shall  regulate  or  apply  to 
any  shipment  of  explosives  from  a  point  within  this  state, 


BUSINESS   CONTRACTS   AND   LEGAL  OBLIGATIONS.  Ill 

consigned  to  a  point  without  this  state,  over  a  line  or  lines 
of  one  or  more  common  carriers. 

Act  of  the   Legislature,  approved   March  20th,   1911. 

Installment  Sales  of  Personal  Property. 

Section  31k.— CONDITIONAL  SALES  OF  PER- 
SONAL PROPERTY.— Where  personal  property  is  de- 
livered, under  a  contract  for  payments  on  installments,  title 
to  remain  in  the  vendor  until  final  payment,  it  is  a  con- 
ditional sale.  The  title  to  the  property  does  not  pass  from 
the  vendor,  nor  vest  in  the  vendee,  until  the  contract  is 
completed  upon  the  payment  of  the  last  installment. 

Section  311.— LANGUAGE  OF  THE  CONTRACT.— 

It  makes  no  difference  what  language  is  used  in  the  con- 
tract, if  the  intention  of  the  parties  is  to  be  seen,  that  the 
vendor  retains  the  title  until  the  money  is  paid.  The  paper 
may  be  called  a  "deed,"  or  "agreement,"  or  "lease,"  and 
the  designation  will  not  affect  the  real  meaning  of  the 
contract.  It  is  only  a  conditional  sale,  no  more,  no  less, 
whatever  the  language  used  in  the  contract  may  be.  In 
the  case  of  Lundy  Furniture  Company  vs.  White,  our  Su- 
preme Court  said,  "Where  goods  were  delivered  under  a 
contract,  designated  as  a  lease,  providing  for  a  monthly 
rental,  and  that  the  consent  of  the  seller  should  be  neces- 
sary for  the  removal  of  the  goods  from  the  purchaser's  resi- 
dence, and  reserving  title  in  the  seller  until  full  payment, 
after  which  a  bill  of  sale  was  to  be  given,  the  transaction 
was  a  conditional  sale,  and  the  title  remained  in  the  seller. 
The  name  by  which  the  parties  designate  their  contract 
is  not  determinative  of  its  nature.  The  calling  of  this 
agreement  a  'lease'  did  not  make  it  such.  The  payments, 
to  be  made  monthly  in  installments,  designated  'rent,'  were 
in  fact  nothing  but  partial  payments."  (Decided  by  the 
Supreme  Court  of  California,  in  the  case  of  Lundy  Furni- 
ture Company  vs.  White,  which  decision  is  printed  in 
Volume  126  of  the  California  Reports,  page   170.) 


112  BUSINESS   LAWS    FOR   BUSINESS    MEN. 

Section  31m.— DEFAULT  IN  PAYMENTS.— It  is  the 

duty  of  the  vendee  to  make  payments  of  the  installments 
when  due.  He  has  no  right,  after  he  has  received  the 
property,  to  change  or  alter  in  any  way  the  terms  of 
payments.  If  he  does  not  pay  when  due,  this  will  amount 
to  a  default  on  his  part,  and  a  breach  of  the  contract,  for 
which  the  vendor  may  take  immediate  action. 

Section  31n.— SALE  BY  VENDEE  TO  ANOTHER 
PERSON. — The  party  receiving  the  property  has  no  right 
to  sell  it  until  the  purchase  price  is  paid.  If  the  vendee 
sells  the  property,  the  purchaser  from  him  obtains  no  title, 
and  the  original  vendor  may  recover  the  property.  The 
second  vendee  is  not  entitled  to  stand  in  any  better  situa- 
tion than  his  vendor  in  regard  to  the  title  of  the  property. 
And  where  the  owner  of  a  piano  sold  it  on  the  installment 
plan,  with  the  condition  that  the  title  should  remain  in 
the  seller  until  final  payment,  and  the  vendee  sold  the 
piano  before  payment  of  the  final  installment,  the  Supreme 
Court  held  that  the  purchaser  from  him  got  no  title,  and 
the  true  owner  was  entitled  to  recover  his  property.  (De- 
cided by  the  Supreme  Court  of  California  in  the  case  of 
Kohler  vs.  Hayes,  which  decision  is  printed  in  Volume  41 
of  the  California  Reports,  page  445.) 

Section  31o.— REMEDY  OF  SELLER  IN  CASE  OF 
PURCHASER'S  DEFAULT.— If  the  purchaser  fails  to 
make  payments  as  they  accrue,  and  lets  the  installments 
or  any  of  them  go  by  default,  the  seller  has  either  one 
of  two  remedies:  (1)  He  may,  upon  the  default  of  the 
purchaser  in  meeting  the  stipulated  payments,  or  any  of 
them,  treat  the  contract  as  no  sale,  and  take  the  property 
into  his  own  possession  again.  If  he  is  prevented  by  the 
purchaser  from  retaking  the  property,  he  may  go  into 
court  and  recover  it  in  a  suit  on  claim  and  delivery.  (2) 
Or,  the  seller  may  treat  the  sale  as  an  absolute  one,  and 
bring  a  suit  to  recover  each  installment  as  default  is  made 
in    payment;    in    which    case,    other   property    of    the    seller 


BUSINESS    CONTRACTS   AND   LEGAL   OBLIGATIONS.  113 

(not  exempt  from  execution)  may  be  attached  and  levied 
upon  to  pay  the  judgment  obtained  against  him.  (Decided 
by  the  Supreme  Court,  in  the  case  of  Holt  Manufacturing 
Company  vs.  Ewing,  which  decision  is  printed  in  Volume 
109  of  the  California  Reports,  page  353.) 

Section  31p.— MONEY  ALREADY  PAID.— It  is  law- 
ful for  the  contract  to  provide  that  all  installments  paid 
before  default  shall  be  forfeited  as  damages  for  the  use  of 
the  property,  or  as  rent,  and  such  conditions,  if  fairly  en- 
tered into,  will  be  enforced  by  the  law  of  California.  The 
parties  to  a  conditional  installment  sale  have  the  right  to 
agree  upon  a  certain  sum  as  damages,  which  is  called 
"liquidated  damages,"  to  belong  to  the  seller  in  case  of 
default  on  the  part  of  the  purchaser. 
Civil  Code,  Section   1671. 

Section  31q.— ABSOLUTE  SALE  ON  INSTALL- 
MENTS.— A  sale  of  personal  property,  the  purchase  price 
to  be  paid  in  installments,  may  ■  be  made  ■  without  -any 
other  conditions.  In  this  case,  the  sale  is  absolute,  and 
passes  the  title  to  the  purchaser;  and  if  default  is  made, 
the  seller  has  no  right  to  retake  the  property;  but  he  may 
sue  and  put  an  attachment  on  the  property  for  the  pur- 
chase price. 

Section  31r.— FORM  OF  CONDITIONAL  AGREE- 
MENT.— The  following  is  a  good  form  of  agreement  for 
conditional   sale   of   personal   property: — 

San   Francisco,   California, ,  191 . . 

I  promise  to  pay  to 

., Dollars,    at 

,  Cal.,  as  rent  for 


(Here  describe  property.) 


as  follows : Dollars  before  delivery 

of  said  property  to  me,  and Dollars 

per  month  on  the day  of  each  and  every 


114  BUSINESS   LAWS   FOR   BUSINESS   MEN. 

month  thereafter,  commencing  on  the 

day  of 191 . . ,  with  interest  on 

the  amount  unpaid  at  the  rate  of per  cent  per 

annum,  payable  monthly. 

I  acknowledge  the  receipt  of  said  property,  and  agree  that 
I  will  keep  the  same  in  good  order,  and  that  it  shall  not  be 

removed    from    No Street, 

in  the  City  of ,  without  the 

written  consent  of  said    

,  and  do  also  agree  that  until  the  sum  of 

Dollars  with  interest,  as  aforesaid, 

is  fully  paid,  said  property  is  the  property  of  said 

,  and  that  I  have  no 

right  to  dispose  thereof ;  but  when  the  total  sum  of 

Dollars  and  interest  has  been  paid,  and 

not  until  then,  I  shall  receive  a  bill  of  sale  and  the  title  to 
said  property  shall  vest  in  me. 

I  also  agree  that  if  I  fail  to  pay  any  of  said  installments 
when  due,  or  perform  any  of  the  aforesaid  conditions,  or 
said  property  be  attached  or  levied  upon,  all  of  said  sum  of 

Dollars   shall   in   any   of   said 

cases  immediately  become  due  and  payable,  and 

may  enforce  pay- 
ment of  the  entire  sum  then  unpaid  and  interest  thereon; 
or  may,  if  he  so  elect,  rescind  this  executory  contract  and 
take  possession,  without  legal  process,  of  said  property,  and 
for  that  purpose  may  enter  any  premises  where  the  same 
may  be   (all  damages  for  said  entry  being  hereby  expressly 

waived)  ;   and   thereupon,    if    said 

shall  elect  to  rescind,  and  shall  retake  said 

property,  they  shall  refund  the  money  paid  by  me,  if  any 
remains,  after  deducting  a  rental   for  use  of  said  property 

of Dollars   per   month,   expenses   of 

taking  possession  and  removal,  and  twenty  per  cent  of  total 
sum  to  be  paid  for  liquidated  and  assessed  damages,  which 
rental,  expenses,  and  damages  I  promise  and  agree  to  pay 

said Said 

rental  dating  from  delivery  of  said  property  to  me. 

In  all  matters  herein  mentioned,  time  is   declared  to   be 
the  essence  of  this  contract. 

,  Vendee. 

I  agree  to  the  terms  of  the  foregoing  contract. 

,  Vendor. 


BUSINESS   CONTRACTS   AND   LEGAL   OBLIGATIONS.  115 

Section  31s.— SELLING  AS  A  PLEDGE.— If  the  ven- 
dor, when  the  vendee  fails  to  pay  the  installments,  takes  the 
property  into  his  own  possession  again,  he  is  not  required 
to  keep  it;  he  may  sell  it  as  a  pledge,  apply  the  proceeds 
upon  the  amount  due  him  from  the  buyer,  and  then  sue  the 
buyer  for  the  balance.  (Decided  by  the  Supreme  Court  of 
California  in  the  case  of  Matteson  vs.  Equitable  Mining 
and  Milling  Co.,  which  decision  is  printed  in  Volume  27, 
CaHfornia  Decisions,  page   1024.) 

Section  31t.— FORM  OF  CONDITIONAL  AGREE- 
MENT WHERE  PERSONAL  PROPERTY  IS  AT- 
TACHED OR  TO  BE  ATTACHED  TO  A  BUILD- 
ING.— Another  form  may  be  used,  if  it  is  for  the  conditional 
sale  of  property  attached  or  to  be  attached  to  a  building, 
as  follows: 

San   Francisco,   CaHfornia, ,  191 . . 

I  promise  to  pay  to the  sum  of 

Dollars,  at    

as    rent    for 

(Here  describe  property.) 


as  follows :    Dollars  before  delivery  of 

said  property  to  me,  and Dollars 

per  month  on  the day  of  each  and  every 

month  thereafter,   commencing  on  the 

day  of ,  191 . .,  with  interest  on 

the  amount  unpaid  at  the  rate  of per  cent  per 

annum,  payable  monthly. 

I  acknowledge  the  receipt  of  said  property,  and  agree  that 
I  will  keep  the  same  in  good  order,  and  that  it  shall  not  be 

removed  from  No Street, 

in  the  City  of ,  without  the 

written  consent  of  said 

The  said  property  is  to  be  attached  to  that  certain  build- 
ing occupying  or  standing  on  the  following  described 
premises,   to-wit : 


(Here  describe  the  lot  or  tract  of  land;  if  in  a  city  or 
village,  describe  its  location  by  street  number,  if  known;  if  in 


116  BUSINESS   LAWS   FOR   BUSINESS    MEN. 

a  city  or  county  where  the  block  system  of  recording  and 
indexing  conveyances  is  in  use,  the  section  and  block  within 
which  it  is  located  must  be  given.) 

And  I  do  also  agree  that  until  the  sum  of 

Dollars  with  interest,  as  aforesaid,  is  fully  paid,  said  prop- 
erty is  the  property  of  said 

and  that  I  have  no  right  to  dispose  thereof;  but  when  the 

total   sum   of 

Dollars  and  interest  has  been  paid,  and  not  until  then,  I  shall 
receive  a  bill  of  sale  and  the  title  to  said  property  shall  vest 
in  me. 

I  also  agree  that  if  I  fail  to  pay  any  of  said  installments 
when  due,  or  perform  any  of  the  aforesaid  conditions,  or 
said  property  be  attached  or  levied  upon,  all  of  said  sum  of 

Dollars  shall  in  any  of  said 

cases  immediately  become  due  and  payable  and 

may  enforce  payment  of  the 

entire  sum  then  unpaid  and  interest  thereon;  or  may,  if  he 
so  elect,  rescind  this  executory  contract  and  take  possession, 
without  legal  process,  of  said  property,  and  for  that  purpose 
may  enter  any  premises  where  the  same  may  be  (all  dam- 
ages  for   said   entry   being  hereby   expressly   waived)  ;   and 

thereupon,    if    said 

shall  elect  to  rescind,  and  shall  retake  said  property,  he  shall 
refund  the  money  paid  by  me,  if  any  remains  after  deduct- 
ing a  rental  for  use  of  said  property  of 

Dollars  per  month,  expenses  of  taking  possession  and  re- 
moval, which  rental  and  expenses  I  promise  and  agree  to 

pay  said ,  said  rental   dating 

from  delivery  of  said  property  to  me. 

In  all  matters  herein  mentioned,  time  is  declared  to  be  of 
the  essence  of  this  contract. 

,  Vendee. 

I  hereby  accept  the  above  contract,  and  agree  to  its  terms. 
,  Vendor. 

Section  31u.— FORM  OF  CONDITIONAL  AGREE- 
MENT FOR  SALE  OF  MACHINERY.— The  following 
is  a  form  of  conditional  agreement  for  the  sale  of 
machinery : 

Agreement  made  the .day  of. 191. ., 

between , ,   of ,  party  of 

the  first  part,  and ,  of ., 


BUSINESS   CONTRACTS   AND  LEGAL  OBLIGATIONS.  117 

party  of  the  second  part.     The  said  parties  mutually  agree 
as  follows: 

1.  In  consideration  of  payments  hereby  reserved,  and  of 
the  performance  of  the  conditions  and  stipulations  herein- 
after contained,  and  on  the  part  of  the  said  party  of  the 
second  part  to  be  performed,  the  said  party  of  the  first  part 

will,  on  or  before  the day  of next, 

erect  and  place  in  the  mill  of  the  said  party  of  the  second 

part  situated  at ,  in  the  County  of 

,    State   of , 

the  machinery  particularly  described  in  the   schedule  hereto 
annexed,  and  hereafter  called  the  said  machinery. 

2.  The  said  party  of  the  second  part  shall  hold  and  be  at 

liberty  to  use  the  said  machinery  for  the  term  of 

years  from  the  said day  of next, 

at  the  rent  of dollars  per  annum,  payable 

half-yearly  on  the day  of ,  and  the 

day  of ,   in   each  year   during 

the  continuance  of  the  said  term,  such  payments  making  in 

the  aggregate  the  sum  of dollars   (price  of 

the  machinery),  the  first  of  such  payments  to  be  made  in  ad- 
vance on  the  said day  of next. 

3.  The  said  party  of  the  second  part  shall,  at  his  own 
expense,  from  time  to  time,  replace  and  repair  all  such 
parts  of  the  said  machinery  as  may  be  broken,  worn  out  or 
damaged,  and  keep  the  same  in  every  respect  in  good  work- 
ing order;  and  he  will  not,  during  the  said  term,  remove  any 
part  of  the  said  machinery  from  the  building  where  the  same 
may  be  erected  without  the  consent  in  writing  of  the  said 
party  of  the  first  part,  and  will  not  assign,  transfer,  underlet, 
or  part  with  the  possession  of  the  same  either  directly  or 
indirectly. 

4.  The  said  party  of  the  second  part  will  punctually  pay 
the  rents  hereby  reserved,  and  perform  all  the  conditions  and 
stipulations  herein  contained,  and  on  his  part  to  be  per- 
formed; and  will  not  do  or  suffer  anything  whereby  the  said 
machinery  or  any  part  thereof  shall  or  may  be  seized,  taken 
in  execution,  attached,  removed,  destroyed,  or  injured. 

5.  The  said  party  of  the  second  part  shall  keep  said  ma- 
chinery insured  against  damage  or  loss  by  fire  in  some  office 
to  be  approved  by  the  said  party  of  the  first  part  for  at  least 

the  sum  of dollars,  and  will  pay  the 

premiums  for  such  insurance,  and  will  forthwith  deliver  to 
the  said  party  of  the  first  part  the  policies  of  such  insurance, 


118  BUSINESS   LAWS   FOR   BUSINESS    MEN. 

and  the  receipts  for  the  premiums  which  shall  become  pay- 
able therefor. 

6.  It  is  hereby  expressly  declared  that  the  property  in  said 
machinery  shall  remain  in  the  said  party  of  the  first  part  to 
all  intents  and  purposes ;  provided,  that  the  said  machinery 
shall  become  the  absolute  property  of  the  said  party  of  the 
second  part  on  the  expiration  of  the  said  term,  and  payment 
of  all  the  rent  hereby  covenanted  to  be  paid,  and  all  costs, 
charges,  and  expenses  provided  for  under  this  agreement. 

7.  In  case  of  the  bankruptcy  of  the  said  party  of  the 
second  part,  or  in  case  he  shall  assign,  transfer,  or  mortgage 
the  said  machinery,  or  any  part  thereof,  or  in  case  he  shall 
make  default  in  performing  and  observing  any  of  the  cove- 
nants, conditions,  or  agreements  herein  contained,  the  said 
aggregate  sum  of dollars  shall  become  im- 
mediately payable  to  the  said  party  of  the  first  part,  and  he 
may  at  his  option  enter  said  premises,  and  every  building  in 
which  any  part  of  the  said  machinery  may  be,  and  take 
possession  of  and  remove  the  said  machinery. 

8.  The  said  machinery  is  to  be  attached  to  that  certain 
building  occupying  or  standing  on  the  following  described 
premises,  to-wit: 


(Here  describe  the  lot  or  tract  of  land  on  which  the  mill 
or  building  is  situated;  if  in  a  city  or  village,  describe  its 
location  by  street  number,  if  known;  if  in  a  city  or  county 
where  the  block  system  of  recording  and  indexing  convey- 
ances is  in  use,  the  section  and  block  within  which  it  is 
located  must  be  given.) 

In  witness  whereof  the  parties  hereto  have  hereunto  set 
their  hands  and  seals  the  day  and  year  first  above  written. 

(Seal.) 

(Seal.) 

Section  31v.— ASSIGNMENT  OF  CONTRACT.— The 

contract  may  be  assigned,  if  there  is  nothing  in  its  terms 
prohibiting  such  assignment.  Under  the  contract  the  vendee 
is  entitled  to  the  possession  of  the  property,  and  to  be- 
come the  absolute  owner  thereof,  upon  complying  with  the 
terms  of  the  contract.  These  are  rights  of  which  he  cannot 
be  divested  by  any  act  of  the   vendor,   and  which   he  can 


BUSINESS    CONTRACTS   AND   LEGAL   OBLIGATIONS.  119 

transfer  to  another  in  the  absence  of  a  stipulation  in  the  con> 
tract  to  the  contrary.  The  title  to  the  property  vests  in  the 
vendee  upon  the  performance  of  the  conditions  of  the  sale, 
or  in  his  assignee  in  the  event  that  he  has  transferred  his 
interest  therein.  He  cannot  sell  the  property  itself,  for  he 
does  not  own  it  until  final  payment.  But  he  can  assign  and 
transfer  to  another  his  interest  in  the  contract,  unless  the 
contract  itself  prohibits  such  transfer. 

Section  31w.— FORM  OF  ASSIGNMENT  OF  IN- 
STALLMENT CONTRACT.— The  following  is  a  form 
of  assignment  of  an  installment  contract.  This  form  is  to 
be  indorsed  on  the  contract,  or  written  on  a  separate  paper 
and  affixed  to  the  contract: 

San   Francisco,   California, ,  191 . . 

For  value  received,  I  do  hereby  transfer,  assign  and  con- 
vey to ,  his  heirs  and  assigns 

forever  all  my  right,  title,  and  interest  in,  to,  and  under  the 
within  instrument. 


Stoppage  in  Transit. 

Section  32.— WHEN  SELLER  OR  CONSIGNOR 
MAY  STOP  GOODS  IN  TRANSIT.— A  seller  or  con- 
signor of  goods,  whose  claim  for  the  price  has  not  been 
paid,  may  stop  the  goods  while  on  their  way  to  the  buyer 
or  consignee,  and  may  take  possession  of  the  goods.  He 
may  do  this  whenever  it  becomes  known  to  him,  after  part- 
ing with  the  property,  that  the  buyer  or  consignee  is  insolv- 
ent. A  person  is  insolvent,  in  the  meaning  of  the  law,  when 
he  ceases  to  pay  his  debts  in  the  manner  usual  with  persons 
of  his  business,  or  when  he  declares  his  inability  or  unwill- 
ingness to  pay  his  debts.  The  property  can  be  stopped 
only  by  notice  to  the  carrier  or  holder  of  the  goods,  or  by 
taking  actual  possession  of  the  goods.  As  the  taking  of 
actual  possession  will  be  ordinarily  impossible,  where  the 
goods  are  on  the  way  to  the  buyer  or  consignee  on  board 


120  BUSINESS   LAWS   FOR   UUSINliSS    MEN. 

cars  or  vessels,  a  notice  to  the  carrier  not  to  deliver  the 
goods  will  be  sufficient  to  stop  them;  and  if  the  carrier, 
notwithstanding  such  notice,  delivers  the  goods  to  the 
buyer  or  consignee,  the  carrier  will  be  liable  to  the  seller 
or  consignor  in  damages.  The  property  can  only  be 
stopped  while  in  transit.  The  transit  of  property  is  at  an 
end  when  it  comes  into  the  possession  of  the  consignee, 
or  into  the  possession  of  his  agent  to  receive  it.  There- 
fore, if  the  seller,  after  shipping  the  goods,  discovers  that 
the  consignee  is  insolvent  (that  he  has  ceased  to  pay  his 
debts  in  the  usual  manner,  or  has  declared  his  inability 
or  unwillingness  to  pay  his  debts),  he  must  act  promptly 
in  order  to  stop  the  goods,  and  must  give  notice  to  the 
carrier  not  to  make  delivery.  The  sale  of  the  goods  is 
not  rescinded  by  stopping  them  in  transit.  The  seller 
simply  resumes  his  vendor's  lien  for  the  price  of  the  goods, 
and,  if  the  consignee  comes  forward  and  pays  the  sum  due 
on  the  purchase  price,  the  goods  must  be  released  and 
allowed  to  proceed  on  their  way.  The  seller,  by  stopping 
the  goods  in  transit,  does  not  become  again  the  owner. 
He  has  parted  with  the  title,  but  he  again  comes  into  pos- 
session, and  holds  the  goods  for  the  unpaid  price.  The 
carrier,  after  notice  to  stop,  must  deliver  the  goods  to  the 
vendor,  and  the  vendor  will  then  hold  the  property  until 
the  expiration  of  the  credit  given,  and  may  then  proceed  to 
give  notice  and  sell  them  again. 

Civil  Code,  Sections  3076,  3077,  3078,  3079,  3080. 

Section  33.— RESALE  OF  PERSONAL  PROPERTY. 

— There  has  been  some  controversy  in  the  courts  as  to  the 
manner  of  reselling  personal  property  held  under  a  ven- 
dor's lien,  but  the  safer  method  is  to  give  written  notice 
to  the  vendee,  and  publish  notice  to  the  public,  of  the  time 
and  place  of  sale,  and  then  to  sell  the  goods  at  public 
auction.  No  particular  form  of  notice  need  be  employed, 
as  any  words  or  form  will  be  sufficient  which  describes  the 
goods,  the  time  and  place  of  sale,  and  the  manner  and 
terms  of  the  sale. 


BUSINESS    CONTRACTS   AND   LEGAL   OBLIGATIONS.  121 

Section  34.— WHAT  WILL  DEFEAT  VENDOR'S 
RIGHT  TO  STOP  GOODS.— The  right  of  stoppage  in 
transit  belongs  only  to  one  occupying  in  some  way  the 
relation  of  vendor  toward  the  consignee  of  the  goods. 
And  where  the  goods  are  transferred  by  the  vendee  to  a 
bona  fide  purchaser  for  value,  this  will  defeat  the  vendor's 
right  to  stop  the  goods.  Where  the  buyer  has  possession 
of  the  bill  of  lading,  with  the  consent  of  the  seller,  and 
indorses  it  to  a  bona  fide  purchaser  of  the  goods, — to  one 
who  has  no  notice  of  the  seller's  claim  or  the  buyer's  in- 
solvency, and  who  pays  value  for  the  goods, — this  will  de- 
feat the  right  to  stop  the  goods.  The  consignee  may  inter- 
cept the  goods  on  the  way,  and  take  possession  of  them, 
at  a  different  station  or  place  from  that  of  their  destination, 
and  the  consignor's  right  of  stoppage  will  be  lost. 

Warranty  of  Personal  Property. 

Section  35.— WARRANTY  OF  TITLE.— A  warrant> 
is  an  engagement  by  which  a  seller  assures  to  a  buyer  the 
existence  of  some  fact  affecting  the  transaction,  whether 
past,  present,  or  future.  A  warranty  of  the  character,  con- 
dition, or  quality  of  personal  property  arises  from  con- 
tract, either  express  or  implied.  The  parties  may  expressly 
state .  the  warranty  they  agree  upon,  or  a  warranty  may 
arise  by  reason  of  some  obligation  which  the  law  imposes 
upon  the  parties  or  the  circumstances.  One  who  sells  personal 
property  as  his  own  thereby  warrants  that  he  has  a  good 
and  unencumbered  title  to  the  property.  The  law  implies 
this  warranty  from  the  fact  of  sale. 
Civil  Code,  Section  1765. 

Section  36.— WARRANTY  ON  SALE  BY  SAMPLE. 

— One  who  sells  or  agrees  to  sell  goods  by  sample  thereby 
warrants  the  quality  of  the  bulk  to  be  equal  to  that  of  the 
sample.  Where  goods  are  sold  by  sample,  and  the  articles 
are  inferior  to  the  sample  shown,  the  purchaser  is  not  bound 
to  accept  the  goods,  for  that  would  be  to  force  upon  him 


122  BUSINESS   LAWS   FOR   BUSINESS    MEN. 

goods  of  a  different  quality  from  that  which  he  bargained 
for.  In  a  sale  by  sample  the  law  implies  a  warranty  that 
the  bulk  of  the  property  sold  is  equal  to  the  sample  exhib-* 
ited.  This  warranty  constitutes  a  condition  of  the  contract 
of  sale,  and  in  such  case  the  delivery  of  the  goods  to  the 
carrier  for  transportation  to  the  buyer  does  not  have  the 
effect  of  passing  title  to  the  buyer.  In  order  that  the  deliv- 
ery of  the  goods  to  the  carrier  shall  operate  to  pass  the  title 
to  the  consignee,  it  is  essential  that  the  goods  so  delivered 
shall  conform  in  quantity  and  quality  with  the  order  given 
for  them.  If,  therefore,  the  vendor  sends  more  or  less  than 
the  quantity  ordered,  or  of  a  different  quality,  the  title  will 
not  pass  unless  the  purchaser  accepts  them.  (Decided  by 
the  Supreme  Court  of  California  in  the  case  of  Gardiner  vs. 
McDonogh,  which  decision  is  printed  in  Volume  28,  Cali- 
fornia Decisions,  page  776.') 

Civil  Code,  Section  1766. 

Section  37.— WARRANTY  ON  AGREEMENT  TO 
SELL    MERCHANDISE    NOT    IN    EXISTENCE.— A 

person  may  agree  to  sell  merchandise  not  then  in  existence, 
but  he  thereby  warrants  that  it  shall  be  sound  and  mer- 
chantable at  the  place  of  production  contemplated  by  the 
parties;  and  the  seller  also  warrants  that  such  merchandise, 
when  delivered,  shall  be  as  nearly  sound  and  merchantable 
at  the  place  of  delivery  as  can  be  secured  by  reasonable 
care. 

Civil  Code,  Section  1768. 

Section  38.—  MANUFACTURER'S  WARRANTY 
AGAINST  DEFECTS.— One  who  sells  or  agrees  to  sell 
an  article  of  his  own  manufacture  thereby  warrants  it  to 
be  free  from  any  latent  defect,  not  disclosed  to  the  buyer, 
arising  from  the  process  of  manufacture;  and  also  that 
neither  he  nor  his  agent  in  such  manufacture  has  know- 
ingly used  improper  materials  therein;  and  one  who  manu- 
factures an  article,  under  an  order  for  a  particular  purpose, 


BUSINESS   CONTRACTS   AND  LEGAL  OBLIGATIONS.  123 

warrants  by  the  sale  that  it  is  reasonably  fit  for  that  pur- 
pose; so,  if  it  turns  out  either  that  the  article  manufactured 
IS  defective,  which  defect  was  not  apparent  or  disclosed 
to  the  buyer,  or  that  the  article  is  not  reasonably  fit  for 
the  purpose  for  which  it  was  ordered,  the  buyer  has  the 
right  to  rescind  the  sale,  by  returning  or  offering  to  return 
the  article  to  the  manufacturer. 

Civil  Code,  Sections   1769,   1770. 

Section  39.— WARRANTY    OF    SOUNDNESS.— One 

who  sells  or  agrees  to  sell  merchandise  not  open  to  the 
examination  of  the  buyer  thereby  warrants  that  such  mer- 
chandise is  sound  and  merchantable. 

Section  40.— WARRANTY  BY  TRADE  -  MARKS 
AND  OTHER  MARKS.— One  who  sells  any  article  to 
which  there  is  affixed  a  trade-mark  thereby  warrants  it  to  be 
genuine  and  lawfully  used.  And  one  who  sells  any  article 
with  a  statement  or  mark  on  it,  or  attached  to  it,  ex- 
pressing the  quantity  or  quality  of  the  article,  or  stating 
the  place  where  it  was  manufactured,  thereby  warrants  the 
truth  of  such  representations. 

Civil  Code,   Sections   1772,   1773. 

(a)— "Trade-Mark"  Defined.— The  phrase  "trade-mark," 
as  used  in  Section  40,  includes  every  description  of  word, 
letter,  device,  emblem,  stamp,  imprint,  brand,  printed  ticket, 
label,  or  wrapper,  usually  affixed  by  any  mechanic,  manu- 
facturer, druggist,  merchant,  or  tradesman,  to  denote  any 
article  to  be  goods  imported,  manufactured,  produced,  com- 
pounded, or  sold  by  him;  and  also  any  name  or  names, 
marks  or  devices,  branded,  stamped,  engraved,  etched, 
blown,  or  otherwise  attached  or  produced  upon  any  cask, 
keg,  bottle,  vessel,  siphon,  can,  case,  or  package,  used  by 
any  mechanic,  manufacturer,  druggist,  merchant,  or  trades- 
man, to  hold,  contain  or  enclose  the  goods  so  imported, 
manufactured,  produced,  compounded,  or  sold  by  him. 
Political  Code,  Section  3196. 


124  BUSINESS   LAWS   FOR   BUSINESS    MEN. 

(b) — Recording  Trade-Marks. — Any  person  may  record 
any  trade-mark  or  name  by  filing  with  the  secretary  of  state 
his  claim  to  the  same,  and  a  copy  or  description  of  such 
trade-mark  or  name,  with  his  affidavit  attached  thereto, 
setting  forth  that  he  (or  the  firm  or  corporation  of  which 
he  is  a  member)  is  the  exclusive  owner,  or  agent  of  the 
owner,  of  such  trade-mark  or  name.  The  secretary  of  state 
must  keep  for  public  examination  a  record  of  all  trade- 
marks or  names  filed  in  his  office,  with  the  date  when  filed 
and  name  of  claimant. 

Political  Code,  Sections  3197,  3198. 

(c) — Assignment  of  Trade-Mark. — Any  person  who  has 
first  adopted  and  used  a  trade-mark  or  name,  whether 
within  or  beyond  the  limits  of  this  state,  is  its  original 
owner.  Such  ownership  may  be  transferred  and  assigned 
in  the  same  manner  as  personal  property,  by  bill  of  sale. 
Political   Code,    Section   3199. 

(d) — Protection  of  Trade-Marks. — The  law  will  protect 
the  owner  of  a  trade-mark  in  his  exclusive  use  of  the  same. 
The  superior  court  will  restrain,  by  injunction,  any  use  of 
trade-marks,  or  names,  which  have  been  recorded  with  the 
secretary  of  state  by  the  owner,  where  such  trade-marks 
or  names  are  used  by  any  person  not  entitled  thereto.  The 
secretary  of  state  must  issue  to  the  claimant,  at  the  time  the 
claim  is  filed,  a  certificate  of  filing  under  the  great  seal  of 
the  state,  and  must  then  collect  from  the  claimant  a  fee  of 
five  dollars.  The  secretary  of  state  must,  however,  refuse 
to  file  any  trade-mark  or  name  identical  with,  or  so  similar 
to  any  trade-mark  or  name  already  filed  as  to  be  calculated 
or  liable  to  deceive. 

Political  Code,  Section  3199;  Act  of  the  Legislature, 
approved  Anarch  6th,  1909. 

Any  person  who  has  first  adopted  and  used  a  trade- 
mark or  name,  whether  within  or  beyond  the  limits  of  this 
state,  is  its  original  owner.  Such  ownership  may  be  trans- 
ferred in  the  same  manner  as  personal  property,  and  is 
entitled  to   the  same  protection   by   suits   at   law;   and   any 


BUSINESS   CONTRACTS   AND  LEGAL  OBLIGATIONS.  125 

court    of  competent  jurisdiction  may  restrain,  by  injunction, 
any  use  of  trade-marks  or  names  in  violation  of  this  chapter. 
Act  of  the  Legislature,  approved  March  21st,  1911. 

Section  41.— WARRANTY    OF    PROVISIONS    FOR 
DOMESTIC   USE. — By  a  sale  of  provisions  for  domestic 
use,  for  immediate  consumption,  there  is  a  warranty  that  the 
provisions  are  sound  and  wholesome. 
Civil  Code,  Section  1775. 

Section  42.— WARRANTY    ON    SALE    OF    GOOD 
WILL  OF  BUSINESS.— One  who  sells  the  good  will  of 
a  business  thereby   warrants   that   he   will   not   endeavor   to 
draw  off  any  of  the  customers. 
Civil   Code,   Section   1776. 

Section  42a.— DAMAGES  ALLOWED  ON  BREACH 
OF  WARRANTY. — The  general  rule  is,  damages  in  case 
of  a  breach  of  warranty  of  quality,  of  personal  property 
sold,  are  to  be  estimated  with  reference  to  values  at  the 
time  and  place  of  delivery.  But  where  personal  property  is 
sold  on  a  warranty,  to  be  used  at  some  place  other  than  the 
place  of  sale  and  delivery,  and  it  is  known  to  the  seller  that 
the  property  is  bought  for  use  at  another  place,  the  damages 
for  breach  of  the  warranty  may  be  estimated  with  reference 
to  values  at  the  place  where  the  property  is  to  be  used. 
P.  F.  Dundon  sold  two  boilers  at  San  Francisco  to  be  used 
in  Siberia,  and  warranted  that  they  would  develop  a  certain 
horsepower.  The  boilers  were  constructed  at  San  Francisco 
under  a  contract  which  required  them  to  be  delivered  at  the 
wharf  in  San  Francisco,  but  it  was  understood  by  both 
parties  that  the  boilers  were  to  be  sent  to  and  used  on  the 
Amoor  river  in  Siberia,  13,000  miles  from  San  Francisco. 
When  they  were  set  up  and  used  in  Siberia  they  were  found 
to  fall  short  of  the  warranty,  and  could  not  develop  sufficient 
power  for  the  purpose  for  which  they  were  bought.  The 
purchaser  sued  for  damages,  and  the  Superior  Court  of  San 
Francisco  gave  him  a  judgment  against  Dundon  for  $7,200, 


I 


126  BUSINESS   LAWS   FOR  BUSINESS   MEN. 

the  price  paid  for  the  boilers,  which  would  have  been  their 
value  in  Siberia  if  constructed  so  as  to  do  the  warranted 
work.     The  Court  of  Appeals  has  affirmed  the  judgment. 

(Decided  by  the  California  District  Court  of  Appeals,  in 
the  case  of  Krasilnikoff  vs.  Dundon,  which  decision  is 
printed  in  Appellate  Decisions,  Volume  VII,  page  7.) 

Section  42b.— BOTTLES,  BOXES,  SIPHONS  AND 
KEGS. — Any  and  all  persons  engaged  in  manufacturing, 
bottling,  or  selling  olives,  olive  oil,  salad  oil,  soda  waters, 
mineral  or  aerated  waters,  porter,  ale,  beer,  cider,  ginger 
ale,  milk,  cream,  small  beer,  lager  beer,  weiss  beer,  white 
beer,  or  other  beverages  or  Worcestershire  or  other  sauce 
or  sauces  in  bottles,  siphons,  or  kegs,  with  his,  her,  its  or 
their  name  or  names,  or  other  marks  or  devices,  branded, 
stamped,  engraved,  etched,  and  blown,  impressed,  or  other- 
wise produced  upon  such  bottles,  siphons,  or  kegs,  or  the 
boxes  used  by  him,  her,  it  or  them,  may  file  in  the  office 
of  the  clerk  of  the  county  in  which  his,  her,  its,  or  their 
principal  place  of  business  is  situated,  and  also  in  the  office 
of  the  secretary  of  state,  a  description  of  the  name  or  names, 
marks,  or  devices,  so  used  by  him,  her,  it  or  them,  respec- 
tively, and  cause  such  description  to  be  printed  once  in  each 
week  for  three  weeks  successively,  in  a  newspaper  published 
in  the  county  in  which  said  notice  may  have  been  filed  as 
aforesaid. 

It  is  hereby  declared  to  be  unlawful  for  any  person  or 
persons,  corporation  or  corporations,  to  fill  with  olive  oil, 
salad  oil,  or  any  substitution  for,  or  similar  to  olive  oil,  ripe  or 
green  olives,  soda  waters,  mineral  or  aerated  waters,  port,  ale, 
cider,  ginger  ale,  milk,  cream,  beer,  small  beer,  lager  beer, 
weiss  beer,  white  beer,  or  other  beverages,  or  Worcestershire 
or  other  sauce  or  sauces,  or  with  medicine,  compounds, 
or  mixtures,  any  bottle,  box,  siphon  or  keg,  so  marked 
or  distinguished  as  aforesaid,  with  or  by  any  name, 
mark  or  device,  of  which  a  description  shall  have  been 
filed    and    published,    as    provided    in    this    act,    or    deface, 


BUSINESS    CONTRACTS   AND   LEGAL   OBLIGATIONS.  127 

erase,  obliterate,  cover  up,  or  otherwise  remove  or  con- 
ceal any  such  name,  mark  or  device  thereon,  or  to  sell, 
buy,  give,  take  or  otherwise  dispose  of  or  traffic  in  the 
same,  without  the  written  consent  of,  or  unless  the  same 
shall  have  been  purchased  from  the  person  or  persons, 
corporation  or  corporations,  whose  mark  or  device  shall 
be  or  shall  have  been  in  or  upon  the  bottle,  box,  siphon, 
or  keg  so  filled,  trafficked  in,  used,  or  handled  as  aforesaid. 
It  is  hereby  declared  to  be  unlawful  for  any  person,  firm,  or 
corporation  engaged  in  the  manufacture,  preparation  or  sell- 
ing of  drugs,  or  food  products  to  use  bottles,  in  bottling  or 
packing  their  products,  that  have  been  previously  used  for 
other  purposes. 

1.  Penalty. — Any  person  or  persons  or  corporation  offend- 
ing against  the  provisions  of  this  section  shall  be  deemed 
guilty  of  a  misdemeanor,  and  shall  be  punished  for  the  first 
offense  by  imprisonment  of  not  less  than  ten  days  nor  more 
than  six  months  or  by  a  fine  of  fifty  cents  for  each  and 
every  such  bottle,  box,  siphon  or  keg  so  filled,  sold,  used, 
disposed  of,  bought,  or  trafficked  in,  or  by  both  such  fine 
and  imprisonment;  and  for  each  subsequent  offense  by 
imprisonment  not  less  than  twenty  days,  nor  more  than 
one  year,  or  by  a  fine  of  not  less  than  one  dollar  nor  more 
than  five  dollars  for  each  and  every  bottle,  box,  siphon, 
and  keg  so  filled,  sold,  used,  disposed  of,  bought  or 
trafficked  in,  or  by  both  such  fine  and  imprisonment,  in  the 
discretion  of  the  magistrate  before  whom  the  offense  shall 
be  tried. 

2.  Search  Warrants. — Whenever  any  person,  persons,  or 
corporation,  mentioned  in  section  one  of  this  act,  or  his,  her, 
its  or  their  agent,  shall  make  oath  before  any  magistrate  that 
he,  she  or  it  has  reason  to  believe,  and  does  believe,  that 
any  of  his,  her,  or  their  bottles,  boxes,  siphons,  or  kegs,  a 
description  of  the  names,  marks  or  devices,  whereon  has 
been  so  filed  and  published,  as  aforesaid,  are  being  unlaw- 
fully used  or  filled,  or  had  by  any  person  or  corporation 
manufacturing   or    selling   olives,   olive   oil,    salad   oil,    soda. 


I 


128  BUSINESS   LAWS    FOR   BUSINESS    MEN. 

mineral,  or  aerated  waters,  porter,  ale,  cider,  ginger  ale,  milk, 
cream,  small  beer,  lager  beer,  weiss  beer,  white  beer,  and  other 
beverages,  or  Worcestershire  or  other  sauce  or  sauces,  or 
that  any  junk  dealer,  or  dealer  in  second  hand  articles, 
vendor  of  bottles,  or  any  other  person  or  corporation,  has 
any  such  bottles,  boxes,  siphons,  or  kegs,  in  his,  her,  or 
its  possession,  or  secreted  in  any  place,  the  said  magistrate 
must  thereupon  issue  a  search  warrant  to  discover  and 
obtain  the  same,  and  may  also  cause  to  be  brought  before 
him  the  person  in  whose  possession  such  bottles,  boxes, 
siphons,  or  kegs  may  be  found,  and  then  inquire  into  the 
circumstances  of  such  possession,  and  if  said  magistrate  finds 
that  such  person  has  been  guilty  of  a  violation  of  this  act, 
he  must  impose  the  punishment  therein  prescribed,  and  he 
shall  also  award  possession  of  the  property  taken  upon  such 
search  warrant  to  the  owner  thereof. 

3.  Accepting  Deposits. — The  requiring,  taking,  or  ac- 
cepting of  any  deposit  for  any  purpose,  upon  any  bottle,  box, 
siphon,  or  keg,  shall  not  be  deemed  or  constitute  a  sale  of 
such  property,  either  optional  or  otherwise,  in  any  proceed- 
ing under  this  act. 

4.  Sale  of  Rights. — Any  person  or  persons,  corporation 
or  corporations  that  has  or  have  heretofore  filed  a  descrip- 
tion of  the  name  or  names,  marks,  or  devices,  upon  his, 
her,  their  or  its  property,  and  has  caused  the  same  to  be 
published  according  to  the  laws  existing  at  the  time  of 
such  filing  and  publications,  shall  not  be  required  to  again 
file  and  publish  such  description  to  be  entitled  to  the  bene- 
fits of  this  act;  and  any  person  or  persons,  corporation  or 
corporations,  having  complied  with  the  provisions  of  this 
act,  may  as  a  part  of  the  sale,  assignment  or  transfer  of  all 
his,  her,  their,  or  its  said  bottles,  boxes,  siphons,  or  kegs, 
used  as  aforesaid,  with  his,  her,  their  or  its  name  or 
names  or  other  marks  or  devices,  branded,  stamped,  en- 
graved, etched,  and  blown,  impressed  or  otherwise  pro- 
duced upon  such  bottles,  boxes,   siphons,  and  kegs,  to  anv 


BUSINESS   CONTRACTS   AND  LEGAL  OBLIGATIONS.  129 

Other   person    or   persons,    corporation    or    corporations,    en- 
gaged in  manufacturing,  bottling  or  selling  of  olives,  olive 
oil,  salad  oil,  soda  waters,  mineral  or  aerated  waters,  porter, 
ale,  beer,   cider,   ginger   ale,   milk,   cream,   small  beer,   lager 
beer,  weiss  beer,   white  beer,  or  other  beverages,   or  Wor- 
cestershire or  other  sauce  or  sauces,  sell,  assign,  and  transfer 
the  sole  and  exclusive  right  of  using  said  name  or  names, 
mark  or  devices  in  said  business.    And  in  the  event  of  such 
sale,  transfer  or  assignment  as  aforesaid,  or  in  the  event  of 
the  transfer  by  operation  of  law  or  by  sale  under  order  of 
any  court  of  the  entire  business  of  such  person  or  persons, 
corporation  or  corporations,   of  the   entire   stock   of  bottles, 
boxes,  siphons  or  kegs,  belonging  to  them,  him,  her  or  it, 
to  any  person  or  persons,   corporation  or  corporations,   en- 
gaged in  the  manufacturing,  bottling,  or  selling  olives,  olive 
oil,  salad  oil,  soda  waters,  mineral  or  aerated  waters,  porter, 
ale,  beer,   cider,  ginger  ale,  milk,   cream,   small   beer,   lager 
beer,  weiss  beer,  white  beer  or  other  beverages,  such  person 
or  persons,  corporation  or  corporations,  shall  not  be  again 
required  to  file  and  publish  a  description  of  said  name  or 
names,  marks,  or  devices,  hereunder,  but  shall  be  entitled  to 
all  the  benefits  of  this  act  immediately  upon  acquiring  such 
bottles,  boxes,  siphons  or  kegs,  or  such  business  as  aforesaid. 
Act  of  the  Legislature,  approved  March  21st,  1911. 

Section  42c.— EXAMINATION  OF  PROPERTY  BY 
PURCHASER.— The  law  will  not  give  redress  to  a  pur- 
chaser who  claims  to  have  been  deceived,  if  it  appears  that 
he  had  ample  opportunity  to  examine  the  property,  and  that 
he  had  sufficient  knowledge  of  the  subject  to  know  and 
understand  any  defects  which  might  have  been  apparent 
by  such  examination.  But  this  position  may  be  materially 
changed  by  representations  which  the  seller  himself  makes 
about  the  property.  Where  the  purchaser  may  know  the 
truth  by  looking,  or  where  the  truth  is  shown  him,  he  is 
not  misled;  but  where  he  relies  upon  the  statements  of 
the  seller,  and  has  no  knowledge  that  such  statements  are 


130  BUSINESS   LAWS   FOR  BUSINESS    MEN. 

false,  he  can,  when  they  are  false,  and  when  he  himself  has 
been  reasonably  prudent,  recover  damages.  If  no  knowl- 
edge of  their  falseness  is  presented  to  him,  the  purchaser 
may  rely  implicitly  upon  the  statements  of  the  vendor,  if 
such  statements  are  not  so  openly  false  as  to  be  apparent 
to  an  ordinarily  prudent  person. 

Auction  Sales. 

Section   43.— AUTHORITY    OF    AUCTIONEER.— A 

sale  by  auction  is  a  sale  by  public  outcry  to  the  highest 
bidder  on  the  spot.  Laws  have  been  passed  by  the  Legis- 
lature of  California  to  regulate  the  authority  of  auctioneers, 
and  the  rights  of  bidders,  and  the  manner  of  conducting 
auction  sales.  An  auctioneer,  by  the  law  of  California, 
without  special  authorization,  has  authority  from  the  seller 
only  to  the  extent  that  he  may  sell  by  public  auction  to 
the  highest  bidder;  to  sell  for  cash  only,  except  such  articles 
as  are  usually  sold  on  credit  at  auction;  to  warrant  the 
title  of  his  principal  to  personal  property  sold  by  him,  and 
the  quality  and  quantity  of  the  property;  to  prescribe  rea- 
sonable rules  and  terms  of  sale ;  to  deliver  the  things  sold 
upon  payment  of  the  price;  to  collect  the  price;  and  to  do 
whatever  else  is  necessary,  or  proper  and  usual  in  the 
ordinary  course  of  business,  for  effecting  these  purposes. 
An  auctioneer  will  be  deemed  to  have  authority  from  a 
bidder  at  the  auction,  as  well  as  from  the  seller,  to  bind 
both  seller  and  bidder  by  a  memorandum  of  the  contract, 
whenever  by  law  the  sale  must  be  evidenced  by  a  memo- 
randum in  writing. 

Civil  Code,  Sections  1792,  2362,  2363. 

Section    44.— WHEN    AUCTION    SALE    IS    COM- 
PLETE.— A  sale  by  auction  is  not  complete  until  the  auc- 
tioneer publicly  announces,   by  the   fall   of  his   hammer,   or 
in  some  other  customary  manner,  that  the  thing  is  sold. 
Civil  Code,  Section  1793. 


BUSINESS    CONTRACTS    AND   LEGAL   OBLIGATIONS.  131 

Section    45.— WITHDRAWAL    OF    BIDS.— Until    the 

public  announcement  necessary  to  complete  the  sale  is 
made  by  the  auctioneer,  any  bidder  may  withdraw  his  bid. 
The  only  thing  necessary  to  do  in  withdrawing  a  bid  is  to 
notify  the  auctioneer  that  the  bid  is  withdrawn,  before  the 
final  announcement  of  the  sale. 
Civil  Code,  Section  1794. 

Section  46.— AUCTION  SALE  UNDER  WRITTEN 
CONDITIONS. — Whenever  an  auction  sale  is  made  under 
written  or  printed  conditions,  the  auctioneer  must  follow 
such  conditions,  and  has  no  power  to  change  them  by  any 
oral  declaration,  except  that  he  may  modify  a  condition 
intended  for  his  own  benefit. 

Civil  Code,  Section  1795. 

Section  47.— AUCTION  SALE  WITHOUT  RE- 
SERVE.— Public  policy  requires  that  auction  sales  shall 
be  conducted  with  the  highest  good  faith,  and  that  neither 
the  auctioneer  nor  his  principal  shall  be  allowed  to  deceive 
or  impose  upon  the  persons  who  gather  at  an  auction  for 
the  purpose  of  making  bids.  It  is  therefore  provided  by 
the  law,  for  the  protection  of  the  bidder,  that  at  a  sale  by 
auction,  announced  to  be  without  reserve,  the  highest  bid- 
der in  good  faith  has  an  absolute  right  to  the  completion 
of  the  sale  to  him.  Upon  such  a  sale  bids  by  the  seller,  or 
bids  by  any  agent  for  him,  are  absolutely  void.  The  pub- 
lic is  interested  in  securing  the  advantages  of  fair  and  just 
competition  among  bidders,  and  in  the  prevention  of  favor- 
itism or  fraud  in  any  form.  The  highest  bidder  in  good 
faith,  at  a  sale  without  reserve,  is  entitled  to  the  property; 
and,  if  it  should  appear  that  the  property  was  in  reality 
knocked  down  by  the  auctioneer  upon  a  higher  but  fraud- 
ulent bid  in  the  interest  of  the  seller,  a  suit  can  be  main- 
tained in  the  Superior  Court  to  compel  the  recognition  of 
the  rights  of  the  bidder  in  good  faith,  and  the  delivery  of 
the  property  to  him  upon  payment  of  the  amount  of  his  bid. 
Civil  Code,  Section  1796. 


132  BUSINESS   LAWS   FOR  BUSINESS    MEN. 

Section  48.— FRAUDS  UPON  THE  BUYER.— Some- 
times the  seller,  for  the  purpose  of  increasing  the  price  of 
the  property  sold  at  auction,  will  employ  puffers  to  bid  up 
the  property,  thus  giving  it  a  fictitious  value,  and  often 
inducing  credulous  bidders  to  increase  their  bids  beyond 
what  they  had  any.  idea  of  offering.  The  law  provides, 
without  any  qualification,  that  the  employment  of  puffers 
at  an  auction  sale  by  the  seller,  without  the  knowledge 
of  the  buyer,  is  a  fraud  upon  the  buyer,  which  entitles  him 
to  rescind  his  purchase. 

Civil  Code,  Section  1797. 

Section  49.— AUCTIONEER'S  MEMORANDUM  OF 
SALE  BINDS  BOTH  PARTIES.— When  property  is 
sold  by  auction,  an  entry  made  by  the  auctioneer  in  his 
sale  book,  at  the  time  of  the  sale,  giving  the  names  of  the 
person  for  whom  he  sells  and  the  buyer,  and  describing  the 
thing  sold,  the  price,  and  the  terms  of  sale,  binds  both  the 
seller  and  the  buyer,  in  the  same  manner  as  though  the 
memorandum  had  been  made  by  themselves. 
Civil  Code,  Section  1798. 


Deposit  of  Personal  Property. 

Section  50.— DEPOSIT  FOR  SAFE  KEEPING.— The 

obligations  of  one  who  receives  personal  property  on 
deposit  are  fixed  by  statute.  When  personal  property  is 
deposited  with  one  for  safe  keeping,  the  person  receiving 
the  deposit  is  bound  to  return  the  identical  thing  deposited 
with  him;  he  is  bound  to  use  ordinary  care  in  the  safe 
keeping  of  the  property,  and  if,  by  his  gross  carelessness 
or  neglect,  the  thing  deposited  with  him  is  lost  or  injured, 
he  is  liable  to  the  depositor  for  its  value. 

Section  51.— DEPOSIT  FOR  EXCHANGE.— A  de- 
posit for  exchange  is  one  in  which  the  depositary  is  bound 
to  return  to  the  depositor,  not  the  identical  thing  deposited. 


BUSINESS   CONTRACTS   AND  LEGAL   OBLIGATIONS.  133 

but  something  corresponding  in  kind  to  it.  Where  money 
is  received  on  deposit,  or  any  article  which  is  mingled  with 
the  depositary's  property  of  a  like  kind,  and  not  expected 
to  be  returned  to  the  depositor  in  the  identical  thing  de- 
posited, the  depositor  becomes  a  creditor  of  the  other  party, 
to  the  amount  of  the  money  or  value  of  other  property 
deposited. 

Civil  Code,  Sections  1818,  1878. 

Section  52.— OBLIGATIONS  OF  THE  DEPOSI- 
TARY.— The  depositary  must  deliver  the  property  to  the 
person  for  whose  benefit  it  was  deposited,  on  demand,  un- 
less he  has  a  lien  upon  it.  He  is  not  bound  to  deliver  the 
property  without  a  demand  being  made  for  it,  even  where 
the  deposit  is  made  for  a  specified  time.  A  depositary  must 
deliver  the  thing  deposited  at  his  residence  or  place  of 
business,  as  may  be  most  convenient  for  him.  If  a  thing 
deposited  is  owned  jointly  or  in  common,  by  persons  who 
cannot  agree  upon  the  manner  of  its  delivery,  the  deposi- 
tary may  deliver  to  each  his  proper  share,  if  this  can  be 
done  without  injury  to  the  thing  deposited. 

Civil  Code, 'sections  1822,  1823,  1824,  1827. 

Section  53.— THINGS  WHICH  WILL  EXCUSE 
DELIVERY. — There  are  some  circumstances  which  will 
excuse  delivery,  even  after  demand  is  made.  A  third  person 
may  claim  to  be  the  real  owner  of  the  property,  and  estab- 
lish his  claim  by  law;  or  litigation  may  ensue  between  the 
depositor  and  another  person  claiming  to  be  the  real  owner 
of  the  property,  in  which  the  court  will  enjoin  the  delivery 
or  take  the  property  into  its  own  hands  pending  the  litiga- 
tion. Whenever  any  proceedings  are  taken  averse  to  the 
interest  of  the  depositor,  or  adverse  to  the  interest  of  the 
person  for  whose  benefit  the  deposit  was  made,  the  person 
who  received  the  deposit  must  give  prompt  notice  of  such 
proceedings  to  the  depositor  or  other  person  beneficially 
interested.  The  depositary  may  also  acquire  a  lien  upon 
the  property,  which  will  excuse  delivery;  and  generally  he 


134  BUSINESS   LAWS  FOR  BUSINESS   MEN. 

will  have  a  lien  upon  the  property,  when  he  has  performed 
services  about  the  property,  or  incurred  expense  in  its 
keeping  or  preservation,  for  the  value  of  his  services  and  the 
amount  of  his  expenses. 

A  depositary  for  hire  has  a  lien  for  storage  charges  and 
for  advances  and  insurance  incurred  at  the  request  of  the 
bailor,  and  for  money  necessarily  expended  in  and  about 
the  care,  preservation  and  keeping  of  the  property  stored, 
and  he  also  has  a  lien  for  money  advanced  at  the  request  of 
the  bailor,  to  discharge  a  prior  lien,  and  for  the  expenses  of 
a  sale  where  default  has  been  made  in  satisfying  a  valid 
lien. 

Act  of  the  Legislature,  approved  April  19th,   1909. 

(a)— SALE  OF  PLEDGED  PROPERTY.— The  sale 
by  a  pledgee,  of  property  pledged,  must  be  made  by  public 
auction,  in  the  same  manner  as  a  sale  of  personal  property 
under  execution.  Written  notice  must  be  posted  in  three 
public  places  in  the  township  or  city  where  the  sale  is  to 
take  place,  for  not  less  than  five  days  nor  more  than  ten 
days. 

Code  of  Civil  Procedure,  Section  692. 


Storage  of  Personal  Property. 

Section  54. — STORAGE. — Where  a  person  deposits  per- 
sonal property  with  another  and  agrees  to  pay  him  a  com- 
pensation, it  is  called  storage.  Under  this  designation  is 
included  a  variety  of  business  transactions  wherein  one 
person  takes  charge  and  custody  of  the  goods  of  another 
for  hire. 

Section  55.— CARE  TO  BE  TAKEN  OF  THING 
DEPOSITED. — One  who  takes  goods  on  storage  for  hire 
must  use  at  least  ordinary  care  for  their  preservation,  and 
is  liable  for  damages  by  reason  of  failure  to  perform  his 
obligation  in  this  respect. 


BUSINESS   CONTRACTS   AND   LEGAL  OBLIGATIONS.  135 

Storage  in  Warehouses. 

Section  56.— WAREHOUSE  RECEIPTS.— The  most 
common  form  of  storage  known  to  business  is  that  where 
the  owner  of  a  warehouse  receives  property  on  storage  for 
a  stated  compensation.  The  warehouseman,  upon  receiv- 
ing the  property,  must  give  a  receipt  for  it,  which  receipt 
must  show  on  its  face  that  a  contract  for  storage  has  been 
entered  into  between  the  owner  of  the  goods  and  the  ware- 
houseman, the  latter  to  store  the  goods,  and  the  former  to 
pay  for  that  service.  A  warehouseman  cannot  issue  any 
vaHd  receipt  for  any  merchandise,  grain,  or  other  product 
or  thing  of  value,  unless  the  property  has  actually  been 
received  by  him  and  is  in  the  warehouse  or  under  his  con- 
trol at  the  time;  and  no  second  warehouse  receipt  can  be 
issued,  so  long  as  a  former  receipt  is  outstanding  and  un- 
canceled in  whole  or  in  part.  A  warehouse  receipt  is  a 
negotiable  instrument,  and  may  be  transferred  by  indorse- 
ment, and  a  transfer  of  the  receipt  is  a  good  delivery  of  the 
goods  represented  by  it.  But  it  is  only  persons  who  pur- 
sue the  calling  of  warehousemen — that  is,  receive  and  store 
goods  in  a  warehouse  as  a  business  for  profit — that  have 
power  to  issue  a  technical  warehouse  receipt,  the  transfer 
of  which  will  be  considered  by  the  law  a  good  delivery  of 
the  property  represented  by  the  receipt.  Therefore,  such 
a  receipt  issued  by  one  who  is  not  in  that  business  for 
profit,  even  though  he  receives  the  goods,  will  not  have 
given  to  it  by  law  the  character  of  a  negotiable  instrument. 
In  every  case  where  a  warehouseman  receives  property  in 
a  warehouse  as  a  business  for  profit,  the  warehouse  receipt 
is  negotiable,  and  a  transfer  of  the  receipt  in  good  faith,  by 
indorsement  to  another,  passes  the  title  to  the  goods  cov- 
ered by  the  receipt. 

Warehouse  receipts  need  not  be  in  any  particular  form, 
but  every  such  receipt  must  embody  within  its  written  or 
printed  terms — 

(a)  The  location  of  the  warehouse  where  the  goods  are 
stored, 


136  BUSINESS   LAWS   FOR  BUSINESS   MEN. 

(b)  The  date  of  issue  of  the  receipt, 

(c)  The  consecutive  number  of  the  receipt, 

(d)  A  statement  whether  the  goods  received  will  be  de- 
livered to  the  bearer,  to  a  specified  person,  or  to  a  specified 
person  or  his  order, 

(e)  The  rate  of  storage  charges, 

(f)  A  description  of  the  goods  or  of  the  packages  con- 
taining them, 

(g)  The  signature  of  the  warehouseman,  which  may  be 
made  by  his  authorized  agent, 

(h)  If  the  receipt  is  issued  for  goods  of  which  the  ware- 
houseman is  owner,  either  solely  or  jointly  or  in  common 
with  others,  the  fact  of  such  ownership,  and 

(i)  A  statement  of  the  amount  of  advances  made  and  of 
liabilities  incurred  for  which  the  warehouseman  claims  a 
lien.  If  the  precise  amount  of  such  advances  made  or  of 
such  liabilities  incurred  is,  at  the  time  of  the  issue  of  the 
receipt,  unknown  to  the  warehouseman  or  to  his  agent  who 
issues  it,  a  statement  of  the  fact  that  advances  have  been 
made  or  liabilities  incurred  and  the  purpose  thereof  is 
sufficient. 

Act  of  the  Legislature,  approved  March  19th,  1909. 

Section  57.— NEGOTIABILITY  OF  WAREHOUSE 
RECEIPT. — A  receipt  in  which  it  is  stated  that  the  goods 
received  will  be  delivered  to  the  depositor,  or  to  any  other 
specified  person,  is  a  non-negotiable  receipt. 

A  receipt  in  which  it  is  stated  that  the  goods  received  will 
be  delivered  to  the  bearer,  or  to  the  order  of  any  person 
named  in  such  receipt,  is  a  negotiable  receipt. 

When  more  than  one  negotiable  receipt  is  issued  for  the 
same  goods,  the  word  "duplicate"  shall  be  plainly  placed 
upon  the  face  of  every  such  receipt,  except  the  one  first 
issued.  A  warehouseman  shall  be  liable  for  all  damage 
caused  by  his  failure  so  to  do  to  anyone  who  purchased  the 
subsequent  receipt  for  value  supposing  it  to  be  an  original, 
even  though  the  purchase  be  after  the  delivery  of  the  goods 
by  the  warehouseman  to  the  holder  of  the  original  receipt. 


BUSINESS   CONTRACTS   AND   LEGAL  OBLIGATIONS.  137 

A  non-negotiable  receipt  shall  have  plainly  placed  upon 
its  face  by  the  warehouseman  issuing  it,  "non-negotiable," 
or  "not  negotiable."  In  case  of  the  warehouseman's  failure 
so  to  do,  a  holder  of  the  receipt  who  purchased  it  for  value 
supposing  it  to  be  negotiable,  may,  at  his  option,  treat  such 
receipt  as  imposing  upon  the  warehouseman  the  same  liabil- 
ities he  would  have  incurred  had  the  receipt  been  negotiable. 
Act  of  the  Legislature,  approved  March  19th,  1909. 

Section  58.  — REMOVAL  OF  PROPERTY  BY 
WAREHOUSEMAN. — No  warehouseman  can  sell  or  en- 
cumber, or  ship  or  remove  beyond  his  control,  any  property 
for  which  a  receipt  has  been  given  by  him,  without  the 
consent  in  writing  of  the  holder  of  the  receipt,  and  the 
consent  of  the  holder  must  be  plainly  indorsed  on  the  receipt. 
Act  of  the  Legislature,  approved  March  19th,  1909. 

Section  59.  — DELIVERY  OF  PROPERTY  BY 
WAREHOUSEMAN. — A  warehouseman,  in  the  absence 
of  some  lawful-  excuse  provided  by  this  act,  is  bound  to 
deliver  the  goods  upon  a  demand  made  either  by  the  holder 
of  a  receipt  for  the  goods  or  by  the  depositor,  if  such  de- 
mand is  accompanied  with — 

An  offer  to  satisfy  the  warehouseman's  lien; 

An  offer  to  surrender  the  receipt  if  negotiable,  with  such 
endorsements  as  would  be  necessary  for  the  negotiation  of 
the  receipt;  and 

A  readiness  and  willingness  to  sign,  when  the  goods  are 
delivered,  an  acknowledgment  that  they  have  been  delivered, 
if  such  signature  is  requested  by  the  warehouseman. 

In  case  the  warehouseman  refuses  or  fails  to  deliver  the 
goods  in  compliance  with  a  demand  by  the  holder  or  de- 
positor so  accompanied,  the  burden  is  upon  the  warehouse- 
man to  establish  the  existence  of  a  lawful  excuse  for  such 
refusal. 

A  warehouseman  is  justified  in  delivering  the  goods,  sub- 
ject to  the  above  provisions,  to  one  who  is — 


138  BUSINESS   LAWS   FOR   BUSINESS    MEN. 

The  person  lawfully  entitled  to  the  possession  of  the 
goods,  or  his  agent; 

A  person  who  is  either  himself  entitled  to  delivery  by  the 
terms  of  a  non-negotiable  receipt  issued  for  the  goods,  or 
who  has  written  authority  from  the  person  so  entitled  either 
indorsed  upon  the  receipt  or  written  upon  another  paper;  or 

A  person  in  possession  of  a  negotiable  receipt  by  the  terms 
of  which  the  goods  are  deliverable  to  him  or  order  or  to 
bearer,  or  which  has  been  indorsed  to  him  or  in  blank  by  the 
person  to  whom  delivery  was  promised  by  the  terms  of  the 
receipt  or  by  his  mediate  or  immediate  indorsee. 

Where  a  warehouseman  delivers  the  goods  to  one  who 
is  not  in  fact  lawfully  entitled  to  the  possession  of  them,  the 
warehouseman  will  be  liable  as  for  conversion  to  all  having 
a  right  of  property  or  possession  in  the  goods  if  he  de- 
livered the  goods  otherwise  than  as  authorized  by  law;  and 
though  he  delivered  the  goods  as  authorized  by  law,  he  will 
still  be  liable  if  prior  to  such  delivery  he  had  either  been 
requested,  by  or  on  behalf  of  the  person  lawfully  entitled  to 
a  right  of  property  or  possession  in  the  goods,  not  to  make 
such  delivery,  or  had  information  that  the  delivery  about  to 
be  made  was  to  one  not  lawfully  entitled  to  the  possession 
of  the  goods. 

Where  a  warehouseman  delivers  goods  for  which  he  had 
issued  a  negotiable  receipt,  the  negotiation  of  which  would 
transfer  the  right  to  the  possession  of  the  goods,  and  fails 
to  take  up  and  cancel  the  receipt,  he  will  be  liable  to  any 
one  who  purchases  for  value  in  good  faith  such  receipt,  for 
failure  to  deliver  the  goods  to  him,  whether  such  purchaser 
acquired  title  to  the  receipt  before  or  after  the  delivery  of 
the  goods  by  the  warehouseman;  and 

Where  a  warehouseman  delivers  part  of  the  goods  for 
which  he  had  issued  a  negotiable  receipt  and  fails  either  to 
take  up  and  cancel  such  receipt,  or  to  place  plainly  upon  it 
a  statement  of  what  goods  or  packages  have  been  delivered, 
he  will  be  liable,  to  any  one  who  purchases  for  value  in  good 
faith  such  receipt,  for  failure  to  deliver  all  the  goods  speci- 
fied in  the  receipt,  whether  such  purchaser  acquired  title  to 


BUSINESS    CONTRACTS    AND   LEGAL   OBLIGATIONS.  139 

the  receipt  before  or  after  the  delivery  of  any  portion  of  the 
goods  by  the  warehouseman;  unless  the  goods  have  been 
lawfully  sold  to  satisfy  a  warehouseman's  lien,  or  have  been 
lawfully  sold  or  disposed  of  because  of  their  perishable  or 
hazardous  nature. 

Material  and  fraudulent  alteration  of  a  receipt  will  not 
excuse  the  warehouseman  who  issued  it  from  liability  to 
deliver,  according  to  the  terms  of  the  receipt  as  originally 
issued,  the  goods  for  which  it  was  issued,  but  will  excuse 
him  from  any  other  liability  to  the  person  who  made  the 
alteration,  and  to  any  person  who  took  with  notice  of  the 
alteration.  Any  purchaser  of  the  receipt  for  value  without 
notice  of  the  alteration  will  acquire  the  same  rights  against 
the  warehouseman  which  such  purchaser  would  have  ac- 
quired if  the  receipt  had  not  been  altered  at  the  time  of 
the  purchase. 

Where  a  negotiable  receipt  has  been  lost  or  destroyed,  a 
court  of  competent  jurisdiction  may  order  the  delivery  of 
the  goods  upon  satisfactory  proof  of  such  loss  or  destruc- 
tion and  upon  the  giving  of  a  bond  with  sufficient  sureties 
to  be  approved  by  the  court  to  protect  the  warehouseman 
from  any  liability  or  expense,  which  he  or  any  person  in- 
jured by  such  delivery  may  incur  by  reason  of  the  original 
receipt  remaining  outstanding.  The  court  may  also  in  its 
discretion  order  the  payment  of  the  warehouseman's  reason- 
able costs  and  counsel  fees. 

The  delivery  of  the  goods  under  an  order  of  the  court  will 
not  relieve  the  warehouseman  from  liabilities  to  a  person  to 
whom  the  negotiable  receipt  has  been  negotiated  for  value 
without  notice  of  the  proceedings  or  of  the  delivery  of  the 
goods. 

(a) — Duplicate  Receipt. — A  receipt  upon  the  face  of 
which  the  word  "duplicate"  is  plainly  placed  is  a  representa- 
tion and  warranty  by  the  warehouseman  that  such  receipt  is 
an  accurate  copy  of  an  original  receipt  properly  issued  and 
uncanceled  at  the  date  of  the  issue  of  the  duplicate,  but 
imposes  upon  him  no  other  liability. 

Act  of  the  Legislature,  approved  March  19th,  1909. 


140  BUSINESS  LAWS  FOR  BUSINESS  MEN. 

Section  60.— LIABILITY  OF  WAREHOUSEMAN.— 

If  some  one  other  than  the  depositor  or  person  claiming 
under  him  has  a  claim  to  the  title  or  possession  of  the  goods, 
and  the  warehouseman  has  information  of  such  claim,  the 
warehouseman  will  be  excused  from  liability  for  refusing  to 
deliver  the  goods,  either  to  the  depositor  or  person  claiming 
under  him  or  to  the  adverse  claimant,  until  the  warehouse- 
man has  had  a  reasonable  time  to  ascertain  the  validity  of 
the  adverse  claim  or  to  bring  legal  proceedings  to  compel  all 
claimants  to  interplead.  If  an  adverse  claimant  does  not 
bring  suit  and  serve  summons  on  the  warehouseman  within 
forty-eight  hours  after  the  service  of  notice  of  his  adverse 
claim,  such  failure  will  act  as  a  complete  abandonment  of 
such  adverse  claim. 

A  warehouseman  will  be  liable  to  the  holder  of  a  receipt 
for  damages  caused  by  the  non-existence  of  the  goods  or  by 
failure  of  the  goods  to  correspond  with  the  description  there- 
of in  the  receipt  at  the  time  of  its  issue.  If,  however,  the 
goods  are  described  in  a  receipt  merely  by  a  statement  of 
marks  or  labels  upon  them,  or  upon  packages  containing 
them,  or  by  a  statement  that  the  goods  are  said  to  be  goods 
of  a  certain  kind,  or  that  packages  containing  the  goods  are 
said  to  contain  goods  of  a  certain  kind,  or  by  words  of  like 
purport,  such  statements,  if  true,  will  not  make  liable  the 
warehouseman  issuing  the  receipt,  although  the  goods  are 
not  of  the  kind  which  the  marks  or  labels  upon  them  indi- 
cate, or  of  the  kind  they  were  said  to  be  by  the  depositor, 

A  warehouseman  shall  be  liable  for  any  loss  or  injury  to 
the  goods  caused  by  his  failure  to  exercise  such  care  in  re- 
gard to  them  as  a  reasonable  careful  owner  of  similar  goods 
would  exercise;  but  he  will  not  be  liable,  in  the  absence  of  an 
agreement  to  the  contrary,  for  any  loss  or  injury  to  the 
goods  which  could  not  have  been  avoided  by  the  exercise  of 
such  care. 

A  warehouseman  shall  keep  the  goods  so  far  separate 
from  goods  of  other  depositors,  and  from  other  goods  of  the 
same  depositor  for  which  a  separate  receipt  has  been  issued, 


BUSINESS    CONTRACTS   AND   LEGAL   OBLIGATIONS.  141 

as  to  permit  at  all  times  the  identification  and  re-delivery  of 
the  goods  deposited. 

If  authorized  by  agreement  or  by  custom,  a  warehouse- 
man may  mingle  fungible  goods  with  other  goods  of  the 
same  kind  and  grade.  In  such  case  the  various  depositors 
of  mingled  goods  shall  own  the  entire  mass  in  common,  and 
each  depositor  shall  be  entitled  to  such  portion  thereof  as 
the  amount  deposited  by  him  bears  to  the  whole.  The  ware- 
houseman will  be  severally  liable  to  each  depositor  for  the 
care  and  re-delivery  of  his  share  of  such  mass  to  the  same 
extent  and  under  the  same  circumstances  as  if  the  goods 
had  been  kept  separate. 

If  goods  are  delivered  to  a  warehouseman  by  the  owner  or 
by  a  person  whose  act  in  conveying  the  title  to  them  to  a 
purchaser  in  good  faith  for  value  would  bind  the  owner,  and 
a  negotiable  receipt  is  issued  for  them,  they  can  not  there- 
after, while  in  the  possession  of  the  warehouseman,  be 
attached  by  garnishment  or  otherwise,  or  be  levied  upon 
under  an  execution,  unless  the  receipt  be  first  surrendered  to 
the  warehouseman,  or  its  negotiation  enjoined.  The  ware- 
houseman will  in  no  case  be  compelled  to  deliver  up  the 
actual  possession  of  the  goods  until  the  receipt  is  surren- 
dered to  him  or  impounded  by  the  court. 

Section  61.— WAREHOUSEMAN'S  LIABILITY  FOR 
DELIVERING  PROPERTY  TO  WRONG  PERSON.— 

A  warehouseman  must  use  ordinary  care  and  diligence  to 
ascertain  whether  an  indorsement  is  genuine  before  deliver- 
ing the  property.  And  if  he  delivers  the  property  to  a 
person  who  has  no  right  to  it,  when  he  might  have  ascer- 
tained the  truth  by  the  exercise  of  ordinary  care  and  diligence, 
he  will  be  liable  to  the  owner  of  the  goods. 

Section  62.— WAREHOUSEMAN'S  LIABILITY  FOR 
LOSS  BY  FIRE. — No  warehouseman  is  responsible  for 
any  loss  or  damage  to  property  by  fire  while  in  his  custody, 
if  he  exercises  reasonable  care  and  diligence  for  its  protection 


142  BUSINESS   LAWS   FOR  BUSINESS    MEN. 

and  preservation.  If  the  property  in  his  warehouse  is  de- 
stroyed by  fire,  in  order  to  make  him  liable  for  the  loss,  it 
must  be  shown  that  his  own  neglect  was  the  cause  of  the 
fire,  or  that,  a  fire  occurring,  he  had  the  opportunity  to 
save  the  property,  but  neglected  to  do  so,  with  the  means 
at  hand. 

Statutes  of  1877-78,  pp.  949,  950. 

Section  63.— SALE  OF  PROPERTY  FOR  STOR- 
AGE CHARGES. — A  warehouseman  has  a  lien  on  goods 
deposited  or  on  the  proceeds  thereof  in  his  hands,  for  all 
lawful  charges  for  storage  and  preservation  of  the  goods; 
also  for  all  lawful  claims  for  money  advanced,  interest,  insur- 
ance, transportation,  labor,  weighing,  coopering  and  other 
charges  and  expenses  in  relation  to  such  goods;  also  for  all 
reasonable  charges  and  expenses  for  notice,  and  advertise- 
ments of  sale,  and  for  sale  of  the  goods  where  default  has 
been  made  in  satisfying  the  warehouseman's  lien. 

A  warehouseman's  lien  may  be  enforced  against  all  goods, 
whenever  deposited,  belonging  to  the  person  who  is  liable 
as  debtor  for  the  claims  in  regard  to  which  the  lien  is 
asserted;  and  against  all  goods  belonging  to  others  which 
have  been  deposited  at  any  time  by  the  person  who  is  liable 
as  debtor  for  the  claims  irt  regard  to  which  the  lien  is 
asserted,  if  such  person  had  been  so  entrusted  with  the 
possession  of  the  goods  that  a  pledge  of  the  same  by  him  at 
the  time  of  the  deposit  to  one  who  took  the  goods  in  good 
faith  for  value  would  have  been  valid. 

A  warehouseman  loses  his  lien  upon  goods,  by  surrender- 
ing possession  thereof,  or  by  refusing  to  deliver  the  goods 
when  a  demand  is  made  with  which  he  is  bound  to  comply 
under  the  provisions  of  this  act. 

If  a  negotiable  receipt  is  issued  for  goods,  the  warehouse- 
man shall  have  no  lien  thereon,  except  for  charges  for  stor- 
age of  those  goods  subsequent  to  the  date  of  the  receipt, 
unless  the  receipt  expressly  enumerates  other  charges  for 
which  a  lien  is  claimed. 


BUSINESS    CONTRACTS   AND   LEGAL   OBLIGATIONS.  143 

A  warehouseman  having  a  lien  valid  against  the  person 
demanding  the  goods  may  refuse  to  deliver  the  goods  to 
him  until  the  lien  is  satisfied. 

A  warehouseman's  lien  for  a  claim  which  has  become  due 
may  be  satisfied  as  follows :  The  warehouseman  must  give  a 
written  notice  to  the  person  on  whose  account  the  goods  are 
held,  and  to  any  other  person  known  by  the  warehouseman 
to  claim  an  interest  in  the  goods.  Such  notice  must  be  given 
by  delivery  in  person  or  by  registered  letter  addressed  to  the 
last  known  place  of  business  or  abode  of  the  person  to  be 
notified.    The  notice  must  contain — 

(a)  An  itemized  statement  of  the  warehouseman's  claim, 
showing  the  sum  due  at  the  time  of  the  notice  and  the  date 
or  dates  when  it  became  due, 

(b)  A  brie.f  description  of  the  goods  against  which  the 
Hen  exists, 

(c)  A  demand  that  the  amount  of  the  claim  as  stated  in 
the  notice,  and  of  such  further  claim  as  shall  accrue  shall  be 
paid  on  or  before  the  day  mentioned,  not  less  than  ten  days, 
from  the  delivery  of  the  notice  if  it  is  personally  delivered, 
or  from  the  time  when  the  notice  should  reach  its  destina- 
tion, according  to  the  due  course  of  post,  if  the  notice  is 
sent  by  mail,  and 

(d)  A  statement  that  unless  the  claim  is  paid  within  the 
time  specified  the  goods  will  be  advertised  for  sale  and  sold 
by  auction  at  a  specified  time  and  place. 

In  accordance  with  the  terms  of  a  notice  so  given,  a  sale 
of  the  goods  by  auction  may  be  had  to  satisfy  any  valid 
claim  of  the  warehouseman  for  which  he  has  a  lien  on  the 
goods.  The  sale  must  be  had  in  the  place  where  the  lien  was 
acquired,  or,  if  such  place  is  manifestly  unsuitable  for  the 
purpose,  at  the  nearest  suitable  place.  After  the  time  for  the 
payment  of  the  claim  specified  in  the  notice  to  the  depositor 
has  elapsed,  an  advertisement  of  the  sale,  describing  the 
goods  to  be  sold,  and  stating  the  name  of  the  owner  or  per- 
son on  whose  account  the  goods  are  held,  and  the  time  and 
place  of  the  sale,  must  be  published  once  a  week  for  two 
consecutive    weeks   in   a   newspaper   published    in    the   place 


144  BUSINESS   LAWS    FOR   BUSINESS    MEN.    . 

where  such  sale  is  to  be  held.  The  sale  must  not  be  less 
than  fifteen  days  from  the  time  of  the  first  publication.  If 
there  is  no  newspaper  published  in  such  place,  the  adver- 
tisement must  be  posted  at  least  ten  days  before  such  sale 
in  not  less  than  six  conspicuous  places  therein. 

From  the  proceeds  of  such  sale  the  warehouseman  must 
satisfy  his  lien,  including  the  reasonable  charges  of  notice, 
advertisement,  and  sale.  The  balance,  if  any,  of  such  pro- 
ceeds must  be  held  by  the  warehouseman,  and  delivered  on 
demand  to  the  person  to  whom  he  would  have  been  bound 
to  deliver  or  justified  in  delivering  the  goods. 

At  any  time  before  the  goods  are  sold  any  person  claiming 
a  right  of  property  or  possession  therein  may  pay  the  ware- 
houseman the  amount  necessary  to  satisfy  his  lien  and  pay 
the  reasonable  expenses  and  liabilities  incurred  in  serving 
notices  and  advertising  and  preparing  for  the  sale  up  to  the 
time  of  such  payment.  The  warehouseman  must  deliver  the 
goods  to  the  person  making  such  payment,  if  he  is  a  person 
entitled  to  the  possession  of  the  goods,  on  payment  of 
charges  thereon.  Otherwise  the  warehouseman  must  retain 
possession  of  the  goods  according  to  the  terms  of  the  original 
contract  of  deposit. 

If  the  goods  are  of  a  perishable  nature,  or  by  keeping  will 
deteriorate  greatly  in  value,  or  by  their  odor,  leakage,  in- 
flammability, or  explosive  nature,  will  be  liable  to  injure 
other  property,  the  warehouseman  may  give  such  notice  to 
the  owner,  or  to  the  person  in  whose  name  the  goods  are 
stored,-  as  is  reasonable  and  possible  under  the  circum- 
stances, to  satisfy  the  lien  upon  such  goods,  and  to  remove 
them  from  the  warehouse,  and  in  the  event  of  the  failure  of 
such  •  person  to  satisfy  the  lien  and  to  remove  the  goods 
within  the  time  specified,  the  warehouseman  may  sell  the 
goods  at  public  or  private  sale  without  advertising.  If  the 
warehouseman  after  a  reasonable  effort  is  unable  to  sell  such 
goods,  he  may  dispose  of  them  in  any  lawful  manner,  and 
will  incur  no  liability  by  reason  thereof. 

After  goods  have  been  lawfully  sold  to  satisfy  a  ware- 
houseman's lienVor  have  .been  lawfully  sold -or  disposed. of 


BUSINESS   CONTRACTS   AND  LEGAL  OBLIGATIONS.  145 

because  of  their  perishable  or  hazardous  nature,  the  ware- 
houseman will  not  thereafter  be  liable  for  failure  to  deliver 
the  goods  to  the  depositor,  or  owner  of  the  goods,  or  to  a 
holder  of  the  receipt  given  for  the  goods  when  they  were 
deposited,  even  if  such  receipt  be  negotiable. 

Section  63a.— NEGOTIATION  OF  WAREHOUSE 
RECEIPT. — A  negotiable  receipt  may  be  negotiated  by  de- 
livery where,  by  the  terms  of  the  receipt,  the  warehouseman 
undertakes  to  deHver  the  goods  to  the  bearer;  or  where,  by 
the  terms  of  the  receipt,  the  warehouseman  undertakes  to 
deliver  the  goods  to  the  order  of  a  specified  person,  and  such 
person  or  a  subsequent  indorsee  of  the  receipt  has  indorsed 
it  in  blank  or  to  bearer. 

Where,  by  the  terms  of  a  negotiable  receipt,  the  goods  are 
deliverable  to  bearer,  or  where  a  negotiable  receipt  has  been 
indorsed  in  blank  or  to  bearer,  any  holder  may  indorse  the 
same  to  himself  or  to  any  other  specified  person,  and  in  such 
case  the  receipt  must  thereafter  be  negotiated  only  by  the 
indorsement  of  such  indorsee. 

A  negotiable  receipt  may  be  negotiated  by  the  indorse- 
ment of  the  person  to  whose  order  the  goods  are,  by  the 
terms  of  the  receipt,  deliverable.  Such  indorsement  may  be 
in  blank,  to  bearer,  or  to  a  specified  person.  If  indorsed  to 
a  specified  person,  it  may  be  again  negotiated  by  the  indorse 
ment  of  such  person  in  blank,  to  bearer,  or  to  another  speci- 
fied person.  Subsequent  negotiation  may  be  made  in  like 
manner. 

A  receipt  which  is  not  in  such  form  that  it  can  be  negoti- 
ated by  delivery  may  be  transferred  by  the  holder  by  delivery 
to  a  purchaser  or  donee. 

A  non-negotiable  receipt  can  not  be  negotiated,  and  the 
indorsement  of  such  a  receipt  gives  the  transferee  no  addi- 
tional right. 

A  negotiable  receipt  may  be  negotiated  by  the  owner 
thereof;  or  by  any  person  to  whom  the  possession  or  custody 
of  the  receipt  has  been  entrusted  by  the  owner,  if,  by  the 


146  BUSINESS  LAWS  FOR  BUSINESS   MEN. 

terms  of  the  receipt,  the  warehouseman  undertakes  to  de- 
liver the  goods  to  the  order  of  the  person  to  whom  the 
possession  or  custody  of  the  receipt  has  been  entrusted,  or 
if  at  the  time  of  such  entrusting  the  receipt  is  in  such  form 
that  it  may  be  negotiated  by  deHvery. 

A  person  to  whom  a  negotiable  receipt  has  been  duly 
negotiated  acquires  thereby  such  title  to  the  goods  as  the 
person  negotiating  the  receipt  to  him  had,  or  had  ability  to 
convey  to  a  purchaser  in  good  faith  for  value,  and  also  such 
title  to  the  goods  as  the  depositor  or  person  to  whose  order 
the  goods  were  to  be  delivered  by  the  terms  of  the  receipt 
had,  or  had  ability  to  convey  to  a  purchaser  in  good  faith 
for  value;  and  he  also  acquires  the  direct  obligation  of  the 
warehouseman  to  hold  possession  of  the  goods  for  him 
according  to  the  terms  of  the  receipt  as  fully  as  if  the  ware- 
houseman had  contracted  directly  with  him. 

A  person  to  whom  a  receipt  has  been  transferred  but  not 
negotiated,  acquires  thereby,  as  against  the  transferor,  the 
title  to  the  goods,  subject  to  the  terms  of  any  agreement  with 
the  transferor. 

If  the  receipt  is  non-negotiable  such  person  also  acquires 
the  right  to  notify  the  warehouseman  of  the  transfer  to  him 
of  such  receipt,  and  thereby  to  acquire  the  direct  obligation 
of  the  warehouseman  to  hold  possession  of  the  goods  for 
him  according  to  the  terms  of  the  receipt. 

Prior  to  the  notification  of  the  warehouseman  by  the  trans- 
feror or  transferee  of  a  non-negotiable  receipt,  the  title  of  the 
transferee  to  the  goods  and  the  right  to  acquire  the  obliga- 
tion of  the  warehouseman  may  be  defeated  by  the  levy  of  an 
attachment  or  execution  upon  the  goods  by  a  creditor  of  the 
transferor,  or  by  a  notification  to  the  warehouseman  by  the 
transferor,  or  a  subsequent  purchaser  from  the  transferor, 
of  a  subsequent  sale  of  the  goods. 

Where  a  negotiable  receipt  is  transferred  for  value  by 
delivery,  and  the  indorsement  of  the  transferor  is  essential 
for  negotiation,  the  transferee  acquires  a  right  against  the 
transferor  to  compel  him  to  indorse  the   receipt,   unless   a 


BUSINESS    CONTRACTS   AND   LEGAL   OBLIGATIONS.  147 

contrary  intention  appears.  The  negotiation  will  take  effect 
as  of  the  time  when  the  indorsement  is  actually  made. 

A  person  who  for  value  negotiates  or  transfers  a  receipt 
by  indorsement  or  delivery,  including  one  who  assigns  for 
value  a  claim  secured  by  a  receipt,  unless  a  contrary  inten- 
tion appears,  warrants,  that  the  receipt  is  genuine;  that  he 
has  a  legal  right  to  negotiate  or  transfer  it;  that  he  has 
knowledge  of  no  fact  which  would  impair  the  validity  or 
worth  of  the  receipt;  and  that  he  has  a  right  to  transfer  the 
title  to  the  goods,  and  that  the  goods  are  merchantable  or 
fit  for  a  particular  purpose,  whenever  such  warranties  would 
have  been  implied,  if  the  contract  of  the  parties  had  been 
to  transfer  without  a  receipt  the  goods  represented  thereby. 

The  indorsement  of  a  receipt  will  not  make  the  indorser 
liable  for  any  failure  on  the  part  of  the  warehouseman  or 
previous  indorsers  of  the  receipt  to  fulfill  their  respective 
obligations. 

A  mortgagee,  pledgee  or  holder  for  security  of  a  receipt 
who  in  good  faith  demands  or  receives  payment  of  the  debt 
for  which  such  receipt  is  security,  whether  from  a  party  to 
a  draft  drawn  for  such  debt  or  from  any  other  person,  will 
not  by  so  doing  be  deemed  to  represent  or  to  warrant  the 
genuineness  of  such  receipt  or  the  quantity  or  quality  of  the 
goods  therein  described. 

The  validity  of  the  negotiation  of  a  receipt  is  not  impaired 
by  the  fact  that  such  negotiation  was  a  breach  of  duty  on 
the  part  of  the  person  making  the  negotiation,  or  by  the  fact 
that  the  owner  of  the  receipt  was  induced  by  fraud,  mistake, 
or  duress  to  entrust  the  possession  or  custody  of  the  receipt 
to  such  person,  if  the  person  to  whom  the  receipt  was  nego- 
tiated, or  a  person  to  whom  the  receipt  was  subsequently 
negotiated,  paid  value  therefor,  without  notice  of  the  breach 
of  duty,  or  fraud,  mistake,  or  duress. 

Where  a  person  having  sold,  mortgaged,  or  pledged  goods 
which  are  in  a  warehouse  and  for  which  a  negotiable  receipt 
has  been  issued,  or  having  sold,  mortgaged,  or  pledged  the 
negotiable  receipt  representing  such  goods,  continues  in  pos- 
session of  the  negotiable  receipt,  the  subsequent  negotiation 


148  BUSINESS    LAWS   FOR   BUSINESS    MEN. 

thereof  by  that  person  under  any  sale,  or  other  disposition 
thereof,  to  any  person  receiving  the  same  in  good  faith,  for 
value  and  without  notice  of  the  previous  sale,  mortgage  or 
pledge,  will  have  the  same  effect  as  if  the  first  purchaser  of 
the  goods  or  receipt  had  expressly  authorized  the  subsequent 
negotiation. 

Where  a  negotiable  receipt  has  been  issued  for  goods,  no 
seller's  lien  or  right  of  stoppage  in  transitu  will  defeat  the 
rights  of  any  purchaser  for  value  in  good  faith  to  whom  such 
receipt  has  been  negotiated,  whether  such  negotiation  be 
prior  or  subsequent  to  the  notification  to  the  warehouseman 
who  issued  such  receipt  of  the  seller's  claim  to  a  lien  or 
right  of  stoppage  in  transitu. 

Section    63b.— FRAUD     BY     WAREHOUSEMAN.— 

A  warehouseman,  or  any  officer,  agent,  or  servant  of  a 
warehouseman,  who  issues  or  aids  in  issuing  a  receipt  know- 
ing that  the  goods  for  which  such  receipt  is  issued  have 
not  been  actually  received  by  such  warehouseman,  or  are 
not  under  his  control  at  the  time  of  issuing  such  receipt, 
will  be  guilty  of  a  crime,  and  upon  conviction  will  be  pun- 
ished for  each  offense  by  imprisonment  not  exceeding  five 
years,  or  by  a  fine  not  exceeding  five  thousand  dollars, 
or  by  both. 

A  warehouseman,  or  any  officer,  agent,  or  servant  of  a 
warehouseman,  who  fraudulently  issues  or  aids  in  fraudu- 
lently issuing  a  receipt  for  goods,  knowing  that  it  contains 
any  false  statement,  will  be  guilty  of  a  crime,  and  upon 
conviction  will  be  punished  for  each  offense  by  imprison- 
ment not  exceeding  one  year,  or  by  a  fine  not  exceeding  one 
thousand  dollars,  or  by  both. 

A  warehouseman,  or  any  officer,  agent,  or  servant  of  a 
warehouseman,  who  issues  or  aids  in  issuing  a  duplicate  or 
additional  negotiable  receipt  for  goods,  knowing  that  a 
former  negotiable  receipt  for  the  same  goods  or  any  part  of 
them  is  outstanding  and  uncancelled,  without  plainly  plac- 
ing upon  the  face  thereof  the  word  "duplicate,"  except  in 
the  case  of  a  lost  or  destroyed  receipt,  will  be  guilty  of  a 


BUSINESS   CONTRACTS   AND   LEGAL  OBLIGATIONS.  149 

crime,  and  upon  conviction  may  be  punished  for  each  offense 
by  imprisonment  not  exceeding  five  years,  or  by  a  fine  not 
exceeding  five  thousand  dollars,  or  by  both. 

Where  there  are  deposited  with  or  held  by  a  v^arehouse- 
man  goods  of  which  he  is  owner,  either  solely  or  jointly  or 
in  common  with  others,  such  warehouseman,  or  any  of  his 
officers,  agents,  or  servants  who,  knowing  this  ownership, 
issues  or  aids  in  issuing  a  negotiable  receipt  for  such  goods 
which  does  not  state  such  ownership,  will  be  guilty  of  a 
crime,  and  upon  conviction  may  be  punished  for  each  offense 
by  imprisonment  not  exceeding  one  year,  or  by  a  fine  not 
exceeding  one  thousand  dollars,  or  by  both. 

A  warehouseman,  or  any  officer,  agent,  or  servant  of  a 
warehouseman  who  delivers  goods  out  of  the  possession  of 
such  warehouseman,  knowing  that  a  negotiable  receipt  the 
negotiation  of  which  would  transfer  the  right  to  the  posses- 
sion of  such  goods  is  outstanding  and  uncancelled,  without 
obtaining  the  possession  of  such  receipt  at  or  before  the 
time  of  such  delivery,  will  be  guilty  of  a  crime,  and  upon 
conviction  may  be  punished  for  each  offense  by  imprison- 
ment not  exceeding  one  year,  or  by  a  fine  not  exceeding  one 
thousand  dollars,  or  by  both. 

Any  person  who  deposits  goods  to  which  he  has  not 
title,  or  upon  which  there  is  a  lien  or  mortgage,  and  who 
takes  for  such  goods  a  negotiable  receipt  which  he  after- 
wards negotiates  for  value  with  intent  to  deceive  and  with- 
out disclosing  his  want  of  title  or  the  existence  of  the 
lien  or  mortgage,  will  be  guilty  of  a  crime,  and  upon  con- 
viction may  be  punished  for  each  offense  by  imprisonment 
not  exceeding  one  year,  or  by  a  fine  not  exceeding  one 
thousand  dollars,  or  by  both. 

Act  of  the  Legislature,  approved  March  19,  1909. 

Section    63c.— INSURANCE    ON    STORED    PROP- 
ERTY.— Both  the  owner  of  the  goods  and  the  warehouse- 
man have  an  insurable  interest  in  the  property,  and  if  the 
owner  does  not  insure  against  loss  by  fire  the  warehouse 
man  can  insure  for  his  benefit. 


150  BUSINESS   LAWS   FOR   BUSINESS    MEN. 

Section  63d.— LIABILITY  FOR  LOSS  BY  REASON 
OF  DEFECTIVE  BUILDING.— A  warehouseman  is 
bound  in  the  exercise  of  reasonable  care  to  make  reasonable 
inspection  from  time  to  time  to  see  that  his  building  remains 
safe  and  in  proper  condition.  When  a  warehouseman  receives 
goods  in  his  warehouse  for  storage,  he  must  be  deemed  to 
have  held  out  to  the  public  his  building  as  a  proper  and 
fit  building  in  which  to  store  goods.  Buildings  of  this 
character  are  liable  to  deteriorate.  They  may  be  weakened 
by  storms  and  winds,  and,  when  constructed  upon  piles  over 
waters  or  low  lands,  the  piles  may  decay  and  the  foundation 
become  weak,  endangering  the  structure.  A  warehouseman, 
therefore,  in  the  exercise  of  reasonable  care,  owes  a  duty  to 
his  patrons  of  making  reasonable  inspection  from  time  to 
time  to  see  that  the  building  remains  safe  and  in  a  proper 
condition. 

Hotel  Keepers  and  Lodging-house  Keepers. 

Section  64.— LIABILITY  OF  HOTEL  KEEPERS 
AND  LODGING-HOUSE  KEEPERS.— Hotel  keepers 
(including  boarding-house  keepers)  and  lodging-house  keep- 
ers have  certain  rights  and  liabilities  fixed  by  statute.  The 
language  of  the  California  statute  referring  to  hotels  is, 
"Inn  keepers,  hotel  keepers,  boarding  and  lodging-house 
keepers."  There  is  no  difference  in  the  law  between  an 
inn  and  hotel.  Both  words  mean  the  same  thing.  An  inn 
is  a  house  which  is  held  out  to  the  public  as  a  place  where 
all  transient  persons  who  come  will  be  received  and  enter- 
tained as  guests,  for  compensation, — a  hotel.  There  is  a 
difference  between  a  hotel  and  a  boarding-house,  which  is 
this:  A  hotel  is  a  house  where  a  keeper  holds  himself  out 
as  ready  to  receive  all  who  may  choose  to  come  there  and 
pay  an  adequate  price  for  the  entertainment,  while  the 
keeper  of  a  boarding-house  reserves  the  choice  of  comers 
and  the  terms  of  accommodation,  contracting  specially  with 
each  customer,  and  most  commonly  arranging  for  long 
periods  and  a  definite  abode.     There  is  no  difference  in  the 


BUSINESS    CONTRACTS    AND   LEGAL   OBLIGATIONS.  151 

law  between  the  liability  of  hotel  keepers,  boarding-house 
keepers,  and  lodging-house  keepers.  The  law  puts  them 
all  in  the  same  class  with  reference  to  their  liability  for 
the  property  of  their  guests,  boarders,  or  lodgers.  Hotel 
keepers,  boarding-house  keepers,  and  lodging-house  keepers 
in  California  are  bound  to  use  ordinary  care  and  diligence 
in  the  protection  and  preservation  of  the  personal  property, 
other  than  money,  of  their  guests,  boarders,  or  lodgers  com- 
ing into  their  houses,  and  they  are  liable  for  losses  of 
or  injuries  to  such  property,  if  occasioned  by  their  lack 
of  ordinary  care  and  diligence.  The  law  passed  by  the 
Legislature  in  1895  limited  the  liability  of  hotel  keepers, 
boarding  and  lodging-house  keepers,  to  losses  occasioned 
by  their  lack  of  ordinary  care  and  diligence,  but  does 
not  include  money  within  its  terms ;  consequently  it  seems 
that  greater  and  more  exacting  care  must  be  taken  of 
the  money  of  a  guest,  boarder,  or  lodger  than  is  required 
to  be  exercised  with  reference  to  other  kinds  of  personal 
property.  The  law  provides,  however,  that  in  no  case  of 
loss  of  or  injury  to  personal  property,  other  than  money, 
shall  the  liability  of  the  hotel  keeper,  boarding-house  keeper, 
or  lodging-house  keeper  exceed  the  sum  of  $100  for  each 
trunk  and  its  contents,  $50  for  each  valise  and  traveling 
bag  and  contents,  and  $10  for  each  box,  bundle  or  package 
and  contents,  placed  under  his  care,  unless  he  has  consented 
in  writing  with  the  owner  to  assume  a  greater  liability. 
It  is  customary  to  give  receipts  in  writing  for  money  left 
or  deposited  by  guests,  and  in  such  case  the  liability  would 
be  for  the  amount  shown  by  the  receipt,  in  case  of  loss. 
Civil  Code,  Section  1859. 

Section  65.— EXEMPTION  FROM  LIABILITY  IN 
CERTAIN  CASES.— The  courts  had  held  hotel  keepers, 
to  such  a  strict  liability  that  the  Legislature  was  induced, 
in  1895,  to  pass  a  law  making  practically  an  exemption  in 
certain  cases,  and  modifying  to  a  great  extent  the  extreme 
strictness  of  the  law  as  it  then  stood  in  this  state.  By 
the  law  passed  in  1895,  and  which  is  now  in  force,  if  a  hotel 


152  BUSINESS   LAWS  FOR  BUSINESS   MEN. 

keeper,  or  boarding-house  or  lodging-house  keeper,  keeps 
a  fireproof  safe,  and  gives  notice  to  his  guest,  boarder,  or 
lodger  that  he  keeps  such  a  safe,  and  will  not  be  liable  for 
money,  jewelry,  documents,  or  other  articles  of  unusual 
value  and  small  compass,  unless  such  articles  are  placed 
in  the  safe,  he  will  not  be  liable  for  any  loss  or  damage 
to  such  articles  if  not  deposited  with  him  to  be  placed  in 
his  safe,  provided,  that  he  does  not  by  his  own  acts  con- 
tribute to  the  loss  of  the  property.  This  law  also  provides 
that,  in  any  case,  the  hotel  keeper,  boarding-house  keeper, 
or  lodging-house  keeper  shall  not  be  liable  for  more  than 
$250  for  loss  of  any  money,  jewelry,  or  documents,  or 
other  articles  of  unusual  value  and  small  compass,  belong- 
ing to  any  guest,  boarder,  or  lodger,  unless  he  shall  have 
given  a  receipt  in  writing  for  such  property.  Just  what 
the  law  means  by  a  "receipt  in  writing,"  and  how  that  fact 
alone  should  make  the  liability  greater,  is  difficult  to  under- 
stand; but  it  is  probable  that  the  Legislature  meant  to 
provide,  by  this  language,  that  where  a  receipt  is  given 
acknowledging  a  greater  value,  then  the  liability  for  the  loss 
shall  be  equal  to  the  admitted  value  of  the  property,  and 
that  where  no  receipt  is  given,  no  value  in  excess  of  $250 
shall  be  left  to  be  determined  by  the  conflicting  testimony 
of  witnesses.  The  notice  provided  for  in  the  law  need  not 
be  in  any  particular  form,  and  it  may  be  given  personally 
to  the  guest,  boarder,  or  lodger,  or  it  may  be  given  by  put- 
ting up  a  printed  notice  in  a  prominent  place  in  the  office 
or  in  the  rooms  of  the  house. 
Civil  Code,  Section  1860. 

Section  66.— WHAT  PROPERTY  MUST  BE  DE- 
POSITED IN  THE  SAFE.— Under  the  notice  provided 
for  by  law  to  be  given  by  the  hotel  keeper,  boarding- 
house  keeper,  or  lodging-house  keeper,  he  cannot  demand 
that  his  guest  put  every  article  of  small  compass  and 
peculiar  value,  or  all  his  money  or  jewelry,  in  the  safe. 
The  law  does  not  apply  to  such  articles  as  the  guest  needs 
to  have  about  him,  for  constant  and  daily  use,  even  though 


BUSINESS    CONTRACTS   AND   LEGAL   OBLIGATIONS.  153 

for  personal  adornment.  Jewelry  worn  by  a  woman  daily 
need  not.  when  not  actually  upon  her  person,  be  deposited 
in  the  safe,  in  order  to  make  the  hotel  keeper  or  boarding 
and  lodging-house  keeper  responsible  for  its  loss  in  his 
house.  If  worn  daily,  the  jewelry  does  not  cease  to  be 
needed  for  present  personal  use  when  its  possessor  lays 
it  aside  upon  retiring  for  the  night.  Nor  is  it  necessary, 
in  order  to  render  the  hotel  keeper  liable,  that  the  property 
should  have  been  delivered  into  his  exclusive  personal 
possession.  The  guest  may  retain  personal  possession  of 
his  goods  within  the  house — as  of  his  trunk  and  its  con- 
tents, his  wearing  apparel,  and  other  articles  in  his  room, 
and  any  jewelry  or  valuables  carried  or  worn  around  his 
person — without  discharging  the  keeper  of  the  house  from 
responsibility.  Therefore  the  Act  of  1895,  referred  to  in 
the  preceding  section,  is  not  intended  to  apply,  and  does 
not  apply,  to  the  articles  just  enumerated,  needed  by  the 
guest  for  daily  use;  for  it  would  be  a  manifest  absurdity 
to  require  the  guest,  upon  retiring  for  the  night,  to  leave 
his  personal  apparel,  or  anything  carried  or  worn  around 
his  person,  in  the  house  safe.  The  law  only  applies  to  such 
articles  as  are  not  needed  by  the  guest  for  daily  use. 

Section  67.— LIABILITY  OF  HOTEL,  BOARDING- 
HOUSE,  AND  LODGING-HOUSE  KEEPERS  FOR 
LOSS  BY  FIRE.— In  some  of  the  states  of  the  Union  the 
keeper  of  a  hotel  is  held  to  be  an  insurer  against  loss  by 
fire,  and  is  bound  to  pay  for  property  lost  by  a  fire,  no 
matter  from  what  cause  occurring.  But  this  extreme  view 
is  not  the  law  of  California.  In  this  state,  when  a  fire 
occurs,  and  destroys  or  injures  the  property  of  a  guest, 
boarder,  or  lodger,  the  keeper  of  the  house  is  not  liable  to 
pay  the  damage  if  he  can  show  that  the  fire  was  purely 
accidental,  and  that  neither  his  negligence  nor  the  negli- 
gence of  his  servants  or  employees  contributed  to  the  loss. 
But  if  the  fire  occurs  through  the  negligence  of  the  proprietor, 
or  by  the  neglect  of  any  of  his  servants  or  employees, 
he  will  be  liable  for  damage  to  the  property  of  his  guests. 


154  BUSINESS   LAWS   FOR  BUSINESS   MEN. 

Thus,  if  a  cook  or  fireman  negligently  leaves  coals  or  ashes 
containing  fire  in  a  position  which  ignites  and  destroys  the 
house,  or  if  a  chambermaid  negligently  sets  fire  to  the 
furniture  of  a  room,  or  if  a  porter  or  bellboy  sent  to  build 
a  fire  in  the  room  of  a  guest  sets  fire  to  the  house,  or  if 
a  sufficient  watch  is  not  kept,  or  reasonable  protection  and 
guard  against  fire  is  not  maintained,  the  keeper  of  a  hotel, 
boarding-house,  or  lodging-house  will  be  liable  in  this  state 
for  loss  by  fire.  But  where  the  keeper  of  the  house  has 
done  all  that  a  reasonable  man  can  do  to  guard  against  the 
danger  from  fire,  and  a  fire  occurs,  without  any  negligence 
on  his  own  part  or  on  the  part  of  any  of  his  servants  or 
employees,  he  will  not  be  liable.  Thus,  if  a  fire  starts  in 
an  adjoining  building,  or  in  some  other  quarter  of  the  town, 
and  reaches  and  sweeps  away  his  own  house ;  or  if  a  fire 
occurs  by  reason  of  lightning,  earthquake,  or  floods,  he  will 
not  be  liable  for  losses  to  his  guests,  boarders,  or  lodgers. 
Indeed,  it  may  be  said  that  it  is  the  law  of  this  state  that 
in  no  case  of  loss  by  fire  is  the  keeper  of  a  hotel,  boarding- 
house,  or  lodging-house  liable  for  the  property  of  guests, 
where  the  fire  was  purely  accidental,  and  was  not  occa- 
sioned by  anything  which  reasonable  care  and  prudence 
on  the  part  of  himself  or  his  servants  and  employees  might 
have  avoided  or  prevented. 

Section  68.— LIABILITY  OF  HOTEL,  BOARDING- 
HOUSE,  AND  LODGING-HOUSE  KEEPERS  FOR 
LOSS  BY  THEFT.— The  liability  of  the  keeper  of  a  hotel, 
boarding-house,  or  lodging-house  for  losses  of  the  property 
of  his  guests,  boarders,  or  lodgers,  by  theft,  depends  upon 
whether  the  thieves  come  from  within  the  house.  If  the 
property  is  stolen  by  some  one  employed  in  the  house,  in 
any  capacity,  or  even  by  a  guest,  boarder  or  lodger,  with- 
out the  fault  of  the  person  from  whom  the  property  is 
taken,  the  keeper  of  the  house  will  be  liable  for  its  loss. 
But  if  burglars  or  rioters  break  into  the  house  and  steal, 
this   will  constitute  an   act  which  the   keeper   of   the   house 


BUSINESS  CONTRACTS   AND  LEGAL  OBLIGATIONS.  155 

could  not  very  well  have  had  any  control  over,  and  hence 
he  will  not  be  liable,  if  he  kept  his  house  secured  in  a 
reasonable  manner. 

Section  69.— LIABILITY  OF  HOTEL,  BOARDING- 
HOUSE,  AND  LODGING-HOUSE  KEEPERS  FOR 
LOSS  OF  BAGGAGE.— The  liability  for  loss  of  baggage 
begins  at  the  moment  the  hotel,  boarding-house,  or  lodging- 
house  keeper  takes  charge  of  the  baggage,  whether  at  the 
house  or  elsewhere.  Therefore,  if  a  porter  solicits  a  guest 
at  a  railroad  train,  or  ferry,  or  depot,  and  receives  the 
traveler's  check,  and  indicates  the  conveyance  which  the 
traveler  shall  take  to  the  house,  the  keeper  is  responsible 
from  that  moment  for  the  safe  delivery  of  the  baggage 
at  the  guest's  room,  and,  if  it  is  lost  on  the  way,  the  keeper 
of  the  house  is  liable.  After  the  baggage  has  reached  the 
house,  the  keeper  is  responsible  for  its  safety,  and  will  be 
liable  for  its  loss,  if  the  owner  of  the  baggage  is  not  guilty 
of  any  negligence  which  contributes  to  the  loss.  After  the 
baggage  leaves  the  house,  to  be  taken  to  a  depot,  train, 
or  ferry  by  the  employees  of  the  keeper  of  the  house,  his 
liability  continues  until  the  baggage  safely  reaches  its 
destination  there. 

Section  70.— LIEN  OF  HOTEL,  BOARDING-HOUSE, 
AND  LODGING-HOUSE  KEEPER  ON  BAGGAGE 
AND  OTHER  PROPERTY.— A  hotel,  boarding-house, 
or  lodging-house  keeper  has  a  lien  upon  the  baggage  and 
other  property  of  his  guest,  boarder,  or  lodger,  brought 
into  his  house,  for  the  compensation  due  him.  This  lien 
includes  his  charges  for  accommodation,  board,  and  lodg- 
ing, and  room  rent,  and  such  extras  as  have  been  requested 
and  furnished.  If  the  bill  is  not  paid  when  due,  the  keeper 
of  a  hotel,  boarding-house,  or  lodging  house  has  the  right 
to  take  possession  of  the  baggage  and  other  personal  prop- 
erty of  the  guest,  boarder,  or  lodger,  in  the  house,  and  keep 
possession  until  the  debt  is  paid. 
Civil  Code,  Section  1861. 


156  BUSINESS   LAWS   FOR   BUSINESS    MEN. 

Section  71.— SALE  OF  UNCLAIMED  BAGGAGE 
BY  HOTEL.  BOARDING-HOUSE,  AND  LODGING- 
HOUSE  KEEPERS.— Whenever  any  trunk,  carpet-bag, 
valise,  box,  bundle,  or  other  baggage,  in  the  possession  of 
a  hotel,  boarding-house,  or  lodging-house  keeper,  remains 
there  unclaimed  for  the  period  of  sixty  days,  the  property 
may  be  sold  by  him  at  public  auction,  and  out  of  the  pro- 
ceeds of  the  sale  he  may  retain  the  charges  for  storage  and 
the  expenses  of  advertising  and  sale.  A  notice  of  at  least 
four  weeks,  that  the  property  will  be  sold  at  auction,  must 
be  published  in  a  newspaper.  If  there  is  no  newspaper  in 
the  place  where  the  house  is  located,  then  the  notice  must 
be  published  in  a  newspaper  printed  at  the  nearest  city  or 
town.  The  notice  of  the  sale  must  be  published  once  a 
week  for  four  successive  weeks,  and  the  notice  must  con- 
tain a  description  of  each  trunk,  carpet-bag,  valise,  box, 
bundle,  or  other  baggage,  which  it  is  intended  to  sell,  also 
the  name  of  the  owner,  if  known,  the  name  of  the  person 
selling,  and  the  time  and  place  of  the  sale.  If  there  is  any 
balance  left,  after  retaining  enough  to  pay  storage  charges 
and  the  expenses  of  the  sale,  and  this  balance  is  not  claimed 
by  the  rightful  owner  within  one  week  from  the  day  of 
sale,  the  money  must  be  paid  into  the  Treasurer's  office  of 
the  county  where  the  sale  takes  place;  and  if  no  claim  is 
made  upon  the  County  Treasurer  for  the  money  within  one 
year,  it  goes  into  the  County  General  Fund. 
Civil   Code,   Section   1862. 

Section  72.— STATEMENT  OF  CHARGES,  ETC., 
TO  BE  POSTED  BY  HOTEL,  BOARDING-HOUSE, 
AND  LODGING-HOUSE  KEEPERS.— A  statement  of 
charges  is  required  by  the  law  to  be  posted  in  every  hotel, 
boarding-house,  and  lodging-house  in  this  state.  The  Civil 
Code,  Section  1863,  is  as  follows:  "Every  keeper  of  a  hotel, 
inn,  boarding  or  lodging-house  shall  post,  in  a  conspicuous 
place,  in  the  office  or  public  room,  and  in  every  bedroom 
of  said  hotel,  boarding-house,  inn,  or  lodging-house,  a 
printed  copy   of  this   section,   and   a   statement   of   charges. 


BUSINESS   CONTRACTS   AND  LEGAL  OBLIGATIONS.  157 

or  rate  of  charges,  by  the  day,  and  for  meals  or  items 
furnished,  and  for  lodging.  No  charge  or  sum  shall  be 
collected  or  received  by  any  such  person  for  any  service  not 
actually  rendered,  or  for  any  item  not  actually  delivered, 
or  for  any  greater  or  other  sum  than  he  is  entitled  to  by 
the  general  rules  and  regulations  of  said  hotel,  inn,  board- 
ing or  lodging-house.  For  any  violation  of  this  section,  or 
any  provision  herein  contained,  the  offender  shall  forfeit 
to  the  injured  party  three  times  the  amount  of  the  sum 
charged  in  excess  of  what  he  is  entitled  to." 

Section  72a.— DEFRAUDING  HOTEL  KEEPERS.— 

Any  person  who  obtains  any  food  or  accommodation  at  a 
hotel,  inn,  restaurant,  boarding-house,  or  lodging-house 
without  paying  therefor,  with  intent  to  defraud  the  pro- 
prietor or  manager  thereof,  or  who  obtains  credit  at  a 
hotel,  inn,  restaurant,  boarding-house,  or  lodging-house  by 
the  use  of  any  false  pretense,  or  who,  after  obtaining  credit 
or  accommodation  at  a  hotel,  inn,  restaurant,  boarding- 
house,  or  lodging-house,  absconds  or  surreptitiously  removes 
his  baggage  therefrom  without  paying  for  his  food  or 
accommodations,  is  guilty  of  a  misdemeanor.  If  a  person 
is  convicted  of  this  offense,  he  is  punishable  by  imprisonment 
in  the  county  jail  not  exceeding  six  months,  or  by  fine  not 
exceeding  $500,  or  by  both  fine  and  imprisonment. 

Statutes  of  1903,  p.  22;  Penal  Code,  Section  19. 

Section  72b.— EXIT    AND     STAIRWAY     SIGNS.— 

Every  owner,  manager,  proprietor,  lessee  or  other  person 
having  the  management,  charge  or  control  of  any  public 
hotel,  lodging  or  rooming  house,  is  hereby  required  to  put 
up  in  conspicuous  places  in  the  halls  of  such  hotel,  lodging 
or  rooming  house,  exit  and  stairway  signs  and  permanently 
maintain  the  same.  Said  signs  shall  be  made  and  placed 
where  they  will  definitely  direct  the  patrons  thereof  to  the 
exits  and  stairways,  so  as  to  enable  them  to  escape  from  such 
building  in  case  of  fire  or  other  accident. 


158  BUSINESS   LAWS   FOR   BUSINESS   MEN. 

Every  owner,  manager,  proprietor,  lessee  or  other  person, 
having  the  management,  charge  or  control  of  any  such  hotel, 
lodging  or  rooming  house  who  shall  violate  any  of  the  pro- 
visions of  this  act,  or  who  shall  refuse  or  neglect  to  comply 
therewith,  shall  be  deemed  guilty  of  a  misdemeanor,  and  upon 
conviction  thereof  shall  be  punished  by  fine  not  to  exceed  one 
hundred  dollars  or  by  imprisonment  not  to  exceed  three 
months,  or  by  both  such  fine  and  imprisonment. 

Act  of  the  Legislature,  approved  March  25,  1911. 

Landlord  and  Tenant. 

Section  73.— LEASES  OF  REAL  ESTATE.— The 
Legislature  of  California  has  passed  laws  regulating  by 
statute  the  making  of  leases  of  real  estate.  It  is  the  policy 
of  this  state  to  discourage  long  leases,  which  have  the  effect 
of  tying  up  property  for  many  years,  and  therefore  the  law 
prescribes  the  longest  terms  for  which  real  estate  may  be 
leased  in  California,  and  the  courts  have  sustained  these 
regulations  as  being  wise  and  prudent. 

Section  74.— FOR  WHAT  TERM  LEASES  MAY 
BE  MADE  IN  CALIFORNIA.— A  lease  of  land  for  agri- 
cultural purposes,  in  which  is  reserved  to  the  owner  any  rent 
or  service  of  any  kind,  can  be  made  for  fifteen  years,  and  no 
longer.  A  lease  of  a  town  or  city  lot,  in  which  is  reserved 
to  the  owner  any  rent  or  service  of  any  kind,  can  be  made 
for  ninety-nine  years,  and  no  longer;  provided,  that  the 
property  of  any  municipality,  or  any  minor  or  incompetent 
person,  cannot  be  leased  for  a  longer  period  than  ten  years. 

Statutes  of  1903,  p.  274. 

Act  of  the  Legislature,  approved  April  19,  1909. 

Act  of  the  Legislature,  approved  May  1,   1911. 

Section  75.— WHEN  VERBAL  LEASE  MAY  BE 
MADE. — A  lease  for  a  term  not  exceeding  one  year  may 
be  made  verbally,  and  need  not  be  witnessed  by  any  writing 
whatever. 


BUSINESS    CONTRACTS    AND   LEGAL   OBLIGATIONS.  159 

Section  76.— WHEN  LEASE  MUST  BE  IN  WRIT- 
ING.— A  lease  for  a  term  longer  than  one  year  must  be  in 
writing. 

Section  77.— FORM  OF  LEASE.— A  lease  is  not  re- 
quired to  be  in  any  particular  form,  so  long  as  it  can  be 
ascertained  from  its  terms  what  property  is  leased,  the 
rent  reserved,  and  the  term  for  which  the  lease  is  made. 
The  lease  must  be  signed  by  the  parties,  of  course,  but  it 
is  not  required  to  be  acknowledged.  Without  acknowledg- 
ment before  a  notary,  and  without  recording,  a  lease  is 
good  between  the  parties  to  it.  But,  as  the  rights  of 
creditors,  and  other  claims  of  third  parties,  may  involve 
the  property  in  litigation,  it  is  always  safest  and  best  to 
acknowledge  and  record  a  lease,  as  in  this  manner  a  binding 
notice  of  the  execution  and  terms  of  the  lease  is  given  to 
the  world.  Following  is  a  form  of  lease  for  common  use 
in  California: 

THIS  INDENTURE,  made  the day  of 

,  191 .. ,  witnesseth : — 

That  I,  ,  of 

the  County  of ,  State  of  CaHfornia, 

lessor,  do  hereby  lease,  demise,  and  let  unto 

,  of  the  same  place,  lessee,  the  follow- 
ing  described    real    estate    situate,    lying,    and    being   in   the 

County  of ,  State  of  California,  and 

particularly  described  as  follows,  to-wit :   

(Here  insert  description  of  property.) 

To  have  and  to  hold,  for  the  term  of years,  to-wit: 

from  the day  of ,  191. ., 

to  the day  of ,  191. ., 

yielding  and  paying  therefor  the  rent  of 

Dollars,  Gold  Coin  of  the  United  States 

of  America;   and  the  said   lessee  promises  to  pay  the   said 

rent  in  such  Gold  Coin,  at  and  in  the  following  times  and 

installments,  namely, Dollars  on  the 

day  of ,    191..,    

Dollars  on  the day  of 

191 . . ,  and Dollars  on  the 

day  of ,191... 


160  BUSINESS   LAWS   FOR   BUSINESS    MEN. 

(Or,  in  place  of  above,  insert  for  monthly  payments,  as 
follows:     In  such  Gold  Coin,  as  follows,  to-wit:  the  sum  of 

Dollars  per  month,   monthly   in 

advance,  on  the day  of  each  and  every  month 

during  said  term.) 

And  the  said  lessee  promises  to  quit  and  deliver  up  the 
premises  to  the  lessor  or  his  agent  or  attorney,  peaceably 
and  quietly,  at  the  end  of  the  term,  in  as  good  order  and 
condition  (reasonable  use  and  wear  thereof,  and  damages 
by  the  elements  excepted)  as  the  same  are  now  or  may  be 
put  into,  and  to  pay  the  rent  as  above  stated  during  the 
term,  and  not  to  make  or  suffer  any  waste  thereof,  nor  lease, 
nor  underlet,  nor  permit  any  other  person  or  persons  to 
occupy  or  improve  the  same,  or  make,  or  suffer  to  be  made, 
any  alteration  therein,  without  the  consent  of  the  lessor 
thereto  in  writing  having  been  first  obtained ;  and  that  the 
lessor  may  enter  to  view  and  make  improvements,  and  to 
expel  the  lessee  if  he  shall  fail  to  pay  the  rent  as  aforesaid, 
or  make  or  suffer  any  waste  thereof. 

And  should  default  be  made  in  the  payment  of  any  por- 
tion of  said  rent  when  due,  the  said  lessor,  his  agent  or 
attorney,  may  at  his  option  terminate  this  lease,  and  re-enter 
and  take  possession  of  said  property. 

In  witness  whereof  the  parties  hereto  have  hereunto  set 
their  hands  and  seals  the  day  and  year  first  above  written. 

(Seal.) 

(Seal.) 

Section  77a.— FORM  OF  LEASE  OF  AGRICUL- 
TURAL LANDS.— The  following  is  a  form  of  lease  of 
agricultural  lands : 

THIS  INDENTURE,  made  the day  of 

,  in  the  year  of  our  Lord  one  thousand  nine 

hundred  and ,  between 

,  of  the  County  of 

,  State  of  CaUfornia,  the  party  of  the  first  part, 

and  ,  of  said 

County  and  State,  the  party  of  the  second  part,  witnesseth: 
That  the  said  party  of  the  first  part,  for  and  in  considera- 
tion of  the  rents,  covenants,  and  agreements  hereinafter 
mentioned,  reserved  and  contained  on  the  part  of  the  said 
party  of  the  second  part,  to  be  paid,  kept,  and  performed, 
has  granted,  demised,  and  to  farm  let,  and  by  these  presents 


BUSINESS   CONTRACTS   AND   LEGAL   OBLIGATIONS.  161 

does   grant,   demise,   and  to   farm   let,   unto   the   said   party 
of  the  second  part,  all  those  lots,  pieces,  or  parcels  of  land, 

situate  in  the  County  of ,  State  of 

California,  and  particularly  described  as  follows:  to-wit: 

(Here  describe  land.) 

for  the  term  of years  from  the 

day  of ,191... 

To  have  and  to  hold  the  said  demised  premises,  unto 
the  party  of  the  second  part,  his  heirs,  executors,  and 
administrators,  for  his  and  their  sole  and  proper  use  and 
benefit,  for  and  during  the  term  aforesaid,  together  with 
all  the  tenements  and  hereditaments  thereunto  appertain- 
ing; and  all  the  stock  and  farming  utensils,  of  every  name 
and  nature,  now  being  in  or  upon  the  same,  belonging  to 
the  said  party  of  the  first  part. 

In  consideration  whereof,  the  said  party  of  the  second 
part  hereby  covenants  and  agrees  to  and  with  the  party  of 
the  first  p"'^t,  that  he  will  occupy,  till,  and  in  all  respects 
cultivate  ine  i,icmises  above  mentioned,  during  the  term 
aforesaid,  in  a  farmerlike  manner,  and  according  to  the 
usual  course  of  farming  in  the  neighborhood;  that  he  will 
not  commit  any  waste  or  damage  or  suflFer  any  to  be  done; 
that  he  will,  at  his  own  cost  and  expense,  keep  the  fences 
and  buildings  on  the  said  premises  in  good  repair,  reason- 
able wear  thereof  and  damages  by  the  elements  excepted: 
that  he  will  pay  the  party  of  the  first  part  as  rental  for  said 

premises  for  said  term  the  full  sum  of 

Dollars,  Gold  Coin  of  the  United  States,  as  follows,  to-wit: 

Dollars  on  the 

day  of ,  191 . .,  and  the  remainder 

in  equal  yearly  payments  of 

Dollars,  on  the day  of ,  in  each  and 

every  year  during  said  term  of years ;  that 

this  lease  cannot  and  will  not  be  assigned  without  the  written 
consent  of  the  lessor;  and  that  he  will  give  up  and  yield 
peaceable  possession  of  the  said  premises  at  the  expiration 
of  said  term. 

In  witness  whereof,  the  parties  hereto  have  hereunto  set 
their  hands  and  seals  the  day  and  year  first  above  written. 

(Seal.) 

(Seal.) 

(Acknowledgement  in  usual  form.) 


162  BUSINESS   LAWS   FOR   BUSINESS    MEN. 

Section  77b.— ASSIGNMENT  OF  LEASE.— The  lessee 
may  make  an  assignment  of  the  lease,  with  the  written 
consent  of  the  lessor;  or,  if  the  lease  contains  no  provision 
against  assignment  without  consent,  then  the  lessee  may 
make  an  assignment  of  the  lease  without  the  consent  of  the 
lessor. 

Section  77c.— FORM  OF  ASSIGNMENT  OF  LEASE. 

— The  following  is  a  form  of  assignment  of  lease: 

KNOW  ALL  MEN  BY  THESE  PRESENTS:    That  I, 

,  of  the  County 

of ,  State  of  California,  for  and  in 

consideration  of  the  sum  of 

Dollars,  Gold  Coin  of  the  United  States,  to  me  in  hand  paid 

by ,  of  the  same 

place,    do   by   these   presents    sell,    convey,    assign,    transfer, 

and  set  oyer  unto  the  said 

,  a  certain  indenture  of  lease  bearing 

date  the day  of ,  19L  .,  made  by 

,  of  the  County 

of ,  State  of  California,  to  me,  of 

a  certain  lot,  piece,  or  parcel  of  land  situate  in  the  County 
of ,  State  of  California,  and  par- 
ticularly described  as  follows,  to-wit :   

(Here  describe  property.) 

for  the  term  of years,  reserving  unto  the 

said the  rent  of 

Dollars,  payable  in (monthly  or 

yearly)    payments  of on   the 

day  of in  each  and  every 

(month  or  year) during  said  term,  with  all  and  singular 

the  premises  therein  mentioned  and  described,  and  the  build- 
ings thereon,  together  with  the  appurtenances. 

To  have  and  to  hold  the  same  unto  the  said 

,  his  heirs,  executors, 

and  administrators,  from  the , day  of 

,  191 . . ,  for  and  during  all  the  remainder  yet 

to  come  of  the  said  term  of years, 

mentioned  in  said  indenture  of  lease.  And  I  do  hereby 
covenant  and  agree  to  and  with  the  said 


BUSINESS   CONTRACTS    AND   LEGAL   OBLIGATIONS.  163 

,  that  the  said  assigned  premises 

now  are  free  and  clear  of  and  from  all  former  and  other 
gifts,  grants,  bargains,  sales,  leases,  judgments,  executions, 
back  rents,  taxes,  assessments,  and  incumbrances,  by  me 
suffered,  made,  or  created. 

In  witness  whereof,  I  have  hereunto  set  my  hand  and  seal 
the  day  and  year  first  above  written. 

(Seal.) 

(Acknowledgment  in  usual  form.) 

Section  78.— WHAT  REPAIRS  LESSOR  MUST 
MAKE. — The  lessor  of  a  building  intended  for  the  occupa- 
tion of  human  beings  must,  unless  there  is  an  agreement 
to  the  contrary,  put  the  building  into  a  condition  fit  for 
occupation,  and  keep  it  in  tenantable  repair  during  the  term 
of  the  lease.  If  the  building  gets  out  of  repair  by  the  fault 
of  the  tenant,  or  in  a  dangerous  condition  by  reason  of  the 
tenant's  lack  of  ordinary  care,  the  lessor  is  not  bound  to 
make  such  repairs,  but  the  tenant  himself  will  be  liable  to 
make  them. 

Civil  Code,  Sections  1941,  1949. 

Section  79.— WHEN  LESSEE  MAY  MAKE  RE- 
PAIRS.— When  dilapidations  have  been  occasioned  to  a 
dwelling  which  the  landlord  ought  to  repair,  but  neglects  to 
do  so,  the  tenant  may  make  the  repairs  himself,  provided  the 
cost  of  such  repairs  is  not  more  than  one  month's  rent  of 
the  premises;  and  the  tenant  may  deduct  the  cost  of  such 
repairs  as  he  is  compelled  to  make  from  the  rent.  But,  be- 
fore he  can  legally  make  the  repairs  himself,  so  as  to  deduct 
the  cost  from  the  rent,  he  must  give  reasonable  notice  to 
the  lessor,  stating  the  character  of  the  dilapidations  and  the 
repairs  needed,  and  that  the  lessee  intends  to  make  the  repairs 
if  the  lessor  does  not.  This  notice  may  be  given  verbally 
or  in  writing.  If  after  such  notice  the  lessor  refuses  or 
neglects  to  make  the  repairs,  the  lessee  may  vacate  the 
premises,  in  which  case  he  will  be  discharged  from  further 
payment  of  rent,  or  the  performance  of  the  other  conditions 
of   the   lease.     The   law   gives   the   tenant   the   privilege   of 


164  BUSINESS    LAWS   FOR   BUSINESS    MEN. 

vacating  the  premises  in  case  the  landlord  neglects  to  make 
the  repairs  needed,  and  also  authorizes  him,  if  he  prefers, 
to  remain  and  make  the  repairs  himself,  when  they  do  not 
require  an  expenditure  exceeding  one  month's  rent.  The  law 
relates  only  to  buildings  intended  to  be  occupied  by  human 
beings,  and  the  Supreme  Court  of  this  State  has  intimated 
in  several  decisions  that  the  tenant  of  business  property  has 
no  right  to  make  repairs  himself  at  the  expense  of  the  land- 
lord, and  that  the  lessor  of  business  property  is  not  required 
by  the  law  to  keep  the  building  in  repair  at  all.  So  far  as 
business  property  is  concerned,  that  is,  buildings  not  intended 
for  human  habitation,  for  residence,  the  law  leaves  the  matter 
of  repairs  to  be  determined  solely  by  the  terms  of  the  agree- 
ments in  the  lease. 

Civil  Code,  Section  1942. 

Section  80.— TERMINATION  OF  LEASE.— A  lease 
is  terminated  by  the  expiration  of  the  term,  or  by  the  hap- 
pening of  some  event  which  works  a  forfeiture  of  the  lease, 
or  by  consent  of  the  parties.  A  lease  is  terminated,  as  a 
matter  of  course,  at  the  end  of  the  term.  So,  too,  it  is, 
of  course,  within  the  power  of  the  parties  to  agree,  before 
the  end  of  the  term,  for  the  termination  of  the  lease  at 
any  time.  The  lease  may  provide  that,  if  any  condition  of 
the  lease  be  broken,  as  for  non-payment  of  the  stipulated 
rent  at  the  time  agreed  upon,  or  for  breach  of  a  covenant 
not  to  assign  the  lease  without  the  consent  of  the  lessor, 
the  lease  shall  be  terminated,  and  a  breach  of  the  condition 
will  terminate  the  lease. 

Section  81.— RENEWAL  OF  LEASE.— A  lease  may 
provide  by  its  terms  for  its  renewal,  and  the  lessee  will 
have  the  right  to  a  renewal  of  the  lease  according  to  the 
agreement.  But  if  the  lease  gives  the  privilege  of  renewal 
for  a  further  term,  the  lessee  must,  before  the  expiration 
of  the  original  term,  give  the  lessor  notice  that  he  elects 
to  renew  the  lease;  and  if  he  does  not  give  such  notice,  his 
right  to  insist  upon  the  privilege  of  renewal  is  lost.     If  a 


BUSINESS   CONTRACTS   AND   LEGAL  OBLIGATIONS.  165 

lessee  of  real  property  remains  in  possession  after  the  ex- 
piration of  the  term,  and  the  lessor  accepts  rent  from  him, 
the  law  presumes  that  the  parties  have  renewed  the  contract 
on  the  same  terms  and  for  the  same  time,  but  not  exceeding 
one  month,  when  the  rent  is  payable  monthly,  nor  in  any 
case  exceeding  one  year.  In  all  cases  of  tenancy  upon  agri- 
cultural lands,  where  the  tenant  has  held  over  and  retained 
possession  for  more  than  sixty  days  after  the  expiration  of 
the  term  without  any  demand  for  possession  or  notice  to 
quit  by  the  landlord,  he  will  be  deemed  to  be  holding  by 
permission  of  the  landlord  and  will  be  entitled  to  hold  the 
land  under  the  terms  of  the  lease  for  another  full  year.  (Act 
of  the  Legislature,  approved  February  28,  1905.) 
Civil  Code,  Section  1945. 

Section  81a.— FORM  OF  NOTICE  OF  INTENTION 
TO  RENEW  LEASE.— Following  is  a  form  of  notice  by 
tenant  of  his  intention  to  renew  the  lease.  It  is  not  required 
to  be  acknowledged,  or  recorded,  even  though  the  original 
may  be  both  acknowledged  and  recorded.  The  notice  may 
be  served  on  the  landlord  either  personally  or  by  mail.  It 
must  be  served  on  the  landlord  at  any  time  before  the  ex- 
piration of  the  original  lease: 

San  Francisco,  CaHfornia, ,  191 . . 

John  Smith: — Dear  Sir: 

You  are  hereby  notified  that  I  elect  and  intend  to  renew 

the  lease  dated ,  191 . . ,  executed 

and  delivered   by  you   to  me,   for   the   property   situated   at 

,  State  of  California, 

in  accordance  with  the  terms  stated  in  said  original  lease 
with  reference  to  a  renewal  thereof. 

Tenant. 

Section  82.— TERM  OF  HIRING  WHEN  NO  LIMIT 
IS  FIXED. — By  the  statute  of  California  it  is  provided, 
that  a  hiring  of  real  property,  other  than  lodgings  and 
dwelling-houses,  in  places  where  there  is  no  custom  on  the 


166  BUSINESS   LAWS   FOR   BUSINESS   MEN. 

subject,  is  presumed  to  be  for  one  year  from  its  commence- 
ment, when  no  limit  is  fixed  to  the  term  by  the  agreement 
between  the  parties.  The  hiring  of  lodgings  or  a  dwelling- 
house  for  an  unspecified  term  is  presumed  to  have  been 
made  for  such  length  of  time  as  the  parties  adopt  for  the 
estimation  of  the  rent.  Thus,  a  hiring  at  a  monthly  rate 
of  rent  is  presumed  to  be  for  one  month.  If  there  is  no 
agreement  respecting  either  the  length  of  time  or  the  rent, 
the  hiring  is  presumed  to  be  monthly. 
Civil  Code,  Sections  1943,  1944. 

Section  83.— WHEN  RENT  IS  PAYABLE.— The  law 

provides,  that  when  there  is  no  usage  or  contract  to  the 
contrary,  rents  are  payable  at  the  termination  of  the  hold- 
ing, when  it  does  not  exceed  one  year.  If  the  holding  is 
by  the  day,  week,  month,  quarter,  or  year,  rent  is  payable 
at  the  termination  of  the  respective  periods,  as  it  successively 
becomes  due. 

Civil  Code,  Section  1947. 

Section  84.— NOTICE  TO  QUIT.— When  the  term  of 
hiring  of  real  property  is  not  specified  by  the  parties,  to 
terminate  the  hiring,  one  of  the  parties  must  give  notice  to 
the  other  of  his  intention  to  end  the  hiring.  The  tenancy 
may  be  terminated  by  the  landlord  giving  notice  to  the  tenant, 
in  writing,  to  remove  from  the  premises.  The  notice  must 
specify  the  time  within  which  the  tenant  must  remove  from 
the  premises,  and  must  give  him  a  period  of  not  less  than 
thirty  days.  After  this  notice  has  been  served,  and  the  period 
specified  in  the  notice  has  expired,  the  landlord  may  proceed 
to  recover  possession,  either  by  re-entering  and  taking  posses- 
sion or  by  a  suit  in  court.  Three  days'  notice  only  is  required 
to  be  served  on  a  tenant  under  a  lease  for  a  stated  term.  If 
such  tenant  fails  to  pay  the  rent  agreed  upon,  the  landlord,  at 
any  time  within  one  year  after  the  rent  becomes  due,  may 
give  three  days'  notice,  in  writing,  requiring  the  payment  of 
the  rent  within  that  time;  and  this  notice  must  also  be  served 
on  any  subtenant  who  may  be  in  possession  of  any  portion 


BUSINESS   CONTRACTS   AND  LEGAL  OBLIGATIONS.  167 

of  the  premises.  If  the  tenant  has  broken  some  other  con- 
dition of  the  lease,  the  same  written  notice  must  be  served 
on  him,  and  on  subtenants,  if  there  be  any,  requiring  him  to 
perform  the  conditions  of  the  lease  or  surrender  the  posses- 
sion of  the  property.  The  lease  will  be  saved  from  forfeiture 
if  the  rent  is  paid  or  other  condition  of  the  lease  performed 
within  three  days  after  service  of  the  notice.  If  the  rent  is 
not  paid  or  condition  performed  within  three  days  after 
service  of  the  notice,  the  landlord  may  recover  possession  of 
the  property  in  a  suit  for  unlawful  detainer. 

Civil  Code,  Sections  789,  1946;  Code  of  Civil  Pro- 
cedure, Section  1161. 

Act  of  the  Legislature,  approved  February   15,   1911. 

(a) — rRaising  the  Rent. — The  legislature  has  passed  a 
law  providing  that  a  notice  of  raising  rent  shall  have  legal 
effect.  The  law  reads :  "In  all  leases  of  lands  or  tene- 
ments, or  of  any  interest  therein,  from  month  to  month, 
the  landlord  may,  upon  giving  notice  in  writing  at  least 
thirty  days  before  the  expiration  of  the  month,  change  the 
terms  of  the  lease  to  take  effect  at  the  expiration  of  the 
month.  The  notice,  when  served  upon  the  tenant,  shall 
of  itself  operate  and  be  effectual  to  create  and  establish, 
as  a  part  of  the  lease,  the  terms,  rent,  and  conditions  speci- 
fied in  the  notice,  if  the  tenant  shall  continue  to  hold  the 
premises  after  the  expiration  of  the  month." 

Act  of  the  Legislature,  in  effect  February  26,  1907. 

Section  85.— HOW  NOTICE  TO  QUIT  MUST  BE 
SERVED. — The  notice  to  quit  must  be  served  either  by 
delivering  a  copy  to  the  tenant  personally;  or,  if  he  is  ab- 
sent from  his  place  of  business  or  residence,  by  leaving  a 
copy  of  the  notice  at  either  place  with  some  person  of  suit- 
able age  and  discretion,  and  sending  a  copy  through  the 
mail,  addressed  to  the  tenant  at  his  place  of  residence;  or  if 
his  place  of  business  or  residence  cannot  be  ascertained, 
or  if  no  person  of  suitable  age  and  discretion  can  be  found 


168  BUSINESS   LAWS    FOR   BUSINESS    MEN. 

at  either  place,  the  notice  may  be  served  by  posting  a 
copy  in  a  conspicuous  place  on  the  premises,  and  delivering 
a  copy  to  any  person  found  residing  there,  and  also  sending 
a  copy  through  the  mail  addressed  to  the  tenant  at  the 
place  where  the  property  is  situated. 

Code  of  Civil  Procedure,  Section  1162. 

Section    85a.— FORM    OF    NOTICE    TO    QUIT.— A 

notice  to  quit  need  not  be  in  any  particular  form  to  be 
valid.  It  is  sufficient,  in  any  form,  if  it  shows  on  its  face 
that  possession  is  demanded,  and  that  the  time  fixed  by  the 
statute  is  given.  The  following  is  a  form  of  notice  to  quit, 
to  be  served  where  the  tenancy  is  for  no  definite  term: 

,  State  of 

California,   /  191 

To 

Take  notice  that  you  are  hereby  required  to  quit  and 
deliver  up  to  me  the  possession  of  the  premises  now  held 
and  occupied  by  you,  known  as 

(Here  describe  the  premises.) 

on  the day  of ,  191 . . 

This  is  intended  as  a  thirty  days'  notice  to  quit,  for  the 
purpose  of  terminating  your  tenancy. 

Landlord. 


Section  85b.— FORM   OF  NOTICE  TO  PAY  RENT 

OR     SURRENDER    POSSESSION.— The  following    is 

a    form    of    three    days'    notice    to    pay    rent  or    surrender 
possession : 

,  State  of  California, 

,  191.. 

To , 

You  are  hereby  required  to  pay  the  rent  of  the  premises 
hereinafter   described,   and   which   you   now   hold   possession 

of,  amounting  to  the  sum  of Dollars, 

being  the  amount  now  due  and  owing  to  me  by  you,  within 


BUSINESS    CONTRACTS    AND   LEGAL   OBLIGATIONS.  169 

three  days  after  service  of  this  notice  as  required  by  law,  or 
deliver  up  to  me  the  possession  of  the  said  premises. 

Said  premises  are  situated  at 

,  and  described  as  follows,  to- wit : 

(Here  describe  property.) 


Landlord. 

Section  86.— OPTION  TO   PURCHASE  IN  LEASE. 

— The  lessor  may  provide  in  the  lease  that  the  lessee  shall 
have  the  right  to  purchase  the  leased  premises  at  some 
time  within  the  term.  If  the  lessee  concludes  to  take 
advantage  of  the  option  given  him,  he  must  so  notify  the 
lessor,  and  tender  the  purchase  price  agreed  upon  in  the 
lease.  If  he  notifies  the  lessor  that  he  will  take  the  property, 
as  provided  for  in  the  lease,  and  tenders  the  purchase  price, 
the  lessee  will  have  the  right  to  a  deed,  and  the  lessor  can 
be  compelled  to  execute  his  deed  to  the  property. 

Section  86a.— FORM  OF  LEASE  OF  PERSONAL 
PROPERTY. — The  following  is  a  form  of  lease  of  personal 
property : 

THIS  INDENTURE,  made  this day  of 

,  191 .. ,  between ,  of 

the  County  of ,  State  of  California,  the 

party  of  the  first  part,  and ,  of  the 

same  place,  witnesseth: 

That  in  consideration  of  the  rents,  covenants  and  agree- 
ments to  be  paid  and  performed  on  the  part  of  the  said  party 
of  the  second  part,  the  said  party  of  the  first  part  does 
hereby  lease  to  the  party  of  the  second  part  all  those  certain 

goods  and  chattels,  situate  at ,  and 

particularly  described  as  follows,  to-wit: 

(Here  give  a  particular  description  of  each  article  of  per- 
sonal property.) 

To  have  and  to  hold  the  same  to  the  said  lessee,  for  the 
term  of years,   beginning 


170  BUSINESS   LAWS   FOR  BUSINESS    MEN. 

,  191 . . ,  and  ending 

,  191 . . ,  the  said  lessee  paying 

therefor  the  yearly  rent  of Dollars 

during  the  said  term. 

And  the  said  lessee  covenants  and  agrees  with  the  said 
lessor  that  he  will  pay  the  rent  aforesaid,  in  monthly  pay- 
ments of Dollars  each,  on  the  first  day 

of  each  and  every  month  during  said  term ;  and  that  he  will 
not  assign  nor  underlet  this  lease  or  the  said  goods  and 
chattels,  nor  any  part  thereof,  without  the  written  consent 
of  said  lessor;  and  that  he  will,  at  his  own  expense,  replace 
any  and  all  of  said  goods  and  chattels  which  shall  be  lost,  or 
carelessly  or  accidentally  injured,  during  the  said  term ; 
and  at  the  expiration  of  said  term,  or  sooner  termination  of 
this  lease,  he  will  restore  the  said  goods  and  chattels  to  the 
said  lessor,  in  the  like  good  order  in  which  they  now  are, 
wear  and  diminution  resulting  from  reasonable  use  and 
unavoidable  casualties  excepted.  And  it  is  agreed  that,  un- 
til the  expiration  of  said  term,  or  until  condition  broken, 
said  party  of  the  second  part  shall  peaceably  retain  posses- 
sion of  said  goods  and  chattels,  but  in  case  any  one  or  more 
of  the  conditions  of  this  lease  are  broken  by  the  said  party 
of  the  second  part,  the  party  of  the  first  part  may  at  any 
time,  day  or  night,  enter  the  place  where  said  goods  and 
chattels,  or  any  part  thereof,  may  be,  and  remove  the  same, 
and  he  may  use  all  necessary  force  to  remove  the  property 
herein  described. 

And  it  is  further  agreed  that  time  is  of  the  essence  of  this 
contract. 

In  witness  whereof  the  parties  hereto  have  hereunto  set 
their  hands  and  seals  the  day  and  year  first  above  written. 

(Seal.) 

(Seal.) 

Section  86b.— TENANT  MUST  DELIVER  NOTICE 
SERVED  ON  HIM. — Every  tenant  who  receives  notice 
of  any  proceeding  to  recover  the  real  property  occupied 
by  him,  or  its  possession,  must  inform  his  landlord  imme- 
diately, and  must  also  deliver  to  his  landlord  the  notice 
he  received,  if  in  writing;  and  if  the  tenant  fails  to  inform 
his  landlord  of  any  such  notice,  or  to  deliver  the  notice  to 


BUSINESS   CONTRACTS   AND   LEGAL   OBLIGATIONS.  171 

him,  if  in  writing,  he  will  be  liable  to  the  landlord  for  all 
damages  which  he  may  sustain  by  reason  of  his  failure. 
Civil  Code,  Section  1949. 

Section  87.— FORM  OF  FARMING  LEASE  ON 
SHARES. — The  following  is  a  form  of  farming  lease  on 
shares : 

THIS  INDENTURE,  made  the day  of 

,  191 . . ,  between 

of  the  County  of 

State  of  California,  the  party  of  the  first  part,  and 

,  of  the  same  place,  the  party  of  the 

second  part,  witnesseth: 

That  the  said  party  of  the  first  part,  for  and  in  considera- 
tion of  the  rents,  covenants,  and  agreements  hereinafter 
mentioned,  reserved  and  contained  on  the  part  of  the  said 
party  of  the  second  part,  his  executors  or  administrators, 
to  be  paid,  kept,  and  performed,  has  granted,  demised,  and 
to  farm  let,  unto  the  said  party  of  the  second  part,  his  ex- 
ecutors or  administrators,  all  those  certain  lots,  pieces  or 
parcels  of  land   situate,   lying  and   being  in   the   County   of 

,  State  of  California,  and  particularly 

described  as  follows,  to-wit: 

(Here  describe  the  land.) 

To  have  and  to  hold  the  said  demised  premises,  unto  the 
party  of  the  second  part,  his  heirs,  executors,  or  administra- 
tors, for  his  and  their  sole  and  proper  use  and  benefit,  for 

and  during  the  term  of ,  years,  beginning 

,  191.  .,  and  ending 

191...,   together  with  all  the   tenements   and   hereditaments 
thereunto  appertaining,  and  all  the  stock  and  farming  utensils, 
of  every  name  and  nature,  now  being  in  or  upon  the  same," 
belonging  to  the  said  party  of  the  first  part. 

In  consideration  whereof,  the  said  party  of  the  second 
part  hereby  covenants  and  agrees  to  and  with  the  said  party 
of  the  first  part,  that  he  will  occupy,  till  and  in  all  respects 
cultivate  the  premises  above  mentioned,  during  the  term 
aforesaid,  in  a  farmerlike  manner,  and  according  to  the 
usual  course  of  farming  practiced  in  the  neighborhood;  that 
he  will  not  commit  any  waste  or  damage,  or  suflfer  any  to 
be  done;  that  he  will,  at  his  own  cost  and  expense,  keep  the 


172  BUSINESS   LAWS   FOR   BUSINESS    MEN. 

fences  and  the  buildings  on  the  said  premises  in  good  re- 
pair, reasonable  wear  thereof  and  damages  by  the  elements 
excepted;  and  that  he  will  deliver  to  the  said  party  of  the 
first  part,  his  heirs,  executors,  or  administrators,  or  to  his 
or  their  order,  each  year  during  the  term  of  this  lease,  one 
equal  (here  insert  share  agreed  on)  of  all  the  proceeds  and 
crops  produced  on  the  said  farm  and  premises  aforesaid,  of 
every  name,  kind  and  description,  to  be  divided  on  the  said 
premises,  in  stack  and  sack,  according  to  the  usual  course 
and  custom  of  making  such  divisions  in  the  neighborhood, 
and  in  a  seasonable  time  after  such  crop  or  crops  shall  have 
been  gathered  and  harvested. 

It  is  further  understood  and  agreed  between  the  afore- 
said parties,  that  the  party  of  the  second  part  shall  find  all 
seed  or  seeds  necessary  to  be  sown  on  said  premises;  that 
the  party  of  the  second  part  is  to  do,  or  cause  to  be  done, 
all  necessary  work  and  labor  in  and  about  the  cultivation 
of  the  said  premises;  that  he  is  to  have  full  permission  to 
inclose,  pasture,  or  till  and  cultivate,  the  said  premises,  so 
far  as  the  same  may  be  done  without  injury  to  the  reversion, 
and  to  cut  all  necessary  timber  for  firewood,  farming  purposes 
and  repairing  fences;  and  that  he  is  to  give  up  and  yield 
peaceable  possession  of  the  said  premises  at  the  expiration 
of  said  term.  Said  first  party  shall  furnish  on  said  premises, 
at  the  proper  time  in  each  year  during  the  term  of  this 
lease,  sacks  sufficient  to  hold  all  the  grain  coming  to  said 
first  party. 

In  witness  whereof  the  parties  hereto  have  hereunto  set 
their  hands  and  seals  the  day  and  year  first  above  written. 

(Seal.) 

(Seal.) 

(Acknowledgment  in  usual  form.) 

Section  87a.— FIXTURES  ON  LEASED  PREM- 
ISES.— If  the  tenant  puts  in  fixtures  on  the  premises — as 
by  building  partition  walls,  elevators,  or  shelving,  coun- 
ters, etc.,  attached  and  built  into  or  upon  the  walls  or 
other  parts  of  the  building  so  as  to  form  fixtures  therein 
— he  cannot  remove  such  fixtures  without  the  consent  of 
the  landlord,  unless  the  lease  itself  contains  a  clause  giving 
him  that  right. 

If  a  lease  expires,  which  contains  a  clause  allowing  the 
tenant  to  remove  the  fixtures,  and  a  new  lease  is  then  made 


BUSINESS    CONTRACTS   AND   LEGAL   OBLIGATIONS.  173 

which  leaves  out  that  clause,  the  tenant  loses  the  rig) it  to 
take  the  fixtures  away;  and,  upon  the  expiration  of  the 
second  lease,  the  fixtures  must  be  left  in  the  building  and 
be  the  property  of  the  landlord. 

Section  87b.— DESTRUCTION  OF  PREMISES  BY 
FIRE. — In  this  state,  the  hiring  of  a  thing  ends  by  the 
destruction  of  the  thing  hired.  Therefore,  if  a  store,  dwell- 
ing, or  factory  is  leased,  and  is  destroyed  by  fire,  so  as  to 
be  no  longer  fit  for  use,  the  lease  is  terminated  and  the 
lessee  released  from  future  payment  of  rent.  But  a  lessee, 
who  has  taken  possession  of  leased  premises  for  a  term  of 
years  and  paid  a  part  of  his  rent  in  advance,  cannot,  in 
the  absence  of  any  covenant  in  the  lease,  recover  the  rent 
so  paid,  in  case  of  the  total  destruction  of  the  premises 
by  fire  without  any  fault  of  either  party  to  the  lease.  (De- 
cided by  the  Supreme  Court  of  California,  in  the  case  of 
Harvey  vs.  Weisbaum,  which  decision  is  printed  in  Vol.  10, 
California  Decisions,  page  177.) 

Repudiation      of      Lease  —  Landlord's      Remedy. — The 

abandonment  of  leased  premises,  and  a  declaration  of  in- 
tention by  the  lessee  not  to  pay  any  more  rent,  does  not 
change  the  relation  of  lessor  and  lessee,  nor  discharge  the 
latter  from  the  obligation  to  pay  rent,  although  the  lessor 
may  relet  the  premises  for  the  benefit  of  the  lessee.  Where 
a  lease  is  repudiated  and  the  premises  abandoned,  the  land- 
lord may  rest  upon  his  contract  and  sue  his  tenant  as  each 
installment  of  rent,  or  the  whole  thereof,  becomes  due,  or 
he  may  take  possession  of  the  premises  and  recover  damages, 
which  damages  is  the  difference  between  what  he  may  be 
able  to  rent  the  premises  for  and  the  price  agreed  to  be 
paid  under  the  lease.  Where  the  landlord  sues  for  dam- 
ages he  cannot  recover  in  advance  the  full  price  to  be 
paid  for  the  unexpired  term,  but  is  limited  in  his  recovery 
as  above  stated.  (Decided  by  the  Supreme  Court  of  Cali- 
fornia, in  the  case  of  Bradbury  vs.  Higginson,  which  de- 
cision is  printed  in  Vol.  42,  California  Decisions,  page  284.) 


174  BUSINESS   LAWS   FOR  BUSINESS    MEN. 

Sale  of  Real  Property. 

Section  87c.— TRANSFER  BY  DEED.— The  title  to 
real  property  is  transferred  from  one  to  another  by  an 
instrument  in  writing  called  a  deed.  A  deed  must  be  signed 
by  the  vendor,  and  acknowledged  by  him  before  a  Notary, 
or  other  officer  having  authority  to  take  acknowledgements, 
and  must  be  recorded  in  the  office  of  the  County  Recorder 
of  the  county  where  the  land  is  situated. 

(a).— CONDITION  AGAINST  SALE  OF  LIQUOR. 

— Conditions  inserted  in  a  deed  that  intoxicating  liquors 
shall  not  be  sold  on  the  conveyed  premises,  and  providing 
that  the  estate  granted  shall  become  forfeited  for  a  breach 
thereof,  are  lawful  and  enforceable.  (Decided  by  the  Su- 
preme Court  of  California,  in  the  case  of  Burdell  vs.  Grandi, 
which  decision  is  printed  in  Volume  XXXIV  of  California 
Decisions,   page    519.) 

(b)._WHO  MAY  TAKE  ACKNOWLEDGMENTS 
OF  DEEDS. — The  acknowledgment  of  a  deed  may  be 
made  in  this  state,  within  the  city,  county,  city  and  county, 
township  or  district  for  which  the  officer  was  elected,  or 
appointed,  before  either: 

Clerk  of  a  court  of  record; 

County  recorder ; 

Court  commissioner; 

Notary  Public; 

Justice  of  the  peace. 

Act  of  the  Legislature,  approved  March  21,  1911. 

Section  87d.— DEED  TO  COMMUNITY  PROP- 
ERTY.— Property  acquired  by  husband  and  wife,  during 
their  marriage,  by  their  joint  efforts,  is  community  property. 
All  property  acquired  during  marriage  is  community  prop- 
erty, except  property  owned  by  either  before  marriage,  or 
property  acquired  by  either  after  marriage  by  gift,  will, 
or  as  heir   of  a  deceased  person.     The   husband   may   sell 


BUSINESS    CONTRACTS   AND   LEGAL   OBLIGATIONS.  175 

the  community  property,  for  an  adequate  consideration,  and 
make  a  valid  deed  signed  by  himself  alone.  But  he  cannot 
make  a  deed  of  gift  of  the  community  property,  without 
his  wife's  consent;  nor  can  he  sell  the  community  property 
at  all,  without  the  wife's  consent,  unless  he  receives  a  fair 
and  reasonable  price  for  the  property.  Considering  that 
there  might  be,  in  case  of  disputes,  a  great  variety  of  opinions 
as  to  what  is  an  adequate  price  for  a  piece  of  property,  the 
most  conservative  business  men  always  require  the  wife's 
signature  to  the  husband's  deed  to  community  property, 
even  where  the  law  does  not  require  it.  Her  signature 
can  do  no  harm,  and  may  prevent  costly  disputes.  There 
are  cases,  however,  where  the  husband  desires  to  sell  com- 
munity property,  and  the  wife  refuses  to  sign  the  deed. 
In  this  case,  if  the  property  is  community  property,  and  if 
the  price  paid  is  the  full  value  of  the  property,  the  title 
of  the  purchaser  will  be  absolutely  good,  with  the  husband's 
deed  alone,  without  the  wife's  signature. 

Section   87e.— DEED   TO    SEPARATE   PROPERTY. 

— Either  husband  or  wife  has  the  right  to  deed  his  or  her 
separate  property,  without  the  consent  of  the  other,  and 
without  the  signature  of  the  other  to  the  deed. 

Section  87f.-— DEED  OF  GIFT.— A  property  consider- 
ation is  not  necessary  to  a  valid  deed  in  California.  A  deed 
of  gift,  for  love  and  affection,  may  be  made  by  one  person 
to  another  of  real  property,  and  the  deed  will  be  for  a 
consideration  which  the  law  recognizes  as  sufficient  and  will 
sustain. 

Section  87g.— FORM  OF  DEED  OF  GIFT.— The  fol- 
lowing is  a  form  of  deed  of  gift,  for  use  in  the  State  of 
California : — 

THIS  INDENTURE,  made  the day  of 

,  191 . . ,  between   

,  of  the  County  of ,  State 


176  BUSINESS  LAWS  FOR  BUSINESS   MEN. 

of  California,  the  party  of  the  first  part,  and 

,  of  the  same  place,  the  party  of  the 

second  part,  witnesseth: — 

That  the  said  party  of  the  first  part,  for  and  in  considera- 
tion of  the  love  and  aflfection  which  the  said  party  of  the 
first  part  has  and  bears  unto  the  said  party  of  the  second 
part,  as  also  for  the  better  maintenance,  support,  protec- 
tion, and  livelihood  of  the  said  party  of  the  second  part, 
does  by  these  presents  give,  grant,  alien,  and  confirm  unto 

the  said  party  of  the  second  part,  and  to heirs  and 

assigns  forever,  all  those  certain  lots,  pieces,  or  parcels  of 

land  situate,  lying,  and  being  in  the  County  of 

,  State  of  California,  bounded  and  particularly 

described  as  follows,  to-wit :    

(Here  describe  property.) 

Together  with  all  and  singular  the  tenements,  hereditaments, 
and  appurtenances  thereunto  belonging  or  in  any  wise  apper- 
taining, and  the  reversion  and  reversions,  remainder  and 
remainders,  rents,  issues,  and  profits  thereof. 

To  have  and  to  hold,  all  and  singular  the  said  premises, 
together  with  the  appurtenances,  unto  the  said  party  of  the 
second  part, heirs  and  assigns  forever. 

In  witness  whereof,  the  said  party  of  the  first  part  has 

hereunto  set hand  and  seal  the  day  and  year  first 

above  written. 

(Seal.) 

STATE  OF  CALIFORNIA,  )  ^^ 
County   of 3 

On  this day  of ,  A.  D, 

one   thousand   nine   hundred   and , 

before  me,    ,   a 

Notary  Public  in  and  for  said County 

and  State,   residing  therein,   duly  commissioned  and   sworn, 

personally  appeared    

,  known  to  me  to  be  the  person . .   whose 

name subscribed  to  and  who  executed  the 

within  instrument,  and acknowledged  to  me 

that executed  the  same. 

In  witness  whereof,  I  have  hereunto  set  my  hand  and 
affixed  my  official  seal,  at  my  office  in  the 


BUSINESS    CONTRACTS   AND   LEGAL   OBLIGATIONS.  177 

County  of ,  the  day  and  year  in 

this  certificate  first  above  written. 

Notary  PubHc  in  and  for  the 

County   of ,    State   of 

California. 
Commission  expires ,   191 . . . 

Section    87h.— BARGAIN    AND    SALE    DEED.— The 

most  common  form  of  transfer  of  real  estate  is  by  bargain 
and  sale  deed.  In  such  a  deed,  the  true  consideration  need 
not  be  stated.  If  the  consideration,  for  instance,  is  $500, 
it  may  be  stated  in  the  deed  at  $1.00,  or  any  other  sum. 
The  law  presumes  that  an  adequate  consideration  was  given, 
and  if  that  should  become  a  disputed  question,  the  law  allows 
proof  to  be  made  as  to  what  the  consideration  really  was. 

Section  87i.— FORM  OF  BARGAIN  AND  SALE 
DEED. — The  following  is  a  form  of  bargain  and  sale 
deed : — 

THIS  INDENTURE,  made  the day  of 

,    191 . . ,    between 

,  of  the  County  of ,  State 

of  CaHfornia,  the  party  of  the  first  part,  and 

,  of  the  same  place,  the  party 

of  the  second  part,  witnesseth: — 

That  the  said  party  of  the  first  part,  for  and  in  considera- 
tion of  the  sum  of Dollars,   Gold 

Coin  of  the  United  States  of  America,  to  him  in  hand  paid 
by  the  said  party  of  the  second  part,  the  receipt  whereof 
is  hereby  acknowledged,  does  by  these  presents  grant,  bar- 
gain, sell,  and  convey  unto  the  said  party  of  the  second  part, 
and  to  his  heirs  and  assigns  forever,  all  those  certain  lots, 
pieces,  or  parcels  of  land   situate,   lying,   and  being   in   the 

County  of ,   State  of   California,   and  bounded 

and  particularly  described  as  follows,  to-wit :  

(Here  describe  the  land.) 

Together  with  all  and  singular  the  tenements,  heredita- 
ments,  and   appurtenances   thereunto   belonging,    or   in    any 


''  I  ss. 


178  BUSINESS   LAWS   FOR   BUSINESS    MEN. 

wise    appertaining,    and    the    reversion    and    reversions,    re- 
mainder and  remainders,  rents,  issues,  and  profits  thereof. 

To  have  and  to  hold,  all  and  singular  the  said  premises, 
together  with  the  appurtenances,  unto  the  said  party  of  the 
second  part,  his  heirs  and  assigns  forever. 

In  witness  whereof,  the  said  party  of  the  first  part  has 
hereunto  set  his  hand  and  seal  the  day  and  year  first  above 
written. 

(Seal.) 

STATE  OF  CALIFORNIA, 
County   of 

On  this day  of ,  A.  D.  one  thousand  nine 

hundred  and ,  before  me, 

,  a  Notary  Public  in  and  for  said 

County  and   State,   residing  therein,   duly  commisioned   and 

sworn,   personally   appeared 

,  known  to  me  to  be  the  person . .  whose 

name subscribed  to,  and  who  executed  the 

within  instrument,  and ,  acknowledged  to  me 

that   executed  the  same. 

IN    WITNESS    WHEREOF,    I    have    hereunto    set    my 

hand  and  affixed  my  official  seal,  at  my  office  in  the 

County  of ,  the  day  and 

year  in  this  certificate  first  above  written. 

Notary   Public   in   and   for   the County 

of ,    State   of   CaUfornia. 

Commission  expires ,  191 . . . 

Section  87j.— QUITCLAIM  DEED.— It  may  occur  that 
the  grantor  has  some  interest  in  real  estate,  which  he  wishes 
to  transfer,  yet  the  interest  is  not  so  exactly  ascertained 
as  to  be  capable  of  definite  description.  In  this  event,  it 
is  usual  to  make  a  quitclaim  deed,  the  grantor  transferring 
all  his  right,  title,  or  claim  in  or  to  the  land,  and  relin- 
quishing all  his  claim  or  right,  whatever  it  may  be,  to  his 
grantee. 

Section  87k.— FORM     OF     QUITCLAIM     DEED.— 

The  following  is  a  form  of  quitclaim  deed: — 

THIS  INDENTURE,  made  the day  of , 

191 . .,  between ,  of  the  County  of 

,  State  of  California,  the  party  of  the 


BUSINESS   CONTRACTS   AND  LEGAL  OBLIGATIONS.  179 

first  part,  and ,  of  the 

same  place,  the  party  of  the  second  part,  witnesseth : — 

That  the  said  party  of  the  first  part,  for  and  in  considera- 
tion of  the  sum  of Dollars,  Gold  Coin 

of  the  United  States  of  America,  to  him  in  hand  paid  by 
the  said  party  of  the  second  part,  the  receipt  whereof  is 
hereby  acknowledged,  has  remised,  released,  and  forever 
quitclaimed,  and  by  these  presents  does  remise,  release,  and 
forever  quitclaim,   unto  the   said  party  of  the   second   part, 

and  to heirs  and  assigns,  all  those  certain  lots, 

pieces,  or  parcels  of  land,   situate,   lying,   and  being  in  the 

County  of ,  State  of  California,  and 

bounded  and  particularly  described  as  follows,  to-wit :   

(Here  describe  land.) 

Together  with  all  and  singular  the  tenements,  heredita- 
ments, and  appurtenances  thereunto  belonging,  or  in  any 
wise  appertaining,  and  the  reversion  and  reversions,  re- 
mainder and  remainders,  rents,  issues,  and  profits  thereof. 

To  have  and  to  hold,  all  and  singular  the  said  premises, 
together  with  the  appurtenances,  unto  the  said  party  of  the 
second  part,   heirs  and  assigns  forever. 

In  witness  whereof,  the  said  party  of  the  first  part  has 

hereunto  set hand  and  seal  the  day  and  year  first 

above  written. 

(Seal.) 

STATE  OF  CALIFORNIA, 
County   of 

On  this day  of ,  A.  D.  one  thousand  nine 

hundred  and ,  before  me,  

,  a  Notary  Public  in  and  for  said  County  and  State, 

residing   therein,   duly   commissioned   and   sworn,   personally 

appeared   ,  known  to 

me  to  be  the  person . .  whose  name subscribed 

to  and  who  executed  the  within  instrument  and 

acknowledged  to  me  that executed  the  same. 

IN  WITNESS  WHEREOF,  I  have  hereunto  set  my 
hand  and  afiixed  my  official  seal  at  my  office  in  the  County 

of ,  the  day  and  year  in  this  certificate 

first  above  written. 


^'  I  ss. 


Notary  Public  in  and  for  the  County  of. 
State  of   California. 
Commission  expires ,  191 . . . 


180  BUSINESS   LAWS   FOR  BUSINESS   MEN. 

Section  871.— WARRANTY  DEED.— The  purchaser  of 
real  estate  may  insist  upon  an  agreement  on  the  part  of 
the  seller  to  defend  the  title,  to  secure  him  in  the  possession, 
in  the  event  of  his  possession  being  invaded  or  questioned 
by  a  third  person  after  the  sale.  The  parties  to  a  sale  of 
land  may  lawfully  make  an  agreement  whereby  the  seller 
will  be  bound  to  defend  the  title  and  possession  in  the 
purchaser.  This  agreement  is  evidenced  by  a  warranty  deed, 
conveying  the  property,  and  at  the  same  time  binding  the 
seller  to  stand  ready  to  defend  the  right  of  possession  in  the 
purchaser,  should  it  be  attacked. 

Section   87m.— FORM    OF    WARRANTY    DEED.— 

The  following  is  a  form  of  warranty  deed: — 

THIS  INDENTURE,  made  the day  of , 

191 . . ,   between ,  of  the   County   of 

,  State  of  California,  the  party  of  the 

first   part,    and , 

of  the  same  place,  the  party  of  the  second  part,  witnesseth : — 

That  the  said  party  of  the  first  part,  for  and  in  considera- 
tion of  the  sum  of Dollars,  Gold  Coin 

of  the  United  States  of  America,  the  receipt  whereof  is 
hereby  acknowledged,  does  by  these  presents  grant,  bargain, 
sell,  and  convey  unto  the  said  party  of  the  second  part,  and 

to heirs  and  assigns  forever,  all  those  certain  lots, 

pieces,  or  parcels  of  land,  situate,   lying,  and  being  in  the 

County    of ,    State    of    California,    and 

bounded  and  particularly  described  as  follows,  to- wit : 

(Here  describe  land.) 

Together  with  all  and  singular  the  tenements,  hereditaments, 
and  appurtenances  thereunto  belonging,  or  in  any  wise 
appertaining,  the  reversion  and  reversions,  remainder  and 
remainders,  rents,  issues,  and  profits  thereof. 

To  have  and  to  hold,  all  and  singular,  the  above  men- 
tioned and  described  premises,  together  with  the  appur- 
tenances, unto  the  said  party  of  the  second  part,  and  to 
heirs  and  assigns  forever. 


BUSINESS   CONTRACTS   AND  LEGAL  OBLIGATIONS.  181 

And  the  said  party  of  the  first  part,  and heirs,  the 

said  premises,  in  the  quiet  and  peaceable  possession  of  the 

said  party  of  the  second  part, heirs,  and  assigns, 

against  the  said  party  of  the  first  part,  and  his  heirs,  and 
against  all  and  every  person  or  persons  whomsoever  lawfully 
claiming  or  to  claim  the  same,  shall  and  will  warrant,  and 
by  these  presents   forever  defend. 

In  witness   whereof  the  said  party   of  the   first  part   has 

hereunto  set hand  and  seal  the  day  and  year  first 

above  written. 

(Seal.) 

STATE  OF  CALIFORNIA,  | 
County   of \  ^^• 

On  this day  of ,  A.  D.  one  thousand  nine 

hundred   and ,    before    me,    

,  a  Notary  Public  in  and  for  said  County  and 

State,  residing  therein,  duly  commissioned  and  sworn,  per- 
sonally  appeared    , 

known  to  me  to  be  the  person . .  whose  name 

subscribed    to,    and    who    executed    the    within    instrument, 

and acknowledged  to  me  that executed 

the   same. 

IN  WITNESS  WHEREOF,  I  have  hereunto  set  my 
hand  and  affixed  my  official  seal  at  my  office  in  the  County 

of ,  the  day  and  year  in  this  certificate 

first  above  written. 

Notary  Public  in  and  for  the  County  of , 

State  of  California. 
Commission  expires ,   191 . . . 

Section  87n.— CORPORATION  DEED.— A  deed  may 
be  made  by  a  corporation,  but  the  deed  must  be  authorized 
by  a  resolution  of  the  Board  of  Directors.  When  the  Board 
of  Directors  of  a  corporation  has  passed  a  resolution  direct- 
ing the  execution  of  a  deed,  the  President  may  sign,  execute, 
and  deliver  the  deed  for  the  corporation. 

Section  87o.— FORM  OF  CORPORATION  DEED 
AND  ACKNOWLEDGMENT.— The  following  is  a  form 
of  corporation  deed,  and  the  acknowledgment  thereto.     The 


182  BUSINESS   LAWS   FOR   BUSINESS   MEN. 

acknowledgment  is  different  from  the  acknowledgment  to  the 
deed  of  an  individual,  in  that  it  must  show  the  official  capacity 
of  the  person  executing  it : 

THIS  INDENTURE,  made  the day  of 

,   191 . . ,  between , 

a  corporation  duly  authorized  under  the  laws  of  the  State 

of  California,  whose  principal  place  of  business  is  at 

,  in  the  County  of , 

State  of  California,  party  of  the  first  part,  and 

,  of  the  same  place,  party  of  the  second  part, 

Witnesseth : 

That,  whereas,  the  said  party  of  the  first  part  is  a  cor- 
poration duly  incorporated  and  existing  under  and  by  virtue 
of  the  laws  of  the  State  of  California;  and,  whereas,  in 
pursuance  of  the  statutes  in  such  cases  made  and  provided, 
it  has  acquired  and  is  the  owner  of  the  land  and  premises 
herein  after  described;  and  whereas,  the  Board  of  Directors 

of  said  corporation,  duly  assembled,  on  the 

day  of ,  duly  passed  the  following  resolutions, 

to-wit :     

(Here  insert  in  full  the  resolution  adopted  by  the  Board  of 
Directors  authorizing  the  sale  of  the  land.) 


Now,  therefore,  in  pursuance  of  said  resolution  aforesaid, 

and  in  consideration  of  the  sum  of 

Dollars,  gold  coin  of  the  United  States  of 

America,  to  it  in  hand  paid  by  the  said  party  of  the  second 
part,  the  receipt  whereof  is  hereby  acknowledged,  the  said 
party  of  the  first  part  does  by  these  presents  grant,  bargain, 
sell,  and  convey  unto  the  said  party  of  the  second  part,  and 
to  his  heirs  and  assigns  forever,  all  those  certain  lots,  pieces, 
or  parcels  of  land  situate,  lying,  and  being  in  the   County 

of ,  State  of  California,  and  bounded  and 

particularly  described  as  folows,  to-wit :    

(Here  describe  the  land.) 

Together  with  all  and  singular  the  tenements,  heredita- 
ments, and  appurtenances  thereunto  belonging,  or  in  any 
wise  appertaining,  and  the  reversion  and  reversions,  remain- 
der and  remainders,  rents,  issues,  and  profits  thereof. 


BUSINESS   CONTRACTS   AND  LEGAL  OBLIGATIONS.  183 

To  have  and  to  hold,  all  and  singular,  the  said  premises, 
together  with  the  appurtenances,  unto  the  said  party  of  the 
second  part,  his  heirs  and  assigns  forever. 

IN  WITNESS  WHEREOF,  the  said  party  of  the  first 
part,  by  resolution  of  its  Board  of  Directors,  has  caused  these 
presents  to  be  subscribed  by  its  President,  and  its  corporate 
name  and  seal  to  be  hereunto  affixed,  the  day  and  year  first 
above  written. 

(Seal.) 

By President. 

STATE  OF  CALIFORNIA,  1 
County   of \  ^^^ 

On  this day  of ,  in  the  year  191 . . , 

before  me,   ,  a  Notary  Public  in  and  for 

the  said  County  and  State,  residing  therein,  duly  commis- 
sioned and  sworn,  personally  appeared , 

known  to  me  to  be  the  President  of  the  corporation  de- 
scribed in  and  that  executed  the  within  instrument,  and  also 
known  to  me  to  be  the  person  who  executed  it  on  behalf 
of  the  corporation  therein  named,  and  he  acknowledged  to 
me  that  such  corporation  executed  the  same. 

IN  WITNESS  WHEREOF,  I  have  hereunto  set  my 
hand  and  affixed  my  official  seal  at  my  office  in  the  County 

of ,  the  day  and  year  in  this  certificate  first 

above  written. 

> 

Notary  Public  in  and  for  the  County  of 

,   State   of   California. 

Commission   expires ,    191 . . . 

Section  87p.— DEED  IN  ESCROW.— A  deed  may  be 
deposited  by  the  grantor  with  a  third  person,  to  be  delivered 
to  the  grantee  on  performance  of  a  condition,  to  take  effect 
when  the  condition  is  performed.  Thus,  a  deed  deposited 
with  a  bank,  to  be  delivered  to  the  grantee  upon  the  pay- 
ment of  so  much  money,  or  a  deed  placed  in  the  hands  of 
a  third  party,  to  be  delivered  to  the  grantee  upon  the  death 
of  the  grantor,  will  take  effect  when  the  money  is  paid,  or 
when  the  death  of  the  grantor  occurs.  While  in  the  posses- 
sion of  the  third  person,  and  subject  to  the  condition,  the 
deed  is  called  an  escrow. 

Civil  Code,  Section  1057. 


184  BUSINESS  LAWS  FOR  BUSINESS   MEN. 

Section  87q.— EFFECT   OF  DEED   IN   ESCROW.— 

It  often  occurs  that  a  person  will  make  a  deed  in  escrow, 
without  sufficient  knowledge  of  the  effect  of  his  act,  and 
when,  if  he  knew  the  law,  the  deed  would  not  have  been 
made.  Many  people  suppose  that  a  deed  can  be  made,  and 
placed  in  the  hands  of  a  third  person,  to  be  delivered  upon 
the  death  of  the  maker,  and  still  be  taken  out  of  escrow 
at  any  time.  But  this  is  not  the  law.  On  the  contrary, 
it  is  the  law  of  California,  that  when  the  owner  of  land 
makes  a  deed,  and  delivers  it  to  another,  with  instructions 
only  to  hold  without  recording  until  his  death,  and  then 
to  deliver  it  to  the  grantee,  the  grantor  cannot  recall  the 
deed,  nor  alter  its  provisions,  and  he  has  no  interest  in 
the  land  left,  except  a  life  estate.  His  deed  passes  the 
title  to  the  land  at  once  to  the  grantee,  qualified  only  by 
the  right  of  the  grantor  to  use  and  occupy  the  property, 
or  take  and  receive  the  rents  and  profits,  during  his  life. 
The  person  with  whom  such  a  deed  is  left  in  escrow  has 
no  right  to  give  it  back  to  the  grantor,  if  the  latter  should 
change  his  mind  about  it.  The  act  of  the  grantor,  in  making 
such  a  deed,  delivered  to  a  third  person  in  escrow,  is 
irrevocable  by  him,  no  matter  how  much  he  would  like  to 
take  it  back,  or  how  deeply  he  may  regret  his  act.  (Decided 
by  the  Supreme  Court  of  California,  in  the  case  of  Bury 
vs.  Young,  which  decision  is  printed  in  Volume  98  of  the 
California  Reports,  page  446.) 

Section    87r.— DEED    CANNOT    BE    CANCELED.— 

If  a  deed  is  made,  executed,  and  acknowledged,  and  de- 
livered, but  not  recorded,  the  property  cannot  be  transferred 
back  by  a  redelivery  of  the  deed,  or  by  its  cancellation. 
The  grantee  in  such  a  case  must  make  a  deed  back  to  the 
grantor,  and  both  deeds  must  then  be  recorded. 
Civil  Code,  Section  1058. 

Section  87s.— POWER  OF  ATTORNEY  TO  MAKE 
DEED. — The  owner  of  real  estate  may  authorize  another 
person  to  sell,  and  to  make  and  execute  a  deed  conveying 


BUSINESS    CONTRACTS    AND   LEGAL   OBLIGATIONS.  185 

his  land,  for  and  on  his  behalf.  This  authority  he  may 
delegate  to  another  by  means  of  a  power  of  attorney.  The 
power  of  attorney  must  be  executed  and  acknowledged  in 
the  same  manner  as  a  deed. 

For  a  form  of  power  of  attorney  authorizing  an  agent  to 
sell  and  convey  real  estate,  see  the  subject,  "Power  of 
Attorney." 

Installment    Sales    of    Real    Estate. 

Section    87t.— SALES     ON     THE     INSTALLMENT 

PLAN. — Real  estate  may  be  sold  on  the  installment  plan, 
the  purchaser  agreeing  to  make  certain  payments  at  stated 
times,  the  title  to  remain  in  the  vendor  until  full  payment 
is  made.  This  is  what  is  termed  a  conditional  sale.  The 
buyer  may  be  let  into  the  possession  of  the  property,-  and 
yet  the  legal  title  will  remain  with  the  seller,  if  it  is  ex- 
pressed in  the  agreement  of  sale  that  all  installments  must 
be  paid  before  the  title  will  pass  or  deed  be  given.  The 
agreement  for  sale  of  real  property  on  the  installment  plan 
must  be  in  writing,  and  the  agreement  should  be  recorded. 
If  recorded,  it  is  notice  to  the  world  that  the  grantee  has 
a  claim  upon  the  land,  and  the  right  to  obtain  the  legal  title 
by  making  stipulated  payments. 

Section  87u.— PAYMENT    OF    INSTALLMENTS.— 

Where  the  agreement  provides  that  time  shall  be  of  the 
essence  of  the  contract,  and  that  payments  shall  be  made 
in  installments  at  specified  times,  it  is  essential  that  the  pur- 
chaser pay  each  installment  as  it  becomes  due,  if  he  wishes 
to  keep  the  contract  good.  He  must  pay,  for  if  he  does  not, 
the  seller  may  rescind  the  contract  and  forfeit  the  payments 
already  made. 

Section  87v.— VENDOR'S  REMEDY  IF  INSTALL- 
MENTS ARE  NOT  PAID.— If  the  purchaser  fails  to 
pay  any  installment,   when   due,  the  seller  may  rescind  the 


186  BUSINESS   LAWS   FOR   BUSINESS    MEN. 

contract.  He  cannot  do  this  arbitrarily,  however,  without 
regard  to  the  rights  of  the  purchaser.  The  seller  should 
give  reasonable  notice  to  the  purchaser,  that  the  unpaid  in- 
stallment must  be  paid,  or  otherwise  the  contract  will  be 
rescinded  and  canceled  and  all  prior  payments  forfeited.  If, 
after  receiving  this  notice,  the  purchaser  still  fails  to  pay 
the  installment,  the  vendor  may  cancel  the  contract,  retain 
the  money  already  paid,  and  regain  the  possession  of  the 
property.  If  the  purchaser  is  in  possession  of  the  property, 
and  refuses  to  give  it  up,  the  vendor  may  bring  a  suit  for 
ejectment,  and  the  courts  will  put  him  into  possession. 

The  vendor  is  not  compelled  to  cancel  the  contract,  how- 
ever. For  he  may,  on  the  contrary,  sue  the  purchaser  for 
the  amount  of  each  installment,  as  default  is  made  in  its 
payment,  and  get  a  judgment  against  him.  The  effect  of 
this  will  be  to  enforce  and  maintain  the  contract  of  sale, 
and  the  judgment  against  the  purchaser  for  the  installments 
due  can  be  collected  out  of  his  property. 

Where  there  is  an  absolute  agreement  on  the  part  of  the 
purchaser,  that,  if  payment  is  not  made  at  the  exact  time 
stipulated  therefor,  all  his  rights  thereunder  shall  be  for- 
feited, the  courts  of  California  will  enforce  the  contract  as 
it  finds  it.  The  hardship  of  any  case  will  not  justify  a 
court  in  setting  aside  the  solemn  agreement  of  the  parties. 

The  vendor  cannot  wait  until  all  the  installments  are  due, 
before  he  takes  action,  and  then  expect  the  courts  to  enforce 
the  contract  as  harshly  as  it  may  be  drawn  up  between  the 
parties.  If  he  waits  until  all  the  installments  are  due,  he 
must  tender  a  deed  of  the  land  to  the  purchaser  and  demand 
payment  of  the  installments  due,  if  he  wishes  to  enforce 
the  contract.  A  vendor  who  waits  until  the  last  installment 
of  the  purchase  price  is  due  cannot  sue  the  vendee  for  the 
unpaid  purchase  money  without  proof  of  performance,  or 
readiness  to  perform,  on  his  part;  and  the  tender  of  a 
deed  before  suit  is  not  alone  sufficient,  but  the  tender  must 
be  kept  good  during  the  court  proceedings;  the  deed  must 
be  kept  in  readiness  to  deliver,  should  the  vendee  elect  to 
pay  up  and  receive  the  title. 


BUSINESS   CONTRACTS   AND   LEGAL  OBLIGATIONS.  187 

The  vendor  may  sue  to  compel  the  purchaser  to  carry  out 
the  contract,  and  the  courts  will  give  damages  for  failure 
to  do  so.  The  damages  allowed  will  be  the  difference  in 
the  value  of  the  land  at  the  time  of  the  suit  and  the  con- 
tract price.  The  reason  of  this  rule  of  damages  is,  the  prop- 
erty may  have  increased  in  value,  and  thus  the  vendor  may 
not  be  damaged  at  all,  or  may  even  be  benefited,  when  he 
gets  the  property  back. 

Section  87w.— PURCHASER'S  REMEDY  IF  VEN- 
DOR FAILS  TO  FULFIL  CONTRACT.— It  may  hap- 
pen that  the  vendor,  when  the  time  comes  when  he  should 
make  a  deed  conveying  the  title  to  the  purchaser,  is  unable 
to  do  so.  He  may  have  been  mistaken  as  to  his  own  title, 
or  some  other  circumstances  may  render  it  impossible  for 
the  vendor  to  meet  his  obligation,  so  that  he  cannot  convey 
a  title  to  the  land  to  the  purchaser.  In  such  case,  the  law 
is,  the  purchaser  may  sue  the  vendor,  and  recover  back  the 
money  he  has  paid,  with  interest  thereon.  If  the  purchaser 
has  been  in  possession,  and  has  made  improvements  on  the 
land,  the  value  of  the  improvements  may  also  be  recovered, 
if  the  vendor  misrepresented  the  facts  and  thereby  induced 
the  purchaser  to  buy. 

Section  87x.— FORM  OF  INSTALLMENT  AGREE- 
MENT FOR  SALE  OF  REAL  ESTATE.— The  follow- 
ing is  a  form  of  installment  contract  for  the  sale  of  real 
estate : — 

This  Agreement,  made  and  entered  into  on  the 

day  of ,  in  the  year  of  our  Lord  one  thousand 

nine,  hundred  and ,  between 

,  of  the  County  of 

,    State    of    California,    the    party 

of   the   first   part,   and , 

of  the  same  place,  the  party  of  the  second  part,  witnesseth : 

That  the  said  party  of  the  first  part,  in  consideration  of 
the  covenants  and  agreements  on  the  part  of  the  said  party 
of  the  second  part,  hereinafter  contained,  agrees  to  sell  and 
convey  unto  the  said  party  of  the  second  part,  and  said 
second  party  agrees  to  buy,  all  that  certain  lot  and  parcel 
of  land  situate  in  the  County  of , 


188  BUSINESS   LAWS   FOR   BUSINESS   MEN. 

State  of  California,  bounded  and  described  as  follows,  to- wit : 
(Here  insert  description  of  land.) 

for  the  sum  of Dollars,  lawful  money 

of  the  United  States,  to  be  paid  in  the  manner  following, 

to-wit : Dollars  on  the  execution  of 

this  contract,  the   receipt  whereof   is   hereby   acknowledged, 

and  the  remainder  in  monthly   installments   of 

Dollars,  payable  on  the  first  day  of  each 

and  every  month  thereafter,  until  the  whole  of  said  purchase 
price  shall  have  been  paid,  together  with  interest  on  deferred 

payments  at  the  rate  of per  cent  per  annum 

from  date  until  paid. 

And  the  said  party  of  the  second  part  agrees  to  pay  all 
State,  City,  and  County  taxes,  or  assessments  of  whatsoever 
nature,  which  are  or  may  become  due  on  the  premises  above 
described. 

In  the  event  of  a  failure  to  pay  the  said  installments,  or 
any  of  them,  by  the  party  of  the  second  part,  as  said  install- 
ments or  installment  shall  become  due,  the  said  party  of  the 
first  part  shall  be  released  from  all  obligation  in  law  or 
equity  to  convey  said  property,  and  the  said  party  of  the 
second  part  shall  forfeit  all  right  thereto,  and  all  payments 
theretofore  made  by  said  party  of  the  second  part  shall  be 
thereby  forfeited  to  the  party  of  the  first  part. 

Time  is  the  essence  of  this  contract. 

And  the  said  party  of  the  first  part,  on  receiving  such 
payments,  at  the  time  and  in  the  manner  above  mentioned, 
agrees  to  execute  and  deliver  to  the  said  party  of  the  second 
part,  or  to  his  assigns,  a  good  and  sufficient  deed  conveying 
the  title  to  said  property  herein  described,  free  and  clear 
of  incumbrances. 

And  it  is  understood  that  the  stipulations  aforesaid  are  to 
apply  to  and  bind  the  heirs,  executors,  administrators,  and 
assigns  of  the  respective  parties  hereto,  and  that  said  party 
of  the  second  part  is  to  be  let  into  and  have  immediate 
possession  of  said  premises. 

IN  WITNESS  WHEREOF,  the  parties  hereto  have 
hereunto  set  their  hands  and  seals  the  day  and  year  first 
above  written. 

(Seal.) 

(Seal.) 

(If  the  above  agreement  is  intended  to  be  recorded,  it 
must  be  acknowledged.) 


BUSINESS   CONTRACTS  AND  LEGAL  OBLIGATIONS.  189 

Employer  and   Employee. 

Section    88.— CONTRACT     OF     EMPLOYMENT.— 

The  contract  of  employment  is  one  by  which  a  person, 
called  an  employer,  engages  another,  called  an  employee,  to 
do  something  for  a  compensation.  In  such  a  contract  there 
is  always  either  an  express  agreement  or  an  implied  agree- 
ment to  pay  a  compensation  for  the  services  performed.  If 
the  agreement  between  the  employer  and  the  employee  fixes 
the  compensation,  the  law  will  not  interfere  with  it;  but 
if  there  is  a  contract  of  employment,  and  no  rate  of  com- 
pensation is  fixed  by  the  parties,  then  the  law  will  imply  an 
obligation  on  the  part  of  the  employer  to  pay  what  the 
services  performed  by  the  employee  were  reasonably  worth. 

Section  89.— OBLIGATIONS  OF  THE  EMPLOYER. 

— It  may  be  stated  generally  of  the  obligations  of  the  em- 
ployer, which  he  assumes  towards  the  employee,  by  the 
contract  or  relation  which  they  mutually  enter  into,  that  by 
the  law  of  California  the  employer  is  bound  to  provide  a 
safe  place  and  safe  appliances  and  machinery  for  the  per- 
formance by  the  employee  of  his  work;  that  the  employer 
is  bound  to  inform  the  employee  of  anything  within  his 
own  knowledge  which  renders  the  place  or  appliances  danger- 
ous, or  which  increases  the  ordinary  risks  of  the  employ- 
ment, and  which  knowledge  is  not  equally  open  to  the 
observation  of  the  employee;  that  the  employer  is  bound 
to  use  reasonable  care  and  diligence  in  the  selection  of 
competent  fellow-servants,  and  he  will  be  liable  to  an  em- 
ployee for  injuries  sustained  by  reason  of  his  negligence  in 
hiring  incompetent  employees  to  work  with  him;  that  the 
employer  must  keep  in  safe  condition  the  premises  in  which 
his  employee  works,  and  must  use  ordinary  care  in  the 
inspection  and  repair  of  such  premises,  and  in  the  inspection 
and  repair  of  machinery  and  appliances  used  by  him.  Also, 
the  law  provides  that  the  employer  must  indemnify  his  em- 
ployee for  all  that  he  necessarily  expends  or  loses  in  direct 
consequence  of  the  discharge  of  his  duties  or  in  obedience 


190  BUSINESS  LAWS  FOR  BUSINESS   MEN. 

to  the  directions  of  the  employer,  provided  that  an  employer 
is  not  bound  to  indemnify  his  employee  for  losses  suffered 
by  the  latter  in  consequence  of  the  ordinary  risks  of  the 
business  in  which  he  is  employed.  And  an  employer  must 
in  all  cases  indemnify  his  employee  for  losses  caused  by  the 
employer's  want  of  ordinary  care,  provided  that  the  em- 
ployee's own  negligence  must  not  contribute  to  his  own 
injury.  It  is  the  duty  of  the  employer  to  inform  his  em- 
ployee of  latent  defects,  or  extraordinary  dangers  or  risks, 
connected  with  the  service,  of  which  the  employer  has 
knowledge,  but  which  are  unknown  to  the  employee.  If 
the  employer  does  not  inform  the  employee  of  such  defects 
or  dangers,  he  will  be  liable  for  damages  if  the  employee  is 
injured.  (Decided  by  the  Supreme  Court  of  California, 
in  the  case  of  Bone  vs.  Ophir  Silver  Mining  Co.,  which 
decision  is  printed  in  Volume  86  of  the  Pacific  Reporter, 
page  685.) 

Section  89a.— EMPLOYER'S  LIABILITY  FOR  IN- 
JURIES.— The  Legislature  of  1911  passed  a  new  employer's 
liability  for  injuries  act,  which  is  as  follows: 

1.  Contributory  Negligence. — In  any  action  to  recover 
damages  for  a  personal  injury  sustained  within  this  state  by 
an  employee  while  engaged  in  the  line  of  his  duty  or  the 
course  of  his  employment  as  such,  or  for  death  resulting 
from  personal  injury  so  sustained,  in  which  recovery  is 
sought  upon  the  ground  of  want  of  ordinary  or  reasonable 
care  of  the  employer,  or  of  any  officer,  agent  or  servant  of 
the  employer,  the  fact  that  such  employee  may  have  been 
guilty  of  contributory  negligence  shall  not  bar  a  recovery 
therein  where  his  contributory  negligence  was  slight  and 
that  of  the  employer  was  gross,  in  comparison,  but  the 
damages  may  be  diminished  by  the  jury  in  proportion  to  the 
amount  of  negligence  attributable  to  such  employee,  and  it 
shall  be  conclusively  presumed  that  such  employee  was  not 
guilty  of  contributory  negligence  in  any  case  where  the 
violation  of  any  statute  enacted  for  the  safety  of  employees 


BUSINESS    CONTRACTS   AND   LEGAL   OBLIGATIONS.  191 

contributed  to  such  employee's  injury;  and  it  shall  not  be 
a  defense: 

That  the  employee  either  expressly  or  impliedly  assumed 
the  risk  of  the  hazard  complained  of;  or 

That  the  injury  or  death  was  caused  in  whole  or  in  part 
by  the  want  of  ordinary  or  reasonable  care  of  a  fellow 
servant. 

2.  Employer  Not  Exempted  by  Contract. — No  contract, 
rule  or  regulation,  shall  exempt  the  employer  from  any 
of  the  provisions  of  the  preceding  section  of  this  act. 

3.  Employer  Liable  for  Compensation. — Liability  for 
the  compensation  hereinafter  provided  for,  in  lieu  of  any  other 
liability  whatsoever,  shall,  without  regard  to  negligence,  exist 
against  an  employer  for  any  personal  injury  accidentally 
sustained  by  his  employees,  and  for  his  death  if  the  injury 
shall  approximately  cause  death,  in  those  cases  where  the 
following  conditions  of  compensation  concur: 

(a)  Where,  at  the  time  of  the  accident,  both  the  employer 
and  employee  are  subject  to  the  provisions  of  this  act 
according  to  the  succeeding  sections  hereof. 

(b)  Where,  at  the  time  of  the  accident,  the  employee  is 
performing  service  growing  out  of  and  incidental  to  his 
employment  and  is  acting  within  the  line  of  his  duty  or 
course  of  his  employment  as  such. 

(c)  Where  the  injury  is  approximately  caused  by  accident, 
either  with  or  without  negligence,  and  is  not  so  caused  by 
the  wilful  misconduct  of  the  employee. 

And  where  such  conditions  of  compensation  exist  for  any 
personal  injury  or  death,  the  right  to  the  recovery  of  such 
compensation  pursuant  to  the  provisions  of  this  act,  and  acts 
amendatory  thereof,  shall  be  the  exclusive  remedy  against 
the  employer  for  such  injury  or  death,  except  that  when  the 
injury  was  caused  by  the  personal  gross  negligence  or  wilful 
personal  misconduct  of  the  employer,  or  by  reason  of  his 
violation  of  any  statute  designed  for  the  protection  of  em- 
ployees from  bodily  injury,  the  employee  may,  at  his  option, 
either   claim   compensation   under   this   act,   or   maintain    an 


192  BUSINESS   LAWS   FOR  BUSINESS   MEN. 

action  for  damages  therefor;  in  all  other  cases  the  liability  of 
the  employer  shall  be  the  same  as  if  this  and  the  succeeding 
sections  of  this  act  had  not  been  passed,  but  shall  be  subject 
to  the  provisions  of  the  preceding  sections  of  this  act. 

4.  Employer  Defined. — The  following  shall  constitute 
employers  subject  to  the  provisions  of  this  act  within  the 
meaning  of  the  preceding  section: 

The  state,  and  each  county,  city  and  county,  city,  town, 
village  and  school  district  and  all  public  corporations,  every 
person,  firm  and  private  corporation  (including  any  public 
service  corporation),  who  has  any  person  in  service  under 
any  contract  of  hire,  express  or  implied,  oral  or  written, 
and  who,  at  or  prior  to  the  time  of  the  accident  to  the 
employee  for  which  compensation  under  this  act  may  be 
claimed,  shall,  in  the  manner  provided  in  the  next  section, 
have  elected  to  become  subject  to  the  provisions  of  this 
act,  and  who  shall  not,  at  the  time  of  such  accident,  have 
withdrawn  such  election,  in  the  manner  provided  in  the  next 
section. 

5.  Employers  Subject  to  the  Provisions  of  this  Act. — 
Such  election  on  the  part  of  the  employer  shall  be  made  by 
filing  with  the  industrial  accident  board,  hereinafter  provided 
for,  a  written  statement  to  the  effect  that  he  accepts  the 
provisions  of  this  act,  the  filing  of  which  statement  shall 
operate,  within  the  meaning  of  section  three  of  this  act,  to 
subject  such  employer  to  the  provisions  of  this  act  and  all 
acts  amendatory  thereof  for  the  term  of  one  year  from  the 
date  of  the  filing  of  such  statement,  and  thereafter,  without 
further  act  on  his  part,  for  successive  terms  of  one  year  each, 
unless  such  employer  shall,  at  least  sixty  days  prior  to  the 
expiration  of  such  first  or  any  succeeding  year,  file  in  the 
office  of  said  board  a  notice  in  writing  to  the  effect  that  he 
withdraws  his  election  to  be  subject  to  the  provisions  of 
the  act. 

6.  Employee  Defined. — The  term  "employee"  shall  be 
construed  to  mean: 


BUSINESS   CONTRACTS   AND  LEGAL  OBLIGATIONS.  193 

(a)  Every  person  in  the  service  of  the  state,  or  any 
county,  city  and  county,  city,  town,  village  or  school  district 
therein,  and  all  public  corporations,  under  any  appointment 
or  contract  of  hire,  express  or  implied,  oral  or  written,  ex- 
cept any  official  of  the  state,  or  of  any  county,  city  and 
county,  city,  town,  village  or  school  district  therein  or  any 
public  corporation,  who  shall  have  been  elected  or  appointed 
for  a  regular  term  of  one  or  more  years,  or  to  complete  the 
unexpired  portion  of  any  such  regular  term. 

(b)  Every  person  in  the  service  of  another  under  any 
contract  of  hire,  express  or  implied,  oral  or  written,  including 
aliens,  and  also  including  minors  who  are  legally  permitted 
to  work  under  the  laws  of  the  state  (who,  for  the  purposes 
of  the  next  section  of  this  act,  shall  be  considered  the  same 
and  shall  have  the  same  power  of  contracting  as  adult  em- 
ployees), but  not  including  any  person  whose  employment  is 
but  casual  and  not  in  the  usual  course  of  the  trade,  business, 
profession  or  occupation  of  his  employer. 

7.  Employees  Subject  to  the  Provisions  of  this  Act. — 

Any  employee  as  defined  in  subsection  (a)  of  the  preceding 
section  shall  be  subject  to  the  provisions  of  this  act  and 
of  any  act  amendatory  thereof.  Any  employee  as  defined  in 
subsection  (b)  of  the  preceding  section  shall  be  deemed  to 
have  accepted  and  shall,  within  the  meaning  of  section  3  of 
this  act  be  subject  to  the  provisions  of  this  act  and  of  any 
act  amendatory  thereof,  if,  at  the  time  of  the  accident  upon 
which  liability  is  claimed: 

(a)  The  employer  charged  with  such  liability  is  subject  to 
the  provisions  of  this  act,  whether  the  employee  has  actual 
notice  thereof  or  not;  and 

(b)  At  the  time  of  entering  into  his  contract  of  hire, 
express  or  implied,  with  such  employer,  such  employee  shall 
not  have  given  to  his  employer  notice  in  writing  that  he  elects 
not  to  be  subject  to  the  provisions  of  this  act,  or,  in  the  event 
tkat  such  contract  of  hire  was  made  in  advance  of  such 
employer  becoming  subject  to  the  provisions  of  this  act,  such 
employee   shall,   without   giving   such   notice,   remain   in   the 


194  BUSINESS   LAWS   FOR   BUSINESS    MEN. 

service  of  such  employer  for  thirty  days  after  the  employer 
has  filed  with  said  board  an  election  to  be  subject  to  the 
terms  of  this  act. 

8.  Medical  and  Surgical  Treatment  and  Supplies. — 
Where  liability  for  compensation  under  this  act  exists  the 
same  shall  be  as  provided  in  the  following  schedule: 

(a)  Such  medical  and  surgical  treatment,  medicines,  medi- 
cal and  surgical  supplies,  crutches  and  apparatus,  as  may  be 
reasonably  required  at  the  time  of  the  injury  and  thereafter 
during  the  disability,  but  not  exceeding  ninety  days,  to  cure 
and  relieve  from  the  effects  of  the  injury,  the  same  to  be  pro- 
vided by  the  employer,  and  in  case  of  his  neglect  or  refusal 
seasonably  to  do  so,  the  employer  to  be  liable  for  the  reason- 
able expense  incurred  by  or  on  behalf  of  the  employee  in  pro- 
viding the  same;  provided,  however,  that  the  total  liability 
under  this  subdivision  shall  not  exceed  the  sum  of  $100.00. 

(b)  Amount  of  Payments. — If  the  accident  causes  disabil- 
ity, an  indemnity  which  shall  be  payable  as  wages  on  the 
eighth  day  after  the  injured  employee  leaves  work  as  the 
result  of  the  injury,  and  weekly  thereafter,  which  weekly 
indemnity  shall  be  as  follows: 

If  the  accident  causes  total  disability,  sixty-five  per  cent 
of  the  average  weekly  earnings  during  the  period  of  such 
total  disability;  provided,  that  if  the  disability  is  such  as 
not  only  to  render  the  injured  employee  entirely  incapable 
of  work,  but  also  so  helpless  as  to  require  the  assistance  of 
a  nurse,  the  weekly  indemnity  during  the  period  of  such 
assistance  shall  be  increased  to  one  hundred  per  cent  of  the 
average  weekly  earnings. 

If  the  accident  causes  partial  disability,  sixty-five  per  cent 
of  the  weekly  loss  in  wages  during  the  period  of  such  partial 
disability. 

If  the  disability  caused  by  the  accident  is  at  times  total 
and  at  times  partial,  the  weekly  indemnity  during  the  periods 
of  each  such  total  or  partial  disability  shall  be  in  accordance 
with  last  two  paragraphs  respectively,  subject  to  the  follow- 
ing limitations: 


BUSINESS   CONTRACTS   AND  LEGAL  OBLIGATIONS.  195 

Aggregate  disability  indemnity  for  a  single  injury  shall  not 
exceed  three  times  the  average  annual  earnings  of  the 
employee. 

If  the  period  of  disability  does  not  last  more  than  one 
week  from  the  day  the  employee  leaves  work  as  the  result 
of  the  accident  no  indemnity  whatever  shall  be  recoverable. 

If  the  period  of  disability  lasts  more  than  one  week  from 
the  day  the  employee  leaves  work  as  the  result  of  the  acci- 
dent, no  indemnity  shall  be  recoverable  for  the  first  week 
of  the  period  of  such  disability. 

The  aggregate  disability  period  shall  not,  in  any  event 
extend  beyond  fifteen  years  from  the  date  of  the  accident. 

(c)  Liability  in  Case  of  Death. — The  death  of  the 
injured  employee  shall  not  affect  the  obligation  of  the  em- 
ployer under  subsections  (a)  and  (b)  of  this  section,  so 
far  as  his  liability  shall  have  accrued  and  become  payable 
at  the  time  of  the  death,  but  the  death  shall  be  deemed  the 
termination  of  the  disability,  and  the  employer  shall  there- 
upon be  liable  for  the  following  death  benefits  in  lieu  of  any 
further  disability  benefits,  provided  that  such  death  was  ap- 
proximately caused  by  the  accident  causing  such  disability : 

In  case  the  deceased  employee  leaves  a  person  or  persons 
wholly  dependent  upon  him  for  support,  the  death  benefit 
shall  be  a  sum  sufficient  when  added  to  the  benefits  which 
shall,  at  the  time  of  death,  have  accrued  and  become  payable 
under  the  provisions  of  subsection  (b)  of  this  section  to 
make  the  total  compensation  for  the  injury  and  death  (ex- 
clusive of  the  benefit  provided  for  in  subsection  (a),  equal 
to  three  times  his  annual  average  earnings,  not  less  than 
$1,000  nor  more  than  $5,000,  the  same  to  be  payable,  unless 
and  until  the  industrial  accident  board  shall  otherwise  direct, 
in  weekly  installments  corresponding  in  amount  to  the  weekly 
earnings  of  the  employee. 

In  case  the  deceased  employee  leaves  no  one  wholly  de- 
pendent on  him  for  support,  but  one  or  more  persons  partially 
dependent  therefor,  the  death  benefit  shall  be  such  percentage 
of  three  times  such  average  annual  earnings  of  the  employee 


196  BUSINESS   LAWS   FOR  BUSINESS    MEN. 

as  the  annual  amount  devoted  by  the  deceased  to  the  support 
of  the  person  or  persons  so  partially  dependent  upon  him 
for  support  bears  to  such  average  earnings,  the  same  to  be 
payable,  unless  and  until  the  industrial  accident  board  shall 
otherwise  direct,  in  weekly  installments  corresponding  to  the 
weekly  earnings  of  the  employee;  provided,  that  the  total 
compensation  for  the  injury  and  death  (exclusive  of  the 
benefit  provided  for  in  said  subsection  (a),  shall  not  exceed 
three  times  such  average  annual  earnings. 

In  the  event  that  the  accident  shall  have  approximately 
caused  permanent  disability,  either  total  or  partial,  and  the 
employee  shall  die  within  fifteen  years  after  the  date  of  the 
accident,  liability  for  the  death  benefits  shall  exist  only  where 
the  accident  was  the  approximate  cause  of  death  within  said 
period  of  fifteen  years. 

If  the  deceased  employee  leaves  no  person  dependent  upon 
him  for  support,  and  the  accident  approximately  causes  death, 
the  death  benefit  shall  consist  of  the  reasonable  expenses  of 
his  burial  not  exceeding  $100. 

9.  Average  Annual  Earnings. — The  weekly  earning  re- 
ferred to  in  section  (8)  shall  be  one  fifty-second  of  the 
average  annual  earnings  of  the  emlpoyee;  average  annual 
earnings  shall  not  be  taken  at  less  than  $333.33,  nor  more 
than  $1,666.66,  and  between  said  limits  shall  be  arrived  at 
as  follows: 

If  the  injured  employee  has  worked  in  such  employ- 
ment, whether  for  the  same  employer  or  not,  during  sub- 
stantially the  whole  of  the  year  immediately  preceding  his 
injury,  his  average  annual  earnings  shall  consist  of  three 
hundred  times  the  average  daily  wage  or  salary  which  he 
has  earned  as  such  employee  during  the  days  when  so 
employed. 

If  the  injured  employee  has  not  so  worked  in  such 
employment  during  substantially  the  whole  of  such  immedi- 
ately preceding  year,  his  average  annual  earnings  shall  con- 
sist   of    three    hundred    times    the    average    daily    wage    or 


BUSINESS    CONTRACTS    AND   LEGAL   OBLIGATIONS.  197 

salary  which  an  employee  of  the  same  class  working  sub- 
stantially the  whole  of  such  immediately  preceding  year  in 
the  same  or  a  similar  employment  in  the  same  or  a  neigh- 
boring place  shall  have  earned  during  the  days  when  so 
employed. 

In  cases  where  the  foregoing  methods  of  arriving  at 
the  average  annual  earnings  of  the  injured  employee  can  not 
reasonably  and  fairly  be  applied,  such  annual  earnings  shall 
be  taken  at  such  sum  as  having  regard  to  the  previous  earnings 
of  the  injured  employee,  and  of  other  employees  of  the  same 
or  most  similar  class,  working  in  the  same  or  most  similar 
employment  in  the  same  or  neighboring  locality,  shall  rea- 
sonably represent  the  average  earning  capacity  of  the  injured 
employee  at  the  time  of  the  injury  in  the  employment  in 
which  he  was  working  at  such  time. 

The  fact  that  an  employee  has  suffered  a  previous  dis- 
ability, or  received  compensation  therefor,  shall  not  pre- 
clude him  from  compensation  for  a  later  injury,  or  for 
death  resulting  therefrom,  but  in  determining  compensation 
for  the  later  injury,  or  death  resulting  therefrom,  his  average 
annual  earnings  shall  be  such  sum  as  will  reasonably  repre- 
sent his  annual  earning  capacity  at  the  time  of  the  later 
injury,  and  shall  be  arrived  at  according  to  the  previous 
provisions  of  this  section. 

The  weekly  loss  in  wages  referred  to  in  section  8,  shall 
consist  of  the  diflference  between  the  average  weekly  earn- 
ings of  the  injured  employee,  computed  according  to  the 
provisions  of  this  section,  and  the  weekly  amount  which  the 
injured  employee,  in  the  exercise  of  reasonable  diligence,  will 
probably  be  able  to  earn,  the  same  to  be  fixed  as  of  the  time 
of  the  accident,  but  to  be  determined  in  view  of  the  nature 
and  extent  of  the  injury. 

The  following  shall  be  conclusively  presumed  to  be  solely 
and  wholly  dependent  for  support  upon  a  deceased  employee: 

A  wife  upon  a  husband. 

A  husband  upon  a  wife  upon  whose  earnings  he  is 
partially  or  wholly  dependent  at  the  time  of  her  death. 


198  BUSINESS   LAWS   FOR   BUSINESS    MEN. 

A  child  or  children  under  the  age  of  eighteen  years 
(or  over  said  age,  but  physically  or  mentally  incapacitated 
from  earning),  upon  the  parent  with  whom  he  or  they  are 
living  at  the  time  of  the  death  of  such  parent,  there  being 
no  surviving  dependent  parent.  In  case  there  is  more  than 
one  child  thus  dependent,  the  death  benefit  shall  be  divided 
equally  among  them.  In  all  other  cases  questions  of  entire 
or  partial  dependency  shall  be  determined  in  accordance  with 
the  fact,  as  the  fact  may  be  at  the  time  of  the  death  of  the 
employee,  and  in  such  other  cases  if  there  is  more  than  one 
person  wholly  dependent,  the  death  benefit  shall  be  divided 
equally  among  them,  and  persons  partially  dependent,  if  any, 
shall  receive  no  part  thereof,  and  if  there  is  more  than  one 
person  partially  dependent,  the  death  benefit  shall  be 
divided  among  them  according  to  the  relative  extent  of  their 
dependency. 

Questions  as  to  who  constitute  dependents  and  the  ex- 
tent of  their  dependency  shall  be  determined  as  of  the  date 
of  the  death  of  the  employee,  and  their  right  to  any  death 
benefit  shall  become  fixed  as  of  such  time,  irrespective  of  any 
subsequent  change  in  conditions,  and  the  death  benefit  shall 
be  directly  recoverable  by  and  payable  to  the  dependent  or 
dependents  entitled  thereto  or  their  legal  guardians  or 
trustees. 

10.  Notice  of  Accident  Within  Thirty  Days. — No  claim 
to  recover  compensation  under  this  act  shall  be  maintained 
unless  within  thirty  days  after  the  occurrence  of  the  accident 
which  is  claimed  to  have  caused  the  injury  or  death,  notice 
in  writing,  stating  the  name  and  the  address  of  the  person 
injured,  the  time  and  the  place  where  the  accident  occurred, 
and  the  nature  of  the  injury,  and  signed  by  the  person  in- 
jured or  someone  in  his  behalf,  or  in  case  of  his  death,  by 
a  dependent  or  someone  in  his  behalf,  shall  be  served  upon 
the  employer  by  delivering  to  and  leaving  with  him  a  copy  of 
such  notice  or  by  mailing  to  him  by  registered  mail  a  copy 
thereof  in  a   sealed  arid  posted  envelope   addressed   to   him 


BUSINESS    CONTRACTS   AND   LEGAL   OBLIGATIONS.  199 

at  his  last  known  place  of  business  or  residence.  Such  mail- 
ing- shall  constitute  complete  service.  Provided,  however, 
that  any  payment  of  compensation  under  this  act,  in  whole 
or  in  part,  made  by  the  employer  before  the  expiration  of 
said  thirty  days  shall  be  equivalent  to  the  notice  herein 
required,  and  provided  further,  that  the  failure  to  give  any 
such  notice,  or  any  defect  or  inaccuracy  therein,  shall  not 
be  a  bar  to  recovery  under  this  act  if  it  is  found  as  a  fact 
in  the  proceedings  for  collections  of  the  claim  that  there 
was  no  intention  to  mislead  the  employer,  and  that  he  was 
not  in  fact  misled  thereby,  and  provided  further  that  if 
no  such  notice  is  given  and  no  payment  of  compensation 
made,  within  one  year  from  the  date  of  the  accident,  the 
right  to  compensation  therefor  shall  be  wholly  barred. 

11.  Examination  by  Physician. — Wherever  in  case  of 
injury  the  right  to  compensation  under  this  act  would  exist 
in  favor  of  any  employee,  he  shall,  upon  the  written  request 
of  his  employer,  submit  from  time  to  time  to  examination 
by  a  regular  practicing  physician,  who  shall  be  provided 
and  paid  for  by  the  employer,  and  shall  likewise  submit  to 
examination  from  time  to  time  by  any  regular  physician 
selected  by  said  industrial  accident  board,  or  any  member  or 
examiner  thereof.  The  employee  shall  be  entitled  to  have 
a  physician  provided  and  paid  for  by  himself  present  at  any 
such  examination.  So  long  as  the  employee,  after  such  written 
request  of  the  employer,  shall  refuse  to  submit  to  such 
examination,  or  shall  in  any  way  obstruct  the  same,  his 
right  to  begin  or  maintain  any  proceeding  for  the  collection 
of  compensation  shall  be  suspended,  and  if  he  shall  refuse 
to  submit  to  such  examination  after  direction  by  the  board, 
or  any  member  or  examiner  thereof,  or  shall  in  any  way 
obstruct  the  same,  his  right  to  weekly  indemnity  which  shall 
accrue  and  become  payable  during  the  period  of  such  re- 
fusal or  obstruction,  shall  be  barred.  Any  physician  who 
shall  make  or  be  present  at  any  such  examination  may  be 
required  to  testify  as  to  the  results  thereof. 


200  BUSINESS   LAWS   FOR   BUSINESS    MEN. 

12.  Industrial  Accident  Board. — Any  dispute  or  contro- 
versy concerning  compensation  under  this  act,  including  any 
in  which  the  state  may  be  a  party,  shall  be  submitted  to 
a  board  consisting  of  three  members,  which  shall  be  known 
as  the  Industrial  Accident  Board.  Within  thirty  days  before 
this  act  shall  take  eflfect,  the  governor,  by  and  with  the 
advice  and  consent  of  the  senate,  shall  appoint  a  member 
who  shall  serve  two  years,  and  another  who  shall  serve  three 
years,  and  another  who  shall  serve  four  years.  Thereafter 
such  three  members  shall  be  appointed  and  confirmed  for 
terms  of  four  years  each.  Vacancies  shall  be  filled  in  the 
same  manner  for  the  unexpired  term.  Each  member  of  the 
board,  before  entering  upon  the  duties  of  his  office,  shall 
take  the  oath  prescribed  by  the  constitution.  A  majority 
of  the  board  shall  constitute  a  quorum  for  the  exercise  of 
any  of  the  powers  or  authority  conferred  by  this  act,  and 
an  award  by  a  majority  shall  be  valid.  In  case  of  a  vacancy, 
the  remaining  two  members  of  the  board  shall  exercise  all 
the  powers  and  authority  of  the  board  until  such  vacancy 
is  filled.  Each  member  of  the  board  shall  receive  an  annual 
salary  of  three  thousand  six  hundred  dollars. 

13.  Board  May  Take  Testimony. — Upon  the  filing  with 
the  board  by  any  party  in  interest  of  an  application  in  writ- 
ing stating  the  general  nature  of  any  dispute  or  controversy 
concerning  compensation  under  this  act,  it  shall  fix  a  time 
for  the  hearing  thereof,  which  shall  not  be  more  than  forty 
days  after  the  filing  of  such  application.  The  board  shall 
cause  notice  of  such  hearing  to  be  given  to  each  party 
interested  by  service  of  such  notice  on  him  personally  or  by 
mailing  a  copy  thereof  to  him  at  his  last  known  post  office 
address  at  least  ten  days  before  such  hearing.  Such  hearing 
may  be  adjourned  from  time  to  time  in  the  discretion  of  the 
board,  and  hearings  shall  be  held  at  such  places  as  the 
board  shall  designate.  Either  party  shall  have  the  right  to 
be  present  at  any  hearing,  in  person  or  by  attorney  or  any 
other  agent,  and  to  present  such  testimony  as  shall  be  perti- 
nent to  the  controversy  before  the  board,  but  the  board  may, 


BUSINESS   CONTRACTS   AND  LEGAL  OBLIGATIONS.  201 

with  or  without  notice  to  either  party,  cause  testimony 
to  be  taken,  or  inspection  of  the  premises  where  the  injury 
occurred  to  be  had,  or  the  time  books  and  payroll  of  the 
employer  to  be  examined  by  any  member  of  the  board  or 
any  examiner  appointed  by  it,  and  may  from  time  to  time, 
direct  any  employee  claiming  compensation  to  be  examined 
by  a  regular  physician ;  the  testimony  so  taken  and  the 
results  of  any  such  inspection  or  examination,  to  be  reported 
to  the  board  for  its  consideration  upon  final  hearing.  The 
board,  or  any  member  thereof,  or  any  examiner  appointed 
thereby  shall  have  power  and  authority  to  issue  subpoenas 
to  compel  the  attendance  of  witnesses  or  parties,  and  the 
production  of  books,  papers,  or  records,  and  to  administer 
oaths.  Obedience  to  such  subpoenas  shall  be  enforced  by 
the  superior  court  of  any  county,  or  city  and  county.  After 
final  hearing  by  said  board,  it  shall  make  and  file  its  findings 
upon  all  facts  involved  in  the  controversy,  and  its  award, 
which  shall  state  its  determination  as  to  the  rights  of  the 
party. 

14.  Filing  of  Judgment. — Either  party  may  present  a 
certified  copy  of  the  award  to  the  superior  court  for  any 
county  or  city  and  county,  whereupon  said  court  shall,  with- 
out notice,  render  a  judgment  in  accordance  therewith,  which 
judgment,  until  and  unless  set  aside  as  hereinafter  provided, 
shall  have  the  same  effect  as  though  duly  rendered  in  an 
action  duly  tried  and  determined  by  said  court,  and  shall, 
with  like  effect,  be  entered  and  docketed. 

15.  Court    May    Confirm    or    Set    Aside    Award. — The 

findings  of  fact  made  by  the  board  acting  within  its  powers, 
shall,  in  the  absence  of  fraud,  be  conclusive,  and  the  award, 
whether  judgment  has  been  rendered  thereon  or  not,  shall 
be  subject  to  review  only  in  the  manner  and  upon  the 
grounds  following:  Within  thirty  days  from  the  date  of 
the  award,  any  party  aggrieved  thereby  may  file  with  the 
board  an  application  in  writing  for  a  review  of  such  award, 
stating  generally  the  grounds  upon  which  such  review  is 
sought;  within  thirty  days  thereafter  the  board  shall  cause 


202  BUSINESS   LAWS   FOR  BUSINESS    MEN. 

all  documents  and  papers  on  file  in  the  matter,  and  a 
transcript  of  all  testimony  which  may  have  been  taken 
therein,  to  be  transmitted  with  their  findings  and  award  to 
the  clerk  of  the  superior  court  of  that  county  or  city  and 
county  wherein  the  accident  occurred;  such  application  for 
a  review  may  thereupon  be  brought  on  for  hearing  before 
said  court  upon  such  record  by  either  party  on  ten  days' 
notice  to  the  other,  subject,  however,  to  the  provisions  of 
law  for  a  change  of  the  place  of  trial  or  the  calling  of  an- 
other judge.  Upon  such  hearing  the  court  may  confirm  or 
set  aside  such  award,  and  any  judgment  which  may  theretofore 
have  been  rendered  thereon,  but  the  same  shall  be  set  aside 
only  upon  the  following  grounds: 

That  the  board  acted  without  or  in  excess  of  its  powers; 

That  the  award  was  procured  by  fraud; 

That  the  findings  of  fact  by  the  board  do  not  support  the 
award. 

Upon  the  setting  aside  of  any  award  the  court  may 
recommit  the  controversy  and  remand  the  record  in  the 
case  to  the  board,  for  further  hearing  or  proceedings,  or  it 
may  enter  the  proper  judgment  upon  the  findings,  as  the 
nature  of  the  case  shall  demand.  An  abstract  of  the  judg- 
ment entered  by  the  trial  court  upon  the  review  of  any 
award  shall  be  made  by  the  clerk  thereof  upon  the  docket 
entry  of  any  judgment  which  may  theretofore  have  been 
rendered  upon  such  award,  and  transcripts  of  such  abstract 
may  thereupon  be  obtained  for  like  entry  upon  the  dockets 
of  the  courts  of  other  counties,  or  city  and  county. 

16.  Appeal  from  Award. — Any  party  aggrieved  by  a 
judgment  entered  upon  the  review  of  any  award,  may  ap- 
peal therefrom  within  the  time  and  in  the  manner  provided 
for  an  appeal  from  the  orders  of  the  superior  court;  but 
all  such  appeals  shall  be  placed  on  the  calendar  of  the 
supreme  court  and  brought  to  a  hearing  in  the  same  manner 
as  criminal  causes  on  such  calendar. 

No  fees  shall  be  charged  by  the  clerk  of  any  court  for  the 
performance    of    any    official    service    required    by    this    act. 


BUSINESS   CONTRACTS   AND  LEGAL  OBLIGATIONS.  203 

except  for  the  docketing-  of  judgments  and  for  certified 
copies  or  transcripts  thereof.  In  proceedings  to  review  an 
award,  costs  as  between  the  parties  shall  be  allowed  or 
not  in  the  discretion  of  the  court. 

17.  Assignment  of  Claim. — No  claim  for  compensation 
under  this  act  shall  be  assignable  before  payment,  but  this 
provision  shall  not  affect  the  survival  thereof;  nor  shall 
any  claim  for  compensation,  or  compensation  awarded,  ad- 
judged or  paid,  be  subject  to  be  taken  for  the  debts  of  the 
party  entitled  thereto. 

18.  Preferred  Claim. — A  claim  for  compensation  for  the 
injury  or  death  of  any  employee,  or  any  award  or  judgment 
entered  thereon,  shall  be  entitled  to  a  preference  over  the 
other  debts  of  the  employer  if  and  to  the  same  extent  as 
the  wages  of  such  employee  shall  be  so  preferred;  but  this 
section  shall  not  impair  the  lien  of  any  judgment  entered 
upon  any  award. 

19.  Right  of  Employer  to  Insure. — Nothing  in  this  act 
shall  affect  the  organization  of  any  mutual  or  other  insur- 
ance company,  or  any  existing  contract  for  insurance  or 
employers'  liability,  nor  the  right  of  the  employer  to  insure 
in  mutual  or  other  companies,  in  whole  or  in  part,  against 
such  liability,  or  against  the  liability  for  the  compensation 
provided  for  by  this  act,  or  to  provide  by  mutual  or  other 
insurance,  or  by  arrangement  with  his  employees,  or  other- 
wise, for  the  payment  to  such  employees,  their  families, 
dependents,  or  representatives,  of  sick,  accident  or  death 
benefits,  in  addition  to  the  compensation  provided  for  by 
this  act.  But  liability  for  compensation  under  this  act  shall 
not  be  reduced  or  affected  by  any  insurance,  contributions, 
or  other  benefit  whatsoever  due  to  or  received  by  the  person 
entitled  to  such  compensation,  and  the  person  so  entitled 
shall,  irrespective  of  any  insurance  or  other  contract,  have 
the  right  to  recover  the  same  directly  from  the  employer, 
and  in  addition  thereto,  the  right  to  enforce  in  his  own 
name,  in  the  manner  provided  in  this  act,   the   liability   of 


204  BUSINESS  LAWS   FOR  BUSINESS   MEN. 

any  insurance  company,  which  may,  in  whole  or  in  part 
have  insured  the  Hability  for  such  compensation;  provided, 
however,  that  payment  in  whole  or  in  part  of  such  com- 
pensation by  either  the  employer  or  the  insurance  company, 
shall,  to  the  extent  thereof,  be  a  bar  to  recovery  against 
the  other  of  the  amount  so  paid,  and  provided  further,  that 
as  between  the  employer  and  the  insurance  company,  pay- 
ment by  either  directly  to  the  employee,  or  to  the  person 
entitled  to  compensation,  shall  be  subject  to  the  conditions 
of  the  insurance  contract  between  them. 

Every  contract  for  the  insurance  of  the  compensation 
herein  provided  for,  or  against  liability  therefor,  shall  be 
deemed  to  be  made  subject  to  the  provisions  of  this  act, 
and  provisions  thereof  inconsistent  with  this  act  shall  be 
void.  No  company  shall  enter  into  any  such  contract  of 
insurance  unless  such  company  shall  have  been  approved 
by  the  commissioner  of  insurance,  as   provided  by   law. 

20.  Release  from  Liability. — The  making  of  a  lawful 
claim  against  an  employer  for  compensation  under  this 
act  for  the  injury  or  death  of  his  employee  shall  operate 
as  an  assignment  of  any  assignable  cause  of  action  in  tort 
which  the  employee  or  his  personal  representative  may  have 
against  any  other  party  for  such  injury  or  death,  and 
such  employer  may  enforce  in  his  own  name  the  liability 
of  such  other  party. 

21.  Notice  of  Election  by  Employer. — The  board  shal) 
cause  to  be  printed  and  furnished  free  of  charge  to  any 
employer  or  employee  such  blank  forms  as  it  shall  deem 
requisite  to  facilitate  or  promote  the  efficient  administra- 
tion of  this  act;  it  shall  provide  a  proper  record  book  in 
which  shall  be  entered  and  indexed  the  name  of  every 
employer  who  shall  file  a  statement  of  election  under  this 
act,  and  the  date  of  the  filing  thereof,  and  a  separate  book 
in  which  shall  be  entered  and  indexed  the  name  of  every 
employer  who  shall  file  his  withdrawal  of  such  election, 
and  the  date  of  the  filing  thereof;  and  a  book  in  which 
shall  be  recorded  all  awards  made  by  the  board;  and  such 


BUSINESS    CONTRACTS   AND   LEGAL   OBLIGATIONS.  205 

Other  books  or  records  as  it  shall  deem  required  by  the 
proper  and  efficient  administration  of  this  act;  all  such 
records  to  be  kept  in  the  office  of  the  board.  Upon  the 
filing  of  a  statement  of  election  by  an  employer  to  become 
subject  to  the  provisions  of  this  act,  the  board  shall  forth- 
with cause  notice  of  the  fact  to  be  given  to  his  employees, 
by  posting  and  keeping  continuously  posted  in  a  public 
and  conspicuous  place  such  notice  thereof  in  the  office, 
shop,  or  place  of  business  of  the  employer,  or  by  publish- 
ing, or  in  such  other  manner  as  the  board  shall  deem 
most  effective,  and  the  board  shall  cause  notice  to  be  given 
in  like  manner  of  the  filing  of  any  withdrawal  of  such 
election;  but  notwithstanding  the  failure  to  give,  or  the 
insufficiency  of,  any  such  notice,  knowledge  of  all  filed 
statements  of  election  and  withdrawals  of  election,  and  of 
the  time  of  the  filing  of  the  same,  shall  conclusively  be 
imputed  to  all  employees. 

22.  Right  to  Compromise. — Nothing  in  this  act  con- 
tained shall  be  construed  as  impairing  the  right  of  parties 
interested,  after  the  injury  or  death  of  an  employee,  to 
compromise  and  settle  upon  such  terms  as  they  may  agree 
upon,  any  liability  which  may  be  claimed  to  exist  under 
this  act  on  account  of  such  injury  or  death,  nor  as  con- 
ferring upon  the  dependents  of  any  injured  employee  any 
interest  which  he  may  not  divert  by  sudi  settlement,  or 
for  which  he  or  his  estate  shall,  in  the  event  of  such 
settlement  by  him,  be  accountable  to  such  dependents  or 
any  of  them. 

Act  of   the   Legislature,   approved   April   8,    191 1 ;   in 
effect   September   1,    1911. 

Section  90.— OBLIGATIONS  OF  THE  EMPLOYEE. 
— ^The  law  imposes  upon  the  employee  the  obligation  of 
serving  his  employer  in  good  faith,  using  ordinary  care  and 
diligence,  and  all  the  skill  which  he  possesses,  in  serving 
his  employer's  interest  during  his  employment.  The  em- 
ployee   must    substantially    comply    with    all    the    reasonable 


206  BUSINESS   LAWS   FOR  BUSINESS   MEN. 

directions  of  his  employer  concerning  the  service  on  which 
he  is  engaged,  except  where  it  is  impossible  or  unlawful 
for  him  to  do  so.  Everything  which  the  employee  acquires 
by  virtue  of  the  employment  belongs  to  the  employer,  except 
the  compensation  which  is  due  to  him  from  the  employer. 
An  employee  must,  on  demand,  render  to  his  employer  just 
accounts  of  all  his  transactions  in  the  course  of  his  em- 
ployment, and  must  render  such  accounts  as  often  as  may  be 
reasonable.  An  employee  who  has  any  business  to  transact 
on  his  own  account,  similar  to  that  intrusted  to  him  by  his 
employer,  must  always  give  the  latter  the  preference.  An 
employee  who  is  guilty  of  gross  negligence  in  the  perform- 
ance of  his  duties  is  liable  to  his  employer  for  the  damages 
thereby  caused  to  him;  and  in  such  case  the  employer  is 
only  liable  to  the  employee  for  the  value  of  such  services 
as  are  properly  rendered. 

Civil   Code,    Sections    1978,    1981,    1984,    1985,    1986, 
1988,  1990. 

Section  91.— TERMINATION    OF    EMPLOYMENT. 

— The  employment  may  be  terminated  at  any  time  by  the 
mutual  agreement  of  the  parties.  The  employment  is  also 
terminated  by  the  expiration  of  the  term  contracted  for, 
or  by  the  extinction  of  its  subject,  or  by  the  death  of  the 
employee,  or  by  the  legal  incapacity  of  the  employee  to  act, 
as  in  the  case  where  the  employee  becomes  insane.  An 
employment  will  also  be  terminated  by  notice  of  the  death 
of  the  employer,  and  by  notice  of  his  legal  incapacity  to 
contract;  but  there  is  an  exception  to  this  rule  in  cases  where 
the  employee  has  an  interest  in  the  subject  of  the  employ- 
ment, as  where,  by  the  terms  of  the  contract  of  employment, 
the  employee  is  to  have  a  part  ownership  of  the  thing  upon 
which  he  is  employed.  An  employment  having  no  specified 
term  may  be  ended  at  the  will  of  either  party,  on  notice  to 
the  other.  The  employer  may  discharge  the  employee  for 
any  wilful  breach  of  duty  by  him  in  the  course  of  his 
employment,  or  in  case  of  the  habitual  neglect  of  his  duty 
by    the    employee,    or    long-continued    incapacity    to    do    his 


BUSINESS   CONTRACTS   AND   LEGAL  OBLIGATIONS.  207 

work;  and  the  empioyee  may  quii  the  service  of  his  employer, 
even  though  he  has  contracted  for  a  specified  term,  where 
the  employer  is  guilty  of  any  wilful  or  permanent  breach  of 
his  obligations  to  the  employee,  as  where  the  employer  fails 
to  provide  a  safe  place  to  work  or  safe  appliances  or  com- 
petent fellow-servants,  or  in  any  other  way  wilfully  fails  to 
keep  the  obligations  which  the  law  or  his  own  contract  en- 
joins upon  him  for  the  benefit  of  the  employee.  An  em- 
ployee, dismissed  by  his  employer  for  good  cause,  is  not 
entitled  to  any  compensation  for  services  rendered  since  the 
last  day  upon  which  a  payment  became  due  to  him  under 
the  contract.  An  employee  who  quits  the  service  of  the 
employer  for  good  cause  is  entitled  to  a  proportionate  pay- 
ment of  the  compensation  which  he  would  have  received 
under  a  full  performance  of  the  contract,  as  compared  with 
the  portion  of  the  services  already  performed  by  him. 

Civil    Code,    Sections    1996,    1997,    1999,    2000,    2001, 
2002,  2003. 

Section  91a.— SANITARY  CONDITION  OF  WORK- 
SHOPS.— Factories  and  workshops  must  be  kept  in  good 
sanitary  condition.  Where  dust,  filaments,  or  injurious  gases 
are  produced  or  generated,  exhaust  fans  or  blowers  must  be 
used,  with  pipes  and  hoods  extending  to  each  machine. 

Act  of  the  Legislature,  approved  February  22,  1909. 

Section   91b.— EMPLOYMENT     OF     CHILDREN.— 

No  minor  under  the  age  of  eighteen  shall  be  employed  in 
laboring  in  any  manufacturing,  mechanical,  or  mercantile 
establishment,  or  other  place  of  labor,  more  than  nine  hours 
in  one  day,  except  when  it  is  necessary  to  make  repairs  to 
prevent  the  interruption  of  the  ordinary  running  of  the  ma- 
chinery, or  when  a  diflferent  apportionment  of  the  hours  of 
labor  is  made  for  the  sole  purpose  of  making  a  shorter 
day's  work  for  one  day  of  the  week,  and  in  no  case  shall 
the  hours  of  labor  exceed  fifty-four  hours  in  a  week. 

No  minor  under  the  age  of  eighteen  years  shall  be  em- 
ployed or  permitted  to  work  between  the  hours  of  ten  o'clock 
in  the  evening  and  five  o'clock  in  the  morning. 


208  BUSINESS   LAWS   FOR   BUSINESS    MEN. 

No  child  under  fifteen  years  of  age  shall  be  employed  in 
any  mercantile  institution,  office,  laundry,  manufacturing 
establishment,  workshop,  place  of  amusement,  restaurant, 
hotel,  apartment  house,  or  in  the  distribution  or  transmission 
of  merchandise  or  messages. 

Provided,  that  the  judge  of  the  juvenile  court  of  the 
county,  or  city  and  county,  or  in  any  county  or  city  and 
county  in  which  there  is  no  juvenile  court,  then  any  judge 
of  the  superior  court  of  the  county  or  city  and  county  in 
which  such  child  resides  shall  have  authority  to  issue  a  per- 
mit to  work  to  any  such  child  over  the  age  of  twelve  years, 
upon  a  sworn  statement  being  made  to  him  by  the  parent 
of  such  child  that  such  child  is  past  the  age  of  twelve  years, 
that  the  parents  or  parent  of  such  child  are  incapacitated  for 
labor,  through  illness,  and  after  investigation  by  a  probation 
officer  or  attendance  officer  of  the  city,  or  city  and  county, 
in  which  such  child  resides,  or  in  cities  and  counties  where 
there  are  no  probation  or  attendance  officers,  then  by  such 
other  competent  person  as  the  judge  may  designate  for  this 
purpose.  The  permit  so  issued  shall  specify  the  kind  of 
labor  and  the  time  for  which  it  is  issued,  and  shall  in  no 
case  be  issued  for  a  longer  period  than  shall  seem  necessary 
to  the  judge  issuing  such  permit.  Such  permit  shall  be 
kept  on  file  by  the  person,  firm  or  corporation  employing 
the  child  therein  designated,  during  the  term  of  said  employ- 
ment, and  shall  be  given  up  to  such  child  upon  his  quitting 
such  employment.  Such  certificate  shall  be  always  open  to 
the  inspection  of  the  attendance  and  probation  officers  of 
the  city  and  county,  city  or  county,  in  which  the  place  of 
employment  is  situated,  or  of  the  officers  of  the  state  bureau 
of  labor  statistics. 

1.  Employment  During  Vacations. — Any  such  child  over 
the  age  of  twelve  years  may  be  employed  at  any  of  the 
occupations  mentioned  in  this  act  during  the  regular  vaca- 
tion of  the  public  schools  of  the  city,  county,  or  city  and 
county,  in  which  the  place  of  employment  is  situated,  upon 


BUSINESS   CONTRACTS   AND  LEGAL  OBLIGATIONS.  209 

the  production  of  a  permit  signed  by  the  principal,  vice* 
principal  of  the  school,  or  secretary  of  the  board  of  school 
trustees  or  board  of  education  of  the  school  which  such  child 
has  attended  during  the  term  next  preceding  any  such  vaca- 
tion. Such  permit  shall  contain  the  name  and  age  of  the 
child  to  whom  it  is  issued,  and  the  date  of  the  termination 
of  the  vacation  for  which  it  is  issued,  and  shall  be  kept  on 
file  by  the  employer  during  the  period  of  employment,  and  at 
the  termination  of  such  employment  shall  be  returned  to  the 
child  to  whom  it  was  issued. 

No  minor  who  is  under  sixteen  years  of  age  shall  be 
employed  or  permitted  to  work  at  any  gainful  occupation 
during  the  hours  that  the  public  schools  of  the  city,  town  or 
school  district  in  which  his  place  of  employment  is  situated 
are  in  session,  unless  he  or  she  can  read  English  at  sight 
and  can  write  legibly  and  correctly  simple  English  sentences, 
or  unless  he  or  she  is  a  regular  attendant  for  the  then 
current  term  at  a  regularly  conducted  night  school.  A  cer- 
tificate of  the  principal  of  such  school  shall  be  held  to  be 
sufficient  evidence  of  such  attendance. 

2.  Notice  to  Be  Posted  by  Employer. — Every  person, 
firm  or  corporation  employing  minors  under  eighteen  years 
of  age,  in  any  manufacturing  establishment,  shall  post,  and 
keep  posted,  in  a  conspicuous  place  in  every  room  where 
such  help  is  employed,  a  written  or  printed  notice  stating 
the  number  of  hours  per  day  for  each  day  of  the  week 
required  of  such  persons. 

3.  Record  of  Employees. — Every  person,  firm  or  corpor- 
ation, agent  or  officer  of  a  firm  or  corporation,  employing 
or  permitting  minors  under  sixteen  and  over  fifteen  years 
of  age  to  work  in  any  mercantile  institution,  office,  laundry, 
manufacturing  establishment,  workshop,  place  of  amuse- 
ment, restaurant,  hotel,  apartment  house,  or  in  the  distribu- 
tion or  transmission  of  merchandise  or  messages,  shall  keep 
a  record  of  the  names,  ages,  and  places  of  residence  of  such 
minors,  and  shall  have  on  file  a  certificate  of  age  and 
schooling,   as   provided   in   this   act,    for   every   such   minor 


210  BUSINESS  LAWS  FOR  BUSINESS   MEN. 

SO  employed,  said  record  and  certificate  to  be  open  at  all 
times  to  the  inspection  of  the  school  attendance  and  probation 
officers  of  the  city  and  county,  city,  or  county,  in  which  the 
place  of  employment  is  situated,  or  of  the  officers  of  the 
state  bureau  of  labor  statistics. 

4.  Age  and  Schooling  Certificates. — An  age  and  school- 
ing certificate  shall  be  approved  only  by  the  superintendent 
of  schools  of  the  city  or  city  and  county,  or  by  a  person 
authorized  by  him  in  writing,  or  where  there  is  no  city  or 
city  and  county  superintendent  of  schools,  by  a  person  author- 
ized by  the  local  school  trustees;  provided,  that  the  super- 
intendent or  principal  of  any  school  of  recognized  standing 
shall  have  the  right  to  approve  an  age  and  schooling  cer- 
tificate, and  shall  have  the  same  rights  and  powers  as  the 
superintendent  of  public  schools  to  issue  the  certificate  herein 
provided,  for  children  attending  such  schools.  The  persons 
authorized  to  issue  age  and  schooling  certificates  shall  have 
the  authority  to  administer  the  oaths  necessary  for  carrying 
out  the  provisions  of  this  act,  but  no  fees  shall  be  charged 
for  issuing  such  certificates. 

An  age  and  schooling  certificate  shall  not  be  approved 
unless  satisfactory  evidence  is  furnished  by  the  last  school 
census,  the  certificate  of  birth  or  baptism  of  such  child,  the 
public  register  of  birth  of  such  child,  or  in  some  other 
manner,  that  such  child  is  of  the  age  stated  in  such  certificate. 

A  duplicate  copy  of  each  age  and  schooling  certificate 
granted  under  the  provisions  of  this  act  shall  be  kept  by  the 
person  issuing  such  certificate,  such  copy  to  be  filed  with  the 
county  superintendent  of  schools  in  the  county  where  the 
certificate  is  issued;  provided,  that  all  such  copies  of  certifi- 
cates issued  between  June  25th  and  December  25th  of  any 
year  shall  be  filed  not  later  than  December  31st  of  such  year; 
and  those  issued  between  December  25th  and  June  2Sth  of 
the  ensuing  year  shall  be  filed  not  later  than  June  30th  of 
each  year. 

The  certificate  as  to  the  birthplace  and  age  of  the  minor 
.under  sixteen  and  over  fifteen  years  of  age  shall  be  signed 


BUSINESS   CONTRACTS   AND  LEGAL  OBLIGATIONS.  211 

by  his  father,  his  mother,  or  his  guardian;  if  a  child  has  no 
father,  mother,  or  guardian  living  in  the  same  city  or  town, 
his  own  signature  to  the  certificate  may  be  accepted  by  the 
person  authorized  to  approve  the  same. 

Every  person  authorized  to  sign  the  certificate  prescribed 
by  this  act,  who  knowingly  certifies  to  any  false  statement 
therein,  is  guilty  of  a  misdemeanor,  and  upon  conviction 
thereof  shall  be  fined  not  less  than  five  nor  more  than  fifty 
dollars,  or  imprisonment  not  more  than  thirty  days,  or  by 
both  such  fine  and  imprisonment. 

5.  School  and  Work. — No  child  having  a  permit  to  work, 
as  prescribed  in  section  2  of  this  act,  and  no  child  having  an 
age  and  schooling  certificate,  and  no  other  child,  between  the 
ages  of  fifteen  and  sixteen  years,  who,  if  between  the  ages 
of  eight  and  fifteen  years,  would  by  law  be  required  to 
attend  school,  shall,  while  the  public  schools  are  in  session, 
be  and  remain  idle  and  unemployed  for  a  period  longer  than 
two  weeks,  but  must  enroll  and  attend  school ;  provided,  that 
within  one  week  after  any  child  having  such  a  permit  to 
work  or  such  age  and  schooling  certificate  shall  have  ceased 
to  be  employed  by  any  employer,  such  employer  shall,  in 
writing,  giving  the  latest  correct  address  of  such  child  known 
to  such  employer,  notify,  in  the  case  of  a  child  having  a 
permit  to  work,  the  judge  of  the  juvenile  court  in  the  county 
of  said  child's  residence,  or  the  probation  officer  of  such 
juvenile  court,  or  in  the  case  of  a  child  having  an  age  and 
schooling  certificate,  the  county  superintendent  of  schools  of 
such  county,  that  such  child  is  no  longer  employed  by  such 
employer;  and  such  judge  of  the  juvenile  court,  or  such 
probation  officer,  or  such  county  superintendent  of  schools, 
shall  thereupon  immediately  notify  the  attendance  officer 
having  jurisdiction  in  the  place  of  such  child's  residence, 
giving  the  said  latest  correct  address  of  such  child,  that  such 
child  is  neither  at  work  nor  in  school ;  and  provided,  further, 
that  no  such  child  shall  be  permitted  to  cease  school  attend- 
ance, without  securing  a  permit  to  work,  or  an  age  and 
schooling  certificate  as  provided  in  this  act. 


212  BUSINESS   LAWS   FOR   BUSINESS    MEN. 

6.  Penalty  for  Violating  Law. — Any  person,  firm,  cor- 
poration, agent,  or  officer  of  a  firm  or  corporation  that  vio- 
lates or  omits  to  comply  with  any  of  the  foregoing  provisions 
of  this  act,  or  that  employs  or  suflfers  or  permits  any  minor 
to  be  employed  in  violation  thereof,  is  guilty  of  a  misde- 
meanor, and  shall,  upon  conviction  thereof,  be  punished  by 
a  fine  of  not  less  than  fifty  dollars  or  more  than  two  hundred 
dollars,  or  by  imprisonment  for  not  more  than  sixty  days,  or 
by  both  such  fine  and  imprisonment,  for  each  and  every 
offense.  A  failure  to  produce  any  age  and  schooling  certifi- 
cate or  permit  or  to  post  any  notice  required  by  this  act, 
shall  be  prima  facie  evidence  of  the  illegal  employment  of 
any  person  whose  age  and  schooling  certificate  or  permit  is 
not  produced,  or  whose  name  is  not  so  posted.  Any  fine 
collected  under  the  provisions  of  this  act  shall  be  paid  into 
the  school  funds  of  the  county,  or  city,  or  city  and  county 
in  which  the  offense  occurred. 

7.  Farm  Labor  —  Domestic  Service  —  Child  Actors. — 
Nothing  in  this  act  shall  be  construed  to  prohibit  the  em- 
ployment of  minors  at  agricultural,  horticultural,  or  viticul- 
tural  or  domestic  labor  during  the  time  the  public  schools 
are  not  in  session,  or  during  other  than  school  hours.  Nor 
shall  anything  in  this  act  be  construed  to  prohibit  any  child 
between  the  ages  of  fifteen  and  eighteen  years,  who  is  by 
any  statute  or  statutes  of  the  State  of  California,  now  or 
hereafter  in  force,  permitted  to  be  employed  as  an  actor,  or 
actress,  or  performer,  in  a  theatre,  or  other  place  of  amuse- 
ment, previous  to  the  hour  of  ten  o'clock  p.  m.,  in  the  pre- 
sentation of  a  performance,  play  or  drama,  continuing  from 
an  earlier  hour  till  after  the  hour  of  ten  o'clock  p.  m.,  from 
performing  his  or  her  part  in  such  presentation  as  such 
employee  between  the  hours  of  ten  and  twelve  o'clock  p.  m. 

Act  of  the  Legislature,  approved  April  14,  1911. 

Section  91c.— EMPLOYMENT  AGENTS.— Employ- 
ment agents  must  procure  a  license  from  the  Commissioner 
of  the  Bureau  of  Labor  Statistics,  and  must  pay  therefor,  in 


BUSINESS   CONTRACTS   AND  LEGAL  OBLIGATIONS.  213 

cities  of  the  first  class,  first  and  one-half  class,  and  second 
class,  an  annual  fee  of  fifty  dollars ;  in  cities  of  the  third  and 
fourth  classes,  an  annual  fee  of  twenty-five  dollars;  and  in 
all  other  cities  and  towns,  an  annual  fee  of  six  dollars. 
Branch  employment  agencies  must  each  have  a  separate 
license.  The  license  must  be  posted  in  a  conspicuous  place 
on  the  premises.  The  license  is  good  from  the  date  of  issu- 
ing to  the  31st  day  of  March  following. 

Act  of  the  Legislature,  approved  March  6,   1909   (in 
effect  on  and  after  April  1,  1909). 

Section  91d.— HOURS  OF  LABOR  OF  FEMALES.— 

No  female  shall  be  employed  in  any  manufacturing,  mechani- 
cal or  mercantile  establishment,  laundry,  hotel,  or  restaurant, 
or  telegraph  or  telephone  establishment  or  office,  or  by  any 
express  or  transportation  company  in  this  state  more  than 
eight  hours  during  any  one  day  or  more  than  forty-eight 
hours  in  one  week.  The  hours  of  work  may  be  so  arranged 
as  to  permit  the  employment  of  females  at  any  time  so 
that  they  shall  not  work  more  than  eight  hours  during  the 
twenty-four  hours  of  one  day,  or  forty-eight  hours  during 
any  one  week;  provided,  however,  that  the  provisions  of  this 
act  in  relation  to  the  hours  of  employment  shall  not  apply 
to  nor  aflfect  the  harvesting,  curing,  canning  or  drying  of 
any  variety  of  perishable  fruit  or  vegetable. 

Every  employer  in  any  manufacturing,  mechanical  or  mer- 
cantile establishment,  laundry,  hotel,  or  restaurant,  or  other 
establishment  employing  any  female,  shall  provide  suitable 
seats  for  all  female  employees,  and  shall  permit  them  to  use 
such  seats  when  they  are  not  engaged  in  the  active  duties 
of  their  employment. 

Any  employer  who  shall  require  any  female  to  work  in 
any  of  the  places  mentioned  more  than  the  number  of  hours 
provided  for  in  this  act  during  any  day  of  twenty-four  hours, 
or  who  shall  fail,  neglect,  or  refuse  to  so  arrange  the  work 
of  females  in  his  employ  so  that  they  shall  not  work  more 
than  the  number  of  hours  provided  for  in  this  act  during 
any   day  of  twenty-four   hours,   or   who   shall    fail,    neglect, 


214  BUSINESS   LAWS  FOR  BUSINESS   MEN. 

or  refuse  to  provide  suitable  seats  as  provided  in  section 
two  of  this  act,  or  who  shall  permit  or  suffer  any  overseer, 
superintendent,  foreman,  or  other  agent  of  any  such  em- 
ployer to  violate  any  of  the  provisions  of  this  act,  shall  be 
gfuilty  of  a  misdemeanor,  and  upon  conviction  thereof  shall 
be  fined  for  each  offense  not  less  than  $50  nor  more  than 
$200,  or  imprisoned  in  the  county  jail  not  less  than  five  nor 
more  than  thirty  days,  or  both  fined  and  imprisoned. 

Act  of  the  Legislature,  approved  March  22,  1911. 

Section  91e.— PAYMENT  OF  WA  GES.— Whenever  an 
employer  discharges  an  employee,  the  wages  earned  and  un- 
paid at  the  time  of  such  discharge  shall  become  due  and 
payable  immediately.  When  any  such  employee  not  having 
a  contract  for  a  definite  period  quits  or  resigns  his  employ- 
ment the  wages  earned  and  unpaid  at  the  time  of  such  quit- 
ting or  resignation  shall  become  due  and  payable  five  days 
thereafter. 

All  wages  other  than  those  above  mentioned  earned  by 
any  person  during  any  one  month  shall  become  due  and 
payable  at  least  once  in  each  month,  and  no  person,  firm 
or  corporation  for  whom  such  labor  has  been  performed 
shall  withhold  from  any  such  employee  any  wages  so  earned 
or  unpaid  for  a  longer  period  than  fifteen  days  after  such 
wages  become  due  and  payable;  provided,  however,  that 
nothing  herein  shall  in  any  way  limit  or  interfere  with  the 
right  of  any  such  employee  to  accept  from  any  such  person, 
firm  or  corporation  wages  earned  and  unpaid  for  a  shorter 
period  than  one  month. 

Any  person,  firm  or  corporation  who  shall  violate  any  of 
the  provisions  of  this  act  shall  be  guilty  of  a  misdemeanor, 
and  upon  conviction  thereof  shall  be  punished  by  a  fine  not 
to  exceed  five  hundred  dollars. 

None  of  the  provisions  of  this  act  shall  apply  to  any 
county,  city  and  county,  incorporated  city  or  town,  or  other 
municipal  corporation. 

Act  of  the  Legislature,  approved  May  1,  1911. 


BUSINESS   CONTRACTS   AND  LEGAL  OBLIGATIONS.  215 

No  person,  firm  or  corporation  engaged  in  any  business  or 
enterprise  within  this  state  shall  issue,  in  payment  of  or  as 
an  evidence  of  indebtedness  for  wages  due  an  employee,  any 
order,  check,  memorandum  or  other  acknowledgement  of 
indebtedness,  unless  the  same  is  negotiable,  and  is  payable 
upon  demand  without  discount  in  cash  at  some  bank  or  other 
estabhshed  place  of  business  in  the  state;  provided,  however, 
that  the  provisions  of  this  act  shall  not  apply  to  counties, 
cities  and  counties,  municipal  corporations,  quasi  municipal 
corporations,  or  school  districts  organized  and  existing  under 
the  laws  of  this  state.  Any  person,  firm,  or  corporation  who 
shall  violate  any  of  the  provisions  of  this  act  shall  be  guilty 
of  a  misdemeanor,  and  upon  conviction  thereof,  shall  be 
punished  by  a  fine  not  to  exceed  five  hundred  dollars,  or  by 
imprisonment  in  the  county  jail  for  not  more  than  six 
months,  or  by  both  such  fine  and  imprisonment. 

Act  of  the  Legislature,  approved  March  1,  1911. 

Section  91f.— RAILROAD  EMPLOYEES.— It  shall 
hereafter  be  unlawful  for  any  corporation  or  receiver  oper- 
ating any  line  of  railroad  in  whole  or  in  part  in  this  state, 
or  any  officer,  agent  or  representative  of  such  corporation 
to  require  or  knowingly  permit  any  conductor,  engineer,  fire- 
man, brakeman,  train  dispatcher  or  telegraph  operator  to  be 
or  remain  on  duty  for  a  longer  period  than  sixteen  consecu- 
tive hours,  and  whenever  any  such  employee  shall  have  been 
continuously  on  duty  for  sixteen  hours  he  shall  be  relieved 
and  not  required  or  permitted  again  to  go  on  duty  until  he 
has  had  at  least  eight  consecutive  hours  off  duty. 

It  shall  hereafter  be  unlawful  for  any  corporation  or 
receiver  operating  any  line  of  railroad  in  whole  or  in  part 
in  this  state,  or  any  officer,  agent,  or  representative  of  such 
company  or  receiver  to  require  or  knowingly  permit  any 
conductor,  engineer,  fireman,  brakeman,  train  dispatcher  or 
telegraph  operator,  who  has  been  on  duty  for  sixteen  con- 
secutive hours  and  who  has  gone  off  duty,  to  again  go  on 


216  BUSINESS  LAWS  FOR  BUSINESS   MEN. 

duty  or  perform  any  work  for  such  receiver  or  corporation 
until  he  has  had  at  least  eight  hours  off  duty. 

Any  corporation  or  receiver  operating  a  line  of  railroad 
in  whole  or  in  part  wfthin  this  state,  who  shall  violate  any 
of  the  provisions  of  this  act  shall  be  liable  to  the  State  of 
California  in  a  penalty  of  not  less  than  two  hundred  dollars 
nor  more  than  one  thousand  dollars  for  each  offense,  and 
such  penalties  shall  be  recovered  and  suit  therefor  shall  be 
brought  in  the  name  of  the  State  of  California  in  any 
court  having  jurisdiction  of  the  amount  in  any  county  into 
or  through  which  said  railroad  may  pass.  Such  suit  or 
suits  may  be  brought  either  by  the  attorney  general  of  the 
state  or  under  his  direction  by  the  district  attorney  of  any 
county  or  city  and  county  in  the  State  of  California  into  or 
through  which  said  railroad  may  pass. 

Any  officer,  agent  or  representative  of  any  corporation  or 
receiver  operating  any  line  of  railroad  in  whole  or  in  part 
within  this  state,  who  shall  violate  any  of  the  provisions  of 
this  act  shall  be  deemed  guilty  of  a  misdemeanor,  and  upon 
conviction  therefor  shall  be  punished  by  a  fine  of  not  less 
than  one  hundred  dollars  nor  more  than  five  hundred  dollars 
for  each  offense,  or  by  confinement  in  the  county  jail  for 
not  less  than  ten  nor  more  than  sixty  days,  or  by  both  fine 
and  imprisonment,  and  such  person  so  offending  may  be 
prosecuted  under  this  section,  either  in  the  county  where  such 
person  may  be  at  the  time  of  commission  of  the  offense,  or 
in  any  county  where  such  employee  has  been  permitted  or 
required  to  work  in  violation  of  this  act. 

Provided,  that  the  provisions  of  this  act  shall  not  apply  in 
any  case  of  casualty  or  unavoidable  accident  or  the  act  of 
God;  nor  where  the  delay  was  the  result  of  a  cause  not 
known  to  the  carrier  or  its  officer  or  agent  in  charge  of  such 
employee  at  the  time  said  employee  left  a  terminal,  and 
which  could  not  have  been  forseen;  provided,  further,  that 
the  provisions  of  this  act  shall  not  apply  to  the  crews  of 
wrecking  or  relief  trains. 

Act  of  the  Legislature,  approved  April  21,  1911. 


BUSINESS   CONTRACTS   AND   LEGAL  OBLIGATIONS.  217 

Master  and  Servant. 

Section  92.— WHO  IS  A  SERVANT.— There  is  a  kind 
of  employment  which  is  distinguished  under  the  head  of 
"Master  and  Servant,"  in  the  law  of  California,  as  in  the 
law  of  other-  countries.  The  term  applies  particularly  to 
one  who  is  employed  to  render  personal  service  to  his  em- 
ployer, otherwise  than  in  the  pursuit  of  an  independent  call- 
ing, and  who  in  such  service  remains  entirely  under  the 
control  and  direction  of  the  latter,  who  is  called  his  master. 
The  word  "servant"  is  not  confined  by  our  law  to  persons 
who  are  in  domestic  service,  but  it  includes  all  who  are 
entirely  under  the  direction  and  control  of  the  employer, 
with  no  independent  choice  or  business  of  their  own,  in  ren- 
dering of  personal  services  of  any  kind. 

Section  93— TERM  OF  HIRING.— A  servant  is  pre- 
sumed to  have  been  hired  for  such  length  of  time  as  the 
parties  adopt  for  the  estimation  of  wages.  A  hiring  at  a 
yearly  rate  is  presumed  to  be  for  one  year;  a  hiring  at  a 
daily  rate,  for  one  day;  a  hiring  by  piece-work,  for  no  speci- 
fied term.  Custom  in  a  particular  employment  or  a  particular 
place  may  change  the  case,  but  if  there  is  no  agreement  or 
custom  as  to  the  term  of  service,  the  time  of  payment,  or 
rate  or  value  of  wages,  a  servant  is  presumed  to  be  hired 
by  the  month,  at  a  monthly  rate  of  reasonable  wages,  to  be 
paid  when  the  services  are  performed.  Where  after  the 
expiration  of  an  agreement  respecting  wages  and  term  of 
service,  the  parties  continue  the  relation  of  master  and  ser- 
vant, they  are  presumed  to  have  renewed  the  agreement  for 
the  same  wages  and  term.  The  Bank  of  Suisun  employed  a 
bookkeeper,  for  the  year  1898,  at  an  annual  salary  of  $1,200, 
payable  monthly,  and  he  continued  in  that  employment  dur- 
ing the  first  two  months  of  1899.  He  was  then  discharged, 
and  he  sued  the  bank  for  $1,000,  the  balance  of  his  salary 
for  the  year.  There  was  a  judgment  of  the  Superior  Court 
for  the  amount  against  the  bank,  and  the  Supreme  Court 
decided  the  case  against  the  bank,  saying:  "The  presumption 


•218  BUSINESS   LAWS   FOR   BUSINESS   MEN. 

arises  that  the  employment  was  renewed  for  the  same  wages 
and  term  as  for  the  previous  term."  (Decided  by  the  Su- 
preme Court  of  California  in  the  case  of  Gabriel  vs.  Bank 
of  Suisun,  which  decision  is  printed  in  Volume  28,  California 
Decisions,  page  720.) 

Civil  Code,  Section  94. 

Section  94.  — WHEN  SERVANT  MAY  BE  DIS- 
CHARGED.— The  law  is  that  a  master  may  discharge  any 
servant,  other  than  an  apprentice,  whether  engaged  for  a 
fixed  term  or  not,  if  he  is  guilty  of  misconduct  in  the  course 
of  his  service,  or  of  gross  immorality,  though  not  connected 
with  his  service;  or  if,  being  employed  about  the  person  of 
the  master  or  in  a  confidential  position,  the  master  discovers 
that  the  servant  has  been  guilty  of  misconduct  before  or 
after  the  commencement  of  his  services,  of  such  a  nature 
that  the  master,  had  he  known  or  contemplated  the  facts, 
would  not  have  employed  him. 
Civil  Code,  Section  2015. 

Principal  and  Agent. 

Section  95.— DEFINITION  OF  AGENCY.— An  agent 
is  one  who  represents  another,  called  the  principal,  in  deal- 
ings with  third  persons.  And  as  a  great  part  of  the  business 
of  all  communities  is  transacted  through  the  medium  of 
agents,  it  is  proposed  in  following  sections  to  give  the  law 
of  California  applying  to  the  relative  rights  and  obligations 
of  Principal  and  Agent  in  this  state. 

Section  96.— KINDS  OF  AGENCY.— There  are  two 
kinds  of  agents,  special  agents  and  general  agents.  An 
agent  for  a  particular  transaction  is  called  a  special  agent, 
because  he  is  appointed  with  special  power  to  do  that  par- 
ticular thing.  A  general  agent,  on  the  other  hand,  has  a 
general  authority  conferred  upon   him   to  transact  business 


BUSINESS   CONTRACTS   AND  LEGAL  OBLIGATIONS.  219 

of  his  principal,  which  includes  more  than  one  particular  act. 
An  agency,  when  it  exists  at  all,  is  either  actual  or  ostensible. 
An  agency  is  actual  when  the  agent  is  really  employed  by 
the  principal.  An  agency  is  ostensible  when  the  principal 
intentionally  or  by  want  of  ordinary  care  causes  a  third 
person  to  believe  another,  who  is  not  really  employed  by 
him,  to  be  his  agent. 

Civil  Code,  Sections  2230,  2297,  2298,  2299. 

Section  97.— AUTHORITY  OF  AGENT.— An  agent 
has  authority  to  do  whatever  his  principal  might  do  in  the 
business  for  which  he  is  employed.  He  has  authority  to  do 
everything  necessary  or  proper  and  usual,  in  the  ordinary 
course  of  business,  for  effecting  the  purpose  of  his  agency. 
But  he  has  only  such  authority  as  the  principal  confers 
upon  him,  and  he  will  be  limited  in  his  authority  to  the 
particular  business  for  which  he  is  employed.  Whatever 
he  does  within  the  scope  of  his  employment,  necessary  or 
proper  and  usual,  in  the  ordinary  course  of  business,  to 
effect  the  purpose  of  his  agency,  will  be  binding  upon  his 
principal.  His  declarations  as  to  the  subject  of  his  agency, 
within  the  scope  of  his  employment,  will  bind  his  principal; 
as  where  an  agent  employed  to  sell  goods  makes  at  the  time 
a  representation  as  to  their  quantity  or  quality. 
Civil  Code,  Sections  2315,  2319,  2320. 

Section  98.— WHAT   INCLUDED   IN   AUTHORITY 

TO    SELL    PERSONAL    PROPERTY.— An  authority  to 

sell  personal  property  includes  authority  to  warrant  the  title 

of  the  principal,  and  the  quality  and  quantity  of  the  property. 

Civil  Code,  Section  2323. 

Section  99.— WHAT  INCLUDED  IN  AUTHORITY 
TO  SELL  REAL  ESTATE.— An  agent's  authority  to  sell 
and  convey  real  property  includes  authority  to  give  the  usual 
covenants  of  warranty. 

Civil  Code,  Section  2324. 


220  BUSINESS   LAWS   FOR  BUSINESS   MEN, 

Section  100.— AUTHORITY  OF  AGENT  TO  RE- 
CEIVE PRICE  OF  PROPERTY.— A  general  agent  to 
sell,  who  is  intrusted  by  the  principal  with  the  possession 
of  the  thing  sold,  has  authority  to  receive  the  price.  A 
special  agent  to  sell  has  authority  to  receive  the  price  on 
delivery  of  the  thing  sold,  but  not  afterward.  But  neither 
a  general  nor  a  special  agent  to  sell  has  any  authority  to 
receive  anything  but  money  in  payment  of  the  price  of  the 
thing  sold.  Therefore,  if  the  agent  sells  property  of  his 
principal,  and  accepts  part  cash  and  part  in  something  else, 
the  principal  will  not  be  bound. 

Civil  Code,  Sections  2325,  2326. 

Section  101.— AGENT'S  POWER  TO  DISOBEY  IN- 
STRUCTIONS.— An  agent  has  power  to  disobey  his  in- 
structions in  dealing  with  the  subject  of  the  agency,  in  cases 
where  it  is  clearly  for  the  interest  of  his  principal  that  he 
should  do  so,  when  there  is  not  time  to  communicate  with 
the  principal.  The  general  rule  is,  that  an  agent  must  follow 
and  adhere  to  the  instructions  and  authority  he  has  received 
from  his  principal,  but  under  some  circumstances  he  may 
depart  from  his  instructions,  and  the  law  will  justify  him, 
and  his  principal  will  be  bound.  So  where,  from  the  neces- 
sities of  the  case,  without  the  agent's  fault  or  neglect,  some 
sudden  and  unexpected  emergency  or  extraordinary  or  super- 
vening necessity  arises,  or  some  unforeseen  event  happens, 
which  will  not  admit  of  delay  for  consultation  or  communica- 
tion with  the  principal,  if  the  agent,  exercising  prudence  and 
sound  discretion,  in  good  faith  adopts  the  course  which  seems 
best  to  him,  under  all  the  circumstances  as  they  exist,  he  will 
be  justified,  and  his  acts  will  bind  his  principal,  though  subse- 
quent events  may  demonstrate  that  some  other  course  would 
have  been  the  better. 

Section  102.— AGENT  CANNOT  HAVE  AUTHOR- 
ITY TO  DEFRAUD  PRINCIPAL.— An  agent  can  never 
have  authority  to  do  any  act  which  is  a  fraud  upon  the 
principal,   and   is   known   or   suspected   by   the  person   with 


BUSINESS   CONTRACTS   AND   LEGAL  OBLIGATIONS.  221 

whom  he  deals  to  be  fraudulent.  The  agent  must  act  in 
good  faith  with  his  principal,  and  if  he  enters  into  collusion 
with  another  to  obtain  an  advantage  over  his  principal,  or 
to  obtain  the  property  of  the  principal  for  less  than  it  is 
worth,  the  courts  of  this  state  will  be  ready  to  give  the 
principal  relief  against  both,  by  restoring  to  him  the  property 
of  which  he  has  been  defrauded,  or,  if  this  cannot  be  done, 
by  giving  him  damages  as  compensation.  Many  illustrations 
might  be  given.  Where  an  agent  invests  money  belonging 
to  his  principal  for  the  purchase  of  an  interest  in  a  syndicate, 
of  which  the  agent  is  a  member,  and  in  which  he  holds  an 
interest,  and  which  is  indebted  in  a  large  amount,  and,  to 
induce  the  investment,  leads  the  principal  to  believe  that 
he  is  not  a  member  of  the  syndicate,  or  interested  therein, 
and  represents  that  the  principal  will  not  have  any  calls  to 
pay  upon  becoming  a  member  thereof,  the  law  imputes  fraud 
on  the  part  of  the  agent,  and  the  principal  may  avoid  the 
transaction  and  recover  from  the  agent  the  amount  so  in- 
vested. So,  it  is  the  law  of  this  state,  that  an  agent  must  not 
unite  his  personal  and  his  representative  characters  in  the 
same  transaction;  for  the  law  will  not  permit  him  to  be  ex- 
posed to  the  temptation,  or  brought  into  a  situation  where 
his  own  personal  interests  will  conflict  with  the  interests 
of  his  principal.  In  dealing  without  the  intervention  of  his 
principal,  if  an  agent  for  the  purpose  of  selling  property 
of  the  principal  purchases  it  himself,  or  an  agent  for  the 
purpose  of  buying  property  for  the  principal  buys  it  from 
himself,  either  directly  or  through  the  instrumentality  of  a 
third  person,  the  sale  or  purchase  is  voidable,  and  will  always 
be  set  aside  at  the  option  of  the  principal. 
Civil  Code,  Section  2306. 

Section  103.— AGENT'S    ACTUAL    AUTHORITY.— 

The  acutal  authority  of  an  agent  is  such  as  a  principal  in- 
tentionally confers  upon  him,  or  intentionally  or  by  want 
of  ordinary  care  allows  the  agent  to  believe  himself  to  be 
possessed  of.  An  agent's  authority  is  actual  when  there  is 
a   contract    of    employment    existing   between    him    and    the 


222  BUSINESS    LAWS   FOR   BUSINESS    MEN. 

principal.  The  principal  may  have  given  the  agent  instruc- 
tions to  act  in  a  certain  way;  or  a  course  of  dealings  or 
other  circumstances  between  them  may  have  been  such  as 
to  lead  the  agent  to  believe  that  his  authority  from  the 
principal  extended  to  the  things  done;  or  the  principal  may 
have  stood  by  and  without  objection  witnessed  the  conduct 
of  the  agent,  and  thus  made  the  agent  believe  that  his  author- 
ity from  the  principal  was  sufficient  to  warrant  the  acts 
done  by  him;  and  in  all  such  cases  the  agent  will  be  deemed 
to  have  had  authority  actually  given  him  by  the  principal. 
Civil  Code,  Sections  2299,  2316, 

Section  104.— AGENT'S  OSTENSIBLE  AUTHOR- 
ITY.— The  ostensible  authority  of  an  agent  is  such  as  the 
principal,  intentionally  or  by  want  of  ordinary  care,  causes 
or  allows  a  third  person  to  believe  the  agent  possesses.  There 
are  two  essential  features  of  an  ostensible  authority;  the 
third  party  must  believe  that  the  agent  has  authority;  and 
such  belief  must  be  generated  in  his  mind  by  some  act  or 
neglect  of  the  person  whom  he  seeks  to  hold  liable  as  prin- 
cipal. A  belief  founded  on  the  agent's  statement  is  not 
sufficient;  for  a  party  has  no  right  to  take  the  agent's  word 
for  the  existence  of  his  authority.  But  where  the  agent 
shows  letters  or  telegrams,  which  are  worded  so  as  to  lead 
a  reasonable  man  to  believe  that  he  has  received  authority 
from  the  principal  to  act  for  him  in  a  certain  way;  or  where 
the  principal  has  been  in  the  habit  of  receiving  money,  for 
shipments  of  products  or  goods,  through  the  same  agent, 
in  similar  transactions;  or  where  the  principal  has  been  in 
the  habit  of  honoring  drafts  signed  by  the  same  person  as 
his  "agent";  or  where  similar  transactions  have  occurred  in 
which  the  acts  of  the  alleged  agent  were  authorized  or 
ratified;  in  all  such  cases,  if  the  third  party  knows  of  the 
former  transactions,  and  has  received  no  notice  that  the 
principal  will  not  be  responsible,  he  will  be  justified  in  be- 
lieving that  the  agent  has  authority,  and  the  principal  will 
be  bound,  even  though  the  person  for  whom  the  agent 
assumes  to  act  may  not  have  intended  to  hold  him  out  as 


BUSINESS    CONTRACTS    AND   LEGAL   OBLIGATIONS.  223 

such  agent.  On  the  other  hand,  a  principal  is  bound  by  acts 
of  his  agent,  under  merely  ostensible  authority,  to  those 
persons  only  who  have  in  good  faith,  and  without  ordinary 
negligence,  incurred  a  liability  or  parted  with  value  upon 
the  faith  of  it.  Therefore,  if  there  is  anything  in  the  cir- 
cumstances of  a  transaction,  or  in  the  conduct  of  one  who 
represents  himself  as  agent,  which  ought  to  excite  the  sus- 
picions or  stimulate  the  inquiry  of  a  reasonable  man,  and 
the  means  of  inquiry  are  open  to  him,  and  he  neglects  to 
make  such  inquiry  or  investigation  as  a  reasonable  man  under 
the  circumstances  should  be  expected  to  make,  the  principal 
will  not  be  liable  for  the  acts  of  one  who  has  no  actual 
authority  as  agent  to  act  for  him.  The  statements  of  the 
agent  himself  do  not  prove  the  agency.  And  one  who  deals 
with  another,  upon  his  mere  statement  that  he  is  the  agent 
of  a  third  person,  takes  upon  himself  the  risk  of  being  able 
to  show,  if  a  dispute  occurs,  that  such  agency  really  existed. 
He  cannot  hold  the  third  person  as  a  principal,  under  such 
circumstances,  unless  he  can  produce  proof  of  the  agency 
aside  from  the  agent's  own  statements.  (Decided  by  the 
District  Court  of  Appeals,  in  the  case  of  Apler  vs.  Tor- 
mey,  which  decision  is  printed  in  Volume  85  of  the  Pacific 
Reporter,  page  661.) 

Civil  Code,  Sections  2300,  2334. 

Section  105.— RATIFICATION  OF  AGENT'S  ACTS. 

— A  person  may  ratify  the  acts  of  another,  done  for  him 
as  his  pretended  agent,  and  so  make  himself  liable,  though 
he  had  given  the  agent  no  authority  before  the  act  was 
done.  This  ratification  may  be  in  many  ways.  It  may  be 
directly,  by  notice  to  the  party  with  whom  the  agent  has 
dealt;  or  it  may  be  by  receiving  and  retaining  the  fruits  of 
the  agent's  acts;  or  it  may  be  by  silence  and  failure  to  object 
after  being  fully  informed  of  the  facts,  for  if  one  is  fully 
informed  of  a  contract  made  by  another  in  his  name,  and 
by  virtue  of  pretended  authority  from  him,  and  remains  silent 
and    does    not    repudiate    the    contract    within    a    reasonable 


224  BUSINESS    LAWS   FOR    BUSINESS    MEN. 

time,  he  is  presumed  to. give  his  consent  and  acquiescence 
to  the  contract.  But  a  ratification  can  be  made  only  in 
the  manner  that  would  have  been  necessary  to  confer  an 
original  authority  for  the  act  ratified;  so  where  the  contract 
made  by  the  agent  was  one  which  the  law  requires  to  be 
in  writing,  the  ratification  of  the  agent's  act  must  also  be 
in  writing. 

Civil  Code,  Section  2310. 

Section   106.— HOW    AGENCY    IS    CREATED.— An 

agency  may  be  created  by  authority  given  before  the  act 
done,  and  its  creation  will  be  presumed  from  a  subsequent 
ratification.  The  authority  conferred  upon  an  agent  may 
be  verbal,  and  it  will  be  sufficient  for  any  purpose,  except 
that  an  authority  to  enter  into  a  contract  required  by  law 
to  be  in  writing  can  only  be  given  by  an  instrument  in 
writing. 

Civil  Code,  Sections  2307,  2309. 

Section  107.— MUTUAL  OBLIGATIONS  OF  PRIN- 
CIPAL AND  THIRD  PERSONS.  — An  agent  repre- 
sents his  principal  for  all  purposes  within  the  scope  of  his 
actual  or  ostensible  authority,  and  all  the  rights  and  liabilities 
which  would  accrue  to  the  agent  from  transactions  within 
such  limit,  if  they  had  been  entered  into  on  his  own  account, 
accrue  to  the  principal.  And  the  principal  is  liable,  even 
if  the  agent  exceeds  his  instructions,  where  the  party  with 
whom  he  deals  is  not  aware  of  it.  In  either  case,  the  ques- 
tion of  the  authority  of  the  agent  must  depend,  so  far  as 
it  involves  the  rights  of  innocent  third  persons  who  have 
relied  thereon,  upon  the  character  bestowed,  and  not  upon 
the  instruction  given.  Or,  in  other  words,  the  principal  is 
bound  to  third  persons  who  have  relied  thereon  in  good 
faith,  and  in  ignorance  of  any  limitations  or  restrictions,  by 
the  apparent  authority  he  has  given  to  the  agent,  and  not 
by  the  actual  or  express  authority,  where  that  diflFers  from 
the  apparent;  and  this,  too,  whether  the  agency  be  a  general 
or  special  one. 


BUSINESS   CONTRACTS   AND   LEGAL   OBLIGATIONS.  225 

As  against  a  principal,  both  principal  and  agent  are  deemed 
to  have  notice  of  whatever  either  has  notice  of,  and  ought 
in  good  faith  and  the  exercise  of  ordinary  care  and  diligence 
to  communicate  to  the  other.  Notice  to  the  agent  of  a 
corporation  is  notice  to  the  corporation  itself. 

An  instrument  within  the  scope  of  his  authority,  by  which 
an  agent  intends  to  bind  his  principal,  does  bind  him,  if  such 
intent  is  plainly  inferable  from  the  instrument  itself. 

A  principal  is  responsible  to  third  persons  for  the  negli- 
gence of  his  agent  in  the  transaction  of  the  business  of  the 
agency,  including  wrongful  acts  committed  by  such  agent 
as  a  part  of  the  transaction  of  such  business,  and  for  the 
agent's  wilful  omission  to  fulfill  the  obligations  of  the 
principal. 

Sometimes  a  person  deals  with  a  man  without  knowing 
or  having  reason  to  believe  that  he  is  not  acting  for  him- 
self, but  is  really  only  the  agent  for  another.  In  such  cases, 
where  the  fact  is  afterwards  disclosed  that  another  is  the 
principal,  and  the  principal  makes  a  claim  arising  out  of  the 
contract,  the  party  who  dealt  with  the  agent  may  set  off 
against  the  principal  all  claims  which  he  might  have  set 
off  against  the  agent  before  receiving  notice  that  he  was 
an  agent. 

An  undisclosed  principal  will  be  liable  when  he  becomes 
known,  upon  a  contract  made  by  the  agent  in  his  own  name. 
Where  a  party  sells  goods  to  one  who  afterwards  turns  out 
to  have  been  the  agent  of  another,  and  the  principal  receives 
the  benefit  of  the  transactions,  the  principal  will  be  held  re- 
sponsible for  the  goods  furnished  the  agent.  But  the  statute  of 
this  state  provides,  that  if  exclusive  credit  is  given  to  an 
agent  by  the  person  dealing  with  him,  his  principal  is  exon- 
erated by  payment  made  to  the  agent  in  good  faith,  before 
receiving  notice  of  the  creditor's  election  to  hold  the  prin- 
cipal responsible. 

Civil   Code,    Sections    2330,    2331,    2332,    2333,    2334, 
2335,  2336,  2337,  2338. 


226  BUSINESS   LAWS   FOR   BUSINESS    MEN. 

Section  108.  — OBLIGATIONS  OF  AGENTS  TO 
THIRD  PERSONS.  — One  who  assumes  to  act  as  an 
agent  thereby  warrants  to  all  who  deal  with  him  in  that 
capacity,  that  he  has  the  authority  which  he  assumes.  And 
if  one  acts  as  an  agent,  without  authority,  the  party  injured 
may  sue  him  for  the  breach  of  the  warranty  and  recover  his 
losses. 

If,  with  the  agent's  consent,  credit  is  given  to  him  per- 
sonally in  a  transaction,  he  will  be  responsible  as  a  principal 
to  third  persons.  He  will  also  be  personally  responsible, 
whenever  he  enters  into  a  contract  in  the  name  of  his 
principal,  without  believing,  in  good  faith,  that  he  has 
authority  to  do  so.  He  will  also  be  responsible  when  his 
acts  are  wrongful  in  their  nature.  If  an  agent  receives 
anything  for  the  benefit  of  his  principal,  to  the  possession 
of  which  another  person  is  entitled,  he  must,  on  demand, 
surrender  it  to  such  person,  or  so  much  of  it  as  he  has 
under  his  control  at  the  time  of  the  demand,  on  being 
indemnified  for  any  advances  which  he  has  made  to  his 
principal,  in  good  faith,  on  account  of  the  same;  and  he  is 
responsible  therefor,  if,  after  notice  from  the  owner,  he  de- 
livers it  to  his  principal. 

Civil  Code,  Sections  2342,  2343,  2344. 

Section  109.  — AGENT'S  DELEGATION  OF  HIS 
POWER. — An  agent,  unless  specially  forbidden  by  his 
principal  to  do  so,  can  delegate  his  power  to  another  person 
in  any  of  the  following  cases,  and  in  no  others:  (1)  When 
the  act  to  be  done  is  purely  mechanical;  (2)  when  it  is 
such  as  the  agent  cannot  himself,  and  the  sub-agent  can, 
lawfully  perform;  (3)  when  it  is  the  usage  of  the  place  to 
delegate  such  powers;  or,  (4)  when  such  delegation  is  spe- 
cially authorized  by  the  principal. 

A  sub-agent  represents  the  principal  in  like  manner  with 
the  original  agent;  and  the  original  agent  is  not  responsible 
to  third  persons  for  the  acts  of  the  sub-agent.  Of  course, 
if    the    agent    should    without    lawful    authority    appoint    a 


BUSINESS   CONTRACTS   AND   LEGAL   OBLIGATIONS.  227 

sub-agent,  he  would  be  responsible  to  third  persons  for  such 
sub-agent's  acts. 

Civil  Code,  Sections  2349,  2351. 

Section    110.— TERMINATION     OF     AGENCY.— An 

agency  is  terminated,  as  to  every  person  having  notice,  by 
the   expiration   of   its   term.      It   is   also    terminated   by   the 
extinction  of  its  subject,  as  where  an  agent  to  sell  certain 
goods  disposes  of  all  of  them,  or  where  the  subject  of  the 
agency   is   lost   or   destroyed   so   that   nothing   more   can   be 
done  about  it.     It  is   also  terminated  by   the   death  of  the 
agent.      It    is    also   terminated   by    the    agent's    renunciation 
of  the  agency.     It  is  also  terminated  by   the  incapacity  of 
the  agent  to  act  as  such,  as  where  the  agent  becomes  insane, 
or    from   some    other   cause    it   becomes    impossible    for    the 
agent   to   perform   his    duties.      It   is   also   terminated    when 
revoked  by  the  principal,  or  by  the  principal's  death,  or  by 
the  principal's   incapacity  to  act ;  but  there  is   an  exception 
to  the  rule  that  an  agency  is  thus  terminated  because  of  the 
revocation  by  death  or  incapacity  of  the  principal,  in  cases 
where  the  agent  has  acquired  from  his  principal  an  interest 
in  the  thing  which  is  the  subject  of  the  agency;   for  such 
an  interest  may  survive  all  of  these  events,  and  be  binding 
upon  the  principal's  heirs,  administrators,  and  executors,  so 
as  to  continue  the  agency  in  existence.     The  interest  which 
will  keep  alive  the  agency,  under  such  conditions,  must  not 
be  a  mere  lien  for  compensation  or  commissions,  but  must 
be  an  interest  in  the  property  or  other  subject  of  the  agency. 
Civil  Code,  Sections  2355,  2356. 


Wholesaler's  Agents. 

Section  111.— TRAVELING  AGENTS.— In  modern 
business  enterprise  the  employment  of  traveling  agents  by 
wholesale  houses  is  adopted  as  one  of  the  necessary  means 
of  obtaining  or  keeping  trade.  The  same  ordinary  rules 
which  apply  to  the  agents  of  other  men  apply  to  the  agents 


228  BUSINESS   LAWS   FOR   BUSINESS   MEN. 

employed  by  wholesalers,  except  when  varied  by  custom  or 
usage  in  a  particular  business  or  locality. 

Section  112.— SALE  BY  SAMPLE.— The  agent  of  a 
wholesaler  who  carries  samples  with  him,  when  he  exhibits 
the  samples  to  the  customer,  and  solicits  his  order  for  the 
goods,  warrants  that  the  bulk  will  be  equal  to  that  of  the 
sample.  This  is  absolutely  necessary  as  a  rule  of  law,  as 
well  as  the  custom  among  merchants. 

Section  113.— PURCHASER'S  RIGHT  TO  RETURN 

GOODS. — The  purchaser  of  goods  sold  by  sample  has  a 
right  to  make  reasonable  inspection  of  the  goods,  and  if 
the  bulk  is  not  equal  to  the  sample,  he  may  repudiate  the 
sale  and  return  the  goods.  But  his  inspection  and  objection 
must  be  reasonable.  If  he  keeps  the  goods,  unpacked  and 
unopened,  for  a  long  time  after  he  receives  them,  his  inspec- 
tion will  not  be  reasonable;  and  if,  after  inspection,  he 
uses  a  part  of  the  goods  himself,  or  disposes  of  a  part  to 
others,  or  delays  in  sending  them  back  to  the  wholesaler, 
his  right  to  avoid  liability  for  the  purchase  price  will  be 
lost.  He  must  act  promptly  in  inspecting  the  goods,  and 
must  with  equal  promptness  return  them,  if  he  does  not 
wish  to  be  held  for  them. 

Section  114.  — COLLECTIONS  BY  TRAVELING 
AGENT. — A  commercial  traveler  who  makes  collections  for 
his  house  cannot,  without  special  authority  from  the  house, 
accept  anything  but  money  from  the  debtor. 

Section  115.— GIVING  CREDIT.— A  commercial  trav- 
eler may  sell  goods  on  credit,  where  that  is  the  usage  or 
custom  of  the  place  or  business;  and  when  a  customer  buys 
on  credit  from  a  wholesaler's  agent,  in  accordance  with  a 
usage  between  them  of  long  standing,  and  without  notice 
of  any  change  in  the  wholesaler's  terms,  the  latter  will 
be  bound,  even  if  he  has  instructed  his  agent  to  give  no 
more  credit. 


BUSINESS   CONTRACTS   AND  LEGAL  OBLIGATIONS.  229 

Section  116— DECLARATIONS  OF  WHOLESAL- 
ER'S AGENT. — When  a  commercial  traveler  approaches 
a  customer,  with  or  without  samples  of  his  principal's  goods, 
he  stands  in  the  place  of  the  principal  and  acts  for  and 
in  his  behalf.  As  the  principal's  own  declarations  would 
bind  him,  if  he  were  present,  so  the  agent's  declarations 
within  the  scope  of  his  authority,  made  at  the  time  of  the 
sale,  and  relating  to  the  goods,  will  be  binding  upon  the 
principal.  So,  whatever  the  agent  of  a  wholesaler  who  is 
sent  out  to  sell  the  goods  of  his  principal  states,  as  to  the 
quantity,  or  quality,  or  condition,  or  price,  or  the  time  and 
manner  of  shipment,  or  any  other  fact  which  is  material  to 
or  an  inducement  for  the  sale,  it  will  bind  the  principal  as 
though  he  had  made  the  representations  in  person. 

Section  117.—  NOTICE  TO  WHOLESALER'S 
AGENT. — Notice  of  a  fact  given  to  the  agent  is  notice  to 
the  wholesaler.  Therefore,  if  the  purchaser  gives  notice 
to  the  agent  of  any  fact  with  respect  to  the  contract  or  the 
goods,  it  is  notice  to  the  wholesaler  himself,  and  he  will  be 
bound  by  it. 

Section    118.— FAILURE   TO    SHIP   GOODS.— When 

a  commercial  agent  solicits  and  receives  an  order  for  goods, 
and  neglects  to  send  the  order  to  his  house,  or  the  principal 
refuses  to  honor  the  order,  after  receiving  it,  the  wholesaler 
will  be  liable  to  the  customer  for  all  damages  sustained  by 
him,  if  the  goods  were  ordered  in  good  faith. 

Section  119.  — NOTICE  BY  WHOLESALER  OF 
TERMINATION  OF  AGENCY.— A  wholesaler  must 
give  notice  to  his  customers  of  the  termination  of  an  agent's 
authority,  or  he  will  be  bound  by  the  agent's  contracts  with 
persons  from  whom  he  has  formerly  solicited  orders,  even 
if  made  after  the  agent's  authority  has  actually  ceased. 
Where  a  wholesaler  dismisses  an  agent  from  his  employ, 
and  revokes  his  authority  to  sell  or  buy,  he  must  give  notice 
to   third   parties    with   whom   the   agent   has   dealings;    and 


230  BUSINESS   LAWS   FOR   BUSINESS    MEN. 

if  he  does  not  give  notice  to  third  parties  of  his  revocation 
of  the  agent's  authority,  or  unless  he  does  what  he  can  to 
make  the  revocation  as  notorious  and  generally  known  to 
the  world  as  was  the  fact  of  the  agency,  he  will  be  bound 
by  the  further  dealings  of  the  agent  with  persons  who  have 
not  received  notice  of  the  agent's  dismissal.  As  to  the 
method  of  giving  notice  that  an  agent's  authority  has  been 
revoked,  or  as  to  the  character  of  notice  required,  the  law 
does  not  prescribe  any  particular  form  of  notice  or  method 
of  giving  it.  Much  will  depend,  in  this  matter,  upon  the 
prevailing  custom  or  usage.  Sometimes  the  notice  is  given 
by  publishing  in  a  newspaper,  but  more  often  by  circular 
letter  mailed  to  each  of  the  wholesaler's  customers.  The 
latter  method  is  to  be  preferred;  for  the  wholesaler's  books 
will  usually  show  the  names  and  addresses  of  all  persons 
with  whom  the  agent  has  had  dealings,  and  a  notice  by 
mail  may  more  surely  reach  the  person  intended  to  be  noti- 
fied of  the  revocation  of  an  agent's  authority.  But  whatever 
may  be  the  method  pursued,  it  must  not  be  forgotten  that 
actual  notice  of  an  agent's  dismissal  is  necessary  to  protect 
his  former  principal  from  being  bound  by  the  agent's  further 
dealing  with  persons  with  whom  he  formerly  dealt. 

Section  120.— WHOLESALER'S  REPUDIATION  OF 
AGENCY. — Circumstances  occur  where  the  wholesaler  will 
dispute  the  agency  altogether,  and  seek  to  repudiate  the 
acts  of  one  who  has  assumed  to  represent  him  in  a  trans- 
action. In  such  cases,  if  the  wholesaler  does  anything  him- 
self to  ratify  the  act  of  the  assumed  agent,  or  accepts  the 
result  of  his  services,  or  acknowledges  in  any  way  his 
capacity  as  agent  for  himself,  he  will  be  bound,  and  his 
effort  to  repudiate  the  transaction  will  be  of  no  avail.  A 
repudiation  of  the  act  of  one  who  assumes  to  act  as  agent, 
and  whose  agency  is  disputed,  must  be  made  promptly,  as 
soon  as  the  wholesaler  learns  of  the  pretended  agency,  and 
must  be  decisive  and  unequivocal.  There  was  a  case  in 
Colusa  County,  which  was  passed  upon  by  the  Supreme 
Court  of  California  in  1896,  which  illustrates  very  well  the 


BUSINESS   CONTRACTS   AND  LEGAL  OBLIGATIONS.  231 

conduct  which  will  bind  a  wholesaler,  and  what  will  not  be 
considered  a  repudiation  of  an  assumed  agent's  authority. 
A  man  named  Willis,  who  represented  himself  as  the  agent 
of  J.  K.  Armsby  Co.,  San  Francisco,  made  a  contract  with 
J.  H.  Pope,  of  Colusa  County,  for  the  purchase  of  a  lot  of 
green  fruit.  The  contract  was  in  writing  and  was  signed, 
"J.  K.  Armsby  Company.  By  Frank  W.  Willis,  Agent." 
Subsequently,  and  before  the  delivery  of  any  fruit  under 
the  contract.  Pope  wrote  to  the  J.  K.  Armsby  Co.  this  letter: 
"Colusa,  Cal.,  May  25,  1894.  J.  K.  Armsby  Co.,  San  Fran- 
cisco— Gentlemen :  I  have  sold  my  green  fruit  to  you,  and 
have  a  contract  signed  to  that  effect,  signed,  'J.  K.  Armsby 
Company,'  by  Frank  Willis,  as  agent.  Now,  what  I  want  to 
know,  is  F.  W.  Willis  your  agent  for  buying  green  fruit, 
and  is  the  contract  correct?  Your  immediate  answer  and 
oblige  Yours  truly,  J.  H.  Pope."  On  the  next  day  Pope 
received  from  the  general  manager  of  the  company  this 
letter:  "San  Francisco,  May  26,  1894.  John  H.  Pope,  Esq., 
Colusa,  Cal. — Dear  Sir:  We  have  yours  of  the  25th.  Mr. 
Willis  bought  some  apricots  on  our  advice,  but  we  are  not 
aware  he  bought  them  in  our  name.  We  will  handle  them, 
however,  and  think  there  is  no  question  on  the  money  part 
of  the  transaction.  The  writer  expects  to  visit  your  section 
within  the  next  week  or  two,  and  will  arrange  the  matter 
satisfactiDrily  with  you  then.  Yours  truly,  J.  K.  Armsby 
Co.  Freeman."  Afterwards  a  dispute  arose,  and  the  J.  K. 
Armsby  Company  denied  that  Willis  was  their  agent  for 
buying  the  fruit,  and  claimed  to  have  repudiated  his  agency. 
But  the  Supreme  Court  reviewed  the  facts,  and  said  that  the 
letter  from  the  company  was  not  frank,  and  did  not  answer 
the  question  put  by  Pope,  whether  Willis  was  the  company's 
agent  in  the  premises,  by  saying,  in  terms,  whether  he  was 
or  was  not  such  agent;  that  the  language  used  in  the  letter, 
and  the  assurances  conveyed  by  it,  authorized  but  one  in- 
ference, that  the  contract  was  all  right  and  the  company 
would  see  it  carried  out.  And  the  Supreme  Court  further 
said,  that  if  the  company  intended  to  repudiate  the  trans- 
action, it  was  its  duty  to  do  so  explicitly,  and  in  such  terms 


BUSINESS   LAWS   FOR   BUSINESS    MEN. 

as  to  leave  no  room  for  doubt;  and  that  Pope  had  a  right 
to  infer  from  the  language  of  the  letter  that  the  contract 
made  by  Willis,  instead  of  being  repudiated,  was  in  fact 
ratified  by  the  J.  K.  Armsby  Company;  and  that  the  com- 
pany was  positively  and  plainly  informed  by  Pope's  letter 
that  he  had  a  written  contract  signed  in  its  name,  and  it  was 
clearly  the  duty  of  the  company,  if  it  did  not  know  the  terms 
of  the  contract,  to  inform  itself,  before  writing  as  it  did, 
if  it  did  not  wish  to  be  bound  by  the  contract.  It  would 
have  been  a  very  easy  thing  to  have  asked  Pope  to  send 
a  copy  of  the  contract,  before  replying  to  his  letter;  and 
not  to  have  taken  this  simple  precaution  was  negligence 
on  the  company's  part,  and  precluded  it  from  denying  the 
effect  of  its  assurances  to  Pope,  which  induced  the  latter  to 
proceed  and  deliver  his  fruit  under  what  he  had  a  right  to 
suppose  was  a  valid  contract.  The  case  just  referred  to, 
like  a  great  many  others  of  like  character,  exemplifies  the 
rule  that  an  attempted  repudiation  of  agency,  or  the  con- 
tract of  an  agent  made  in  the  name  of  the  principal,  must 
be  unequivocal  and  plain  and  clear,  and  must  leave  no  room 
for  a  contrary  inference  on  the  part  of  the  person  with 
whom  the  agent  deals.  (Decided  by  the  Supreme  Court 
of  California  in  the  case  of  Pope  vs.  Armsby  Co.,  reported 
in  Volume  111,  California  Reports,  page  159.) 

Section  120a.— SALE  OF  SAMPLES.— A  traveling 
salesman  has  no  implied  authority  from  the  nature  of  his 
employment  to  sell  the  samples  with  which  he  is  intrusted 
by  his  principal.  Samples  being  essential  and  necessary  to 
the  performance  of  the  salesman's  work,  no  reasonable  in- 
ference can  arise  that  he  is  to  dispose  of  them,  for,  if  he  does, 
he  is  left  without  available  means  for  exhibiting  the  goods 
of  his  employer.  A  traveling  salesman  cannot  sell  his 
samples  without  express  authority  and  instructions  from  his 
employer. 


BUSINESS   CONTRACTS   AND   LEGAL  OBLIGATIONS.  233 

Manufacturer's  Agent. 

Section  121.  —  MANUFACTURER'S  AGENT  TO 
BUY  OR  SELL.— The  law  which  applies  generally  to 
agents  is  also  applicable  to  agents  fox  manufacturers,  whether 
such  agents  have  the  authority  to  buy  raw  material  or  to 
sell  the  finished  product  to  the  retailer.  The  agent  for  the 
manufacturer  has  such  authority  as  his  principal  gives 
him,  or  such  as  may  be  reasonably  inferred  from  a  course 
of  dealings  with  customers  of  which  the  manufacturer  has 
knowledge  and  retains  the  benefits. 

Section  122.— AGENT'S  AUTHORITY  TO  BOR- 
ROW MONEY. — Where  a  manufacturer  establishes  an 
agency  in  a  city  other  than  the  place  where  the  factory  or 
the  main  office  is  located,  the  question  sometimes  arises  as 
to  what  conditions  or  circumstances,  if  any,  will  justify  the 
agent  in  borrowing  money  on  his  principal's  account.  The 
authority  of  an  agent  to  borrow  money  for  his  principal 
may  be  expressly  given,  or  it  may  be  impliedly  conferred 
upon  him  as  an  incident  to  the  business  which  he  under- 
takes to  transact  for  his  principal.  When  the  power  to 
borrow  money  is  expressly  given  to  an  agent,  the  existence 
and  extent  of  the  power  are,  of  course,  to  be  determined 
by  a  construction  of  the  instrument  by  which  it  is  given. 
Where  a  general  power  to  borrow  money  is  expressly  given, 
such  power  includes  authority  to  give  the  lender  the  ordi- 
nary securities  for  the  sum  borrowed,  such  as  bonds,  notes, 
or  collaterals.  The  power  of  an  agent  to  borrow  money 
on  his  principal's  account  may  be  implied,  when  the  carry- 
ing on  of  the  business  intrusted  to  him  absolutely  requires 
the  exercise  of  such  power.  An  agent  is  presumed  to  have 
power  to  do  whatever  is  necessary  to  effect  the  purposes 
of  his  agency.  The  necessity  for  borrowing  money  must, 
however,  be  shown,  before  the  power  to  borrow  can  be 
inferred  from  the  original  employment  of  the  agent.  To 
justify  this  inference,  the  borrowing  must  be  practically  in- 
dispensable, and  it  is  not  sufficient  that  it  was  convenient, 


234  BUSINESS    LAWS   FOR   BUSINESS    MEN. 

or  advantageous,  or  more  effectual  for  the  transaction  of 
the  business  provided  for.  Nor  is  a  party  dealing  with  an 
agent  entitled  to  assume  the  existence  of  any  extraordinary 
state  of  facts,  in  order  to  bring  the  act  of  the  agent  within 
the  scope  of  his  apparent  authority.  Where  it  is  absolutely 
necessary,  in  order  to  carry  on  the  business  with  which  the 
agent  is  intrusted,  that  he  should  borrow  money  on  the  credit 
of  his  principal,  the  authority  to  borrow  will  be  implied. 
But  a  power  given  to  an  agent  to  draw  or  indorse  checks, 
for  and  in  the  name  of  his  principal,  gives  him  no  authority 
to  overdraw  his  principal's  account  at  the  bank.  Where  the 
act  of  an  agent,  in  borrowing  money  for  his  principal,  was 
without  original  authority,  the  principal's  ratification  of  the 
act  cannot  be  inferred  from  the  mere  fact  that  the  money 
borrowed  went  into  the  business  of  the  principal  or  was 
beneficial  or  advantageous  to  him.  But  where  an  agent 
without  original  authority  borrows  money  on  behalf  of  his 
principal,  and  uses  it  in  a  manner  advantageous  to  the  prin- 
cipal, the  ratification  of  the  agent's  act  may  be  inferred  from 
the  silence  of  the  principal  after  knowledge  of  all  the  facts, 
or  from  his  promise  to  repay  the  money  so  borrowed. 

Section  123.— AGENT  SELLING  GOODS  OUT  OF 
MANUFACTURE.— An  agent  authorized  to  sell  new- 
pattern  goods,  to  be  manufactured,  in  addition  to  those  the 
principal  has  already  manufactured,  or  is  willing  to  manu- 
facture, has  no  authority  to  sell  old-pattern  goods,  which 
have  ceased  to  be  manufactured,  and  could  not  be  manu- 
factured except  at  a  loss.  The  very  sending  of  an  agent 
out  to  sell  carries  with  it  the  idea  that  he  is  expected  by 
the  manufacturer  to  sell  to  his  advantage;  and  this  being  so, 
it  cannot  be  said  that  because  he  is  expressly  authorized  to 
sell  manufactured  goods,  he  is  also  authorized  to  sell  those 
that  have  ceased  to  be  manufactured,  and  could  not  be 
except  at  a  loss.  An  agent  who  has  authority  to  sell  new- 
pattern  goods,  to  be  manufactured,  cannot  be  said  to  have 
authority  to  sell  what  is  not  being  manufactured  and  will 
not  be  by  his  principal,  because   to   manufacture   it   would 


BUSINESS   CONTRACTS   AND   LEGAL  OBLIGATIONS.  235 

result  in  a  loss,  which  is  not  the  prevalent  idea  in  any 
business.  A  reasonable  man  would  not  believe  that  a  manu- 
facturer would  carry  out  any  such  contract,  or  that  he 
intended  to  authorize  his  agent  to  make  it. 

Section  124.— SELLING  GOODS  FOR  ONE  YEAR 
MADE  IN  ANOTHER.— The  mere  fact  that  one  acts  as 
agent  of  a  manufacturer  in  one  year,  in  the  sale  of  goods 
manufactured  for  sale  for  that  year,  does  not  make  him  an 
ostensible  agent  for  the  sale  of  the  goods  for  the  next  year, 
unless  such  goods  are  continued  to  be  manufactured  or  are 
in  stock,  and  the  principal  wishes  to  sell  them. 

Section   125.— LIMITATION    OF    AUTHORITY.— A 

letter  from  a  manufacturing  firm  to  a  customer,  to  the  effect 
that  for  the  next  year  they  had  certain  new  patterns  of 
goods,  which  they  would  be  ready  to  submit  to  the  inspec- 
tion of  the  customer  at  the  end  of  the  month,  and  that 
"our  Mr.  W.  will  call  on  you  early  in  January,  and  talk 
to  you  about  handling  the  line  for  next  year,"  only  author- 
ized the  agent  to  sell  the  new  patterns  of  goods  which  were 
in  the  process  of  manufacture,  or  were  offered  to  be  manu- 
factured, and  the  customer  could  not  recover  damages  for 
the  failure  of  the  manufacturer  to  deliver  old  patterns  of 
goods  which  the  latter  had  ceased  to  manufacture. 

Section  126.— SALE  OF  PROPERTY  WHEN  MAN- 
UFACTURED.— An  agent  authorized  to  sell  the  property 
of  his  principal  when  manufactured,  has  no  authority  to 
sell  before  it  is  manufactured. 

Commission  Merchants. 

Section  127.— SELLING  PROPERTY  ON  COMMIS- 
SION.— There  is  a  common  kind  of  agency  exercised  by 
commission  merchants,  who  receive  the  property  of  others 
to    sell    on    commission.      But    commission    merchants,    who 


236  BUSINESS   LAWS   FOR   BUSINESS   MEN. 

usually  have  possession  of  the  property  itself,  and  receive, 
not  a  salary,  but  a  part  of  the  selling  price  as  their  com- 
pensation, and  usually  receive  few  if  any  instructions  from 
the  consignor  of  property  to  be  sold  on  commission,  are  to 
be  considered  from  a  peculiar  point  of  view  in  many  of  their 
business  relations. 

Section      128.—  INSURANCE      OF      CONSIGNED 
PROPERTY. — A  commission  merchant,  unless  he  has   re- 
ceived  contrary  instructions,   has  authority  to   insure  prop- 
erty consigned  to  him  uninsured. 
Civil  Code,  Section  2368. 

Section  129.— AUTHORITY  TO  SELL  ON  CREDIT. 

— Unless  specially  restricted  to  sales  for  cash,  a  commission 
merchant  has  authority  to  sell  on  credit  any  property  in- 
trusted to  him  for  sale;. but  such  authority  does  not  extend 
to  such  things  as  it  is  customary  to  sell  for  cash.  There- 
fore, even  if  he  has  not  received  any  instructions  to  the 
contrary,  a  commission  merchant  will  not  have  authority 
to  sell  on  credit  any  commodity  consigned  to  him  for  sale 
which  it  is  the  custom  at  the  place  where  he  does  business 
to  sell  for  cash. 

Civil  Code,  Section  2368. 

Section    130.— PLEDGE    OF    CONSIGNED     PROP- 
ERTY.— A  commission  merchant  has  no  power  to  pledge 
or  mortgage  property  consigned  to  him,  and  cannot  trade 
the  consigned  property  for  other  property. 
Civil  Code,  Section  2368. 

Section  131.— AUTHORITY  OF  PARTNER  OR 
SERVANT. — The  partner  or  servant  of  a  commission  mer- 
chant may  have  the  same  authority  to  deal  with  the  con- 
signed property  as  he  has,  but  he  cannot  delegate  his 
authority  to  any  person  in  an  independent  employment. 
Civil  Code,  Section  2368. 


BUSINESS   CONTRACTS  AND   LEGAL  OBLIGATIONS.  237 

Section  132.—  INSTRUCTIONS  FROM  CON- 
SIGNOR.— If  a  consignment  of  property  is  received  by  a 
commission  merchant,  and  the  consignor  at  the  same  time 
sends  certain  instructions  for  him  to  follow,  regarding  any 
matter  connected  with  the  sale,  it  is  the  duty  of  the  mer- 
chant to  follow  such  instructions  if  possible,  notwithstanding 
any  advances  he  may  have  made  to  his  principal  upon  the 
property  consigned  to  him.  But  if  he  has  an  opportunity 
to  sell  at  the  market  price,  and  the  consignor  forbids  him 
to  do  so,  he  need  not  follow  such  instructions,  unless  his 
advances  are  repaid  him;  and  if  his  advances  are  not  repaid 
him,  he  may  proceed  to  sell  for  his  own  reimbursement,  after 
giving  to  the  consignor  reasonable  notice  of  his  intention  to 
do  so,  and  of  the  time  and  place  of  sale. 
Civil  Code,  Section  2027. 

Section    133.— CANNOT    EXTEND    CREDIT.— When 

property   is   sold  by   a  commission  merchant  on   credit,   the 
sale  must  be  made  on  such  credit  as  is  usual,  but  he  has  no 
power  to  extend  the  credit  agreed  upon. 
Civil  Code,  Section  2028. 

Section  134.— GUARANTY  OF  CERTAIN  PRICE.— 

Where  the  commission  merchant  guarantees  that  the  goods 
shall  yield  to  the  consignor  a  fixed  price,  he  cannot  by  sell- 
ing for  less,  or  by  deducting  his  commission,  avoid  his 
liability  to  make  his  returns  to  the  consignor  amount  to  the 
price  agreed  upon.  The  value  of  the  goods,  as  it  turns  out 
to  be,  is  not  material.  He  has  fixed  his  own  liability,  and 
his  guaranty  of  a  certain  price,  and  his  liability  to  the  con- 
signor for  so  much,  becomes  absolute  whenever  he  makes 
a  sale,  whether  for  cash  or  upon  credit. 

Section  135.— INSTRUCTIONS  TO  "SELL  ON  AR- 
RIVAL."— Where  a  consignment  of  property  is  made  to 
a  commission  merchant,  with  instructions  to  "sell  on  arrival," 
the  merchant  is  bound  to  follow  the  instructions  and  sell 
for  the  price  the  property   will  command,   and   if  he   does 


238  BUSINESS   LAWS   FOR   BUSINESS   MEN. 

not  do  so,  but  holds  the  property  and  neglects  to  sell  on 
arrival,  he  will  be  liable  for  any  losses  sustained  by  the 
consignor  occasioned  by  a  fall  in  price.  He  cannot  excuse 
himself  by  saying  that  the  market  was  dull,  for  he  had 
received  his  instructions,  and  it  was  his  duty  to  sell,  if  the 
property  might  have  been  disposed  of  even  at  a  reduced 
price.  It  was  his  duty  to  sell  on  arrival,  no  matter  at 
what  loss. 

Section  136.— SPECIAL  PROPERTY  IN  CONSIGN- 
MENTS.— A  commission  merchant  to  whom  goods  have 
been  consigned  for  sale,  has  a  special  property  in  the  goods, 
by  virtue  of  his  position  with  relation  to  them.  For  many, 
if  not  for  most  purposes,  he  is  treated  as  the  owner  of  the 
goods.  He  has  possession;  he  may  sell  and  make  shipments; 
he  may  collect  the  purchase  price;  and,  in  fact,  he  may 
deal  with  the  property  as  though  it  were  his  own,  in  the 
absence  of  explicit  instructions  limiting  his  authority.  And 
it  follows,  necessarily,  that  any  limitation  upon  his  general 
authority  must  be  brought  to  the  notice  of  those  with  whom 
he  deals,  or  his  principal  will  be  bound,  even  though  he 
should  go  outside  his  instructions. 

Section  137.— IN  WHOSE  NAME  INSURANCE 
MAY  BE  PUT. — Insurance  on  property,  consigned  to  a 
commission  merchant  for  sale,  may  be  for  the  benefit  and 
in  the  names  of  both  merchant  and  consignor.  The  mer- 
chant is  not  bound  to  insure,  unless  he  has  received  orders 
to  do  so;  but  he  may  insure,  in  his  own  name,  or  in  the 
name  and  for  the  benefit  of  his  principal. 

Section  138.— RESPONSIBILITY  OF  PURCHASER. 

— It  is  the  duty  of  a  commission  merchant  who  sells  on 
credit  to  make  strict  inquiry  as  to  the  responsibility  of  the 
purchaser;  and  if  he  neglects  to  do  so,  and  a  loss  occurs, 
he  will  be  liable  for  it  to  his  principal. 

Section  139.  — RIGHT  TO  COMMISSIONS.— If  a 
commission  merchant  properly  performs  his  duties,  he  will 


BUSINESS    CONTRACTS   AND   LEGAL   OBLIGATION'S.  239 

always  be  entitled  to  his  commission  in  such  sum  as  has 
been  agreed  upon  between  himself  and  principal;  and  if 
there  has  been  no  agreement  as  to  the  amount  of  the  com- 
mission, then  for  a  reasonable  amount,  which  may  depend 
upon  usage  or  custom.  But  if  the  merchant  be  guilty  of 
gross  misconduct,  or  if  he  perform  his  duties  in  such  a 
negligent  manner  as  to  prevent  any  benefit  to  the  principal, 
he  will  not  be  entitled  to  receive  his  commission.  If  ex- 
penses are  occasioned  by  his  own  negligence,  he  cannot 
recover  them;  and  he  will  not  be  entitled  to  the  difference, 
when  through  his  own  negligence  the  proceeds  of  the  sale 
are  not  equal  to  the  expenses. 

Section   140.— MAY   SELL   IN  HIS   OWN   NAME.— 

Having  a  special  property  in  goods  consigned  to  his  care, 
a  commission  merchant  may  sell  in  his  own  name ;  and  when 
the  purchaser  pays  him,  the  former  is  discharged  from  all 
liability  to  the  real  owner  of  the  goods.  Whenever  the 
commission  merchant  sells  in  his  own  name,  he  may  sue  the 
purchaser  in  his  own  name  for  the  price. 

Section  141.— TAKING  PROMISSORY  NOTE  IN 
PAYMENT. — When  it  is  proper  for  a  commission  merchant 
to  sell  on  credit,  and  he  takes  the  promissory  note  of  the 
purchaser  in  payment,  payable  to  himself,  he  takes  it  in 
trust  for  his  principal,  and  subject  to  his  order. 

Section  142.  — LIEN  OF  COMMISSION  MER- 
CHANT.— Having  possession  of  the  goods,  and  a  special 
property  in  them,  the  commission  merchant  has  a  lien  upon 
them  and  their  proceeds,  and  the  securities  received  upon 
their  sale,  for  his  expenses  and  commissions,  for  his  ad- 
vances to  his  principal,  and  usually  for  the  balance  of  his 
general  account  with  his  principal. 

Section  143.— AUTHORITY  AS  GENERAL  AGENT. 

— Where  general  authority  is  given  to  a  commission  merchant 
to  buy  and  sell  for  the  principal,  he  is  considered  as  a  general 
agent,  and  his  acts  will  be  binding  on  his  principal,  even 
where  he  has  violated  his  private  instructions.  ,     , 


240  BUSINESS   LAWS   FOR  BUSINESS   MEN. 

Section  144.— CARE  TO  BE  TAKEN  OF  GOODS 
CONSIGNED. — A  commission  merchant  is  bound  to  keep 
the  goods  intrusted  to  him  with  the  same  care  as  a  prudent 
man  would  bestow  upon  them,  if  they  were  his  own.  He 
must  use  ordinary  diligence  in  the  care  and  preservation  of 
the  property  while  it  is  in  his  hands;  and  for  any  loss 
occasioned  by  his  neglect  of  his  duty  in  this  respect  he  will 
be  personally  liable  to  his  principal. 

Section  145.— MUST  NOT  MIX  GOODS  WITH  AN- 
OTHER'S.— A  commission  merchant  has  no  right  to  mix 
the  goods  received  from  one  person  with  the  goods  of  an- 
other. 

Section    146.— DUTY   TO    RENDER    ACCOUNTS.— 

A  commission  merchant  is  bound  to  give  the  unbiased  use 
of  his  own  discretion  and  judgment  to  his  principal,  and  he 
must  keep  and  render  to  his  principal  true  accounts  of  his 
transactions,  and  he  must  keep  the  principal  informed  of  all 
facts  material  to  his  interests;  and  if  losses  occur  through 
neglect  of  these  duties,  he  will  become  personally  responsible 
to  the  principal. 

The  Legislature  of  1909  passed  a  law  providing  that  "every 
commission  merchant,  broker,  agent,  factor,  or  consignee, 
who  shall  wilfully  and  corruptly  make,  or  cause  to  be  made 
to  the  principal .  or  consignor,  a  false  statement  as  to  the 
price  obtained  for  any  property  consigned  or  entrusted  for 
sale,  or  as  to  the  quality  or  quantity  of  any  property  so 
consigned  or  entrusted,  or  as  to  any  expenditures  made  in 
connection  therewith,  shall  be  deemed  guilty  of  a  misde- 
meanor, and  on  conviction  thereof,  shall  be  punished  by  fine 
not  exceeding  five  hundred  dollars  and  not  less  than  two 
hundred  dollars,  or  by  imprisonment  in  the  county  jail  not 
exceeding  six  months  and  not  less  than  ten  days,  or  by  both 
such  fine  and  imprisonment." 

Act  of  the  Legislature,  approved  March  20,  1909. 

Another  law  was  passed  relating  to  the  duty  of  a  com- 
mission merchant  to  render  an  account  to  the  consignor,  as 
follows : 


BUSINESS    CONTRACTS   AND   LEGAL   OBLIGATIONS.  241 

"It  is  hereby  made  the  duty  of  every  commission  merchant 
broker,  factor,  or  consignee,  to  whom  any  property  is  con- 
signed or  entrusted  for  sale,  to  make,  when  accounting  there- 
for or  subsequently,  upon  the  written  demand  of  his  principal 
or  consignor,  a  true  written  statement  setting  forth  the  name 
and  address  of  the  person  or  persons  to  whom  a  sale  of 
the  said  property,  or  any  portion  thereof,  was  made,  the 
quantity  so  sold  to  each  purchaser,  and  the  respective  prices 
obtained  therefor;  provided,  however,  that  unless  separate 
written  demand  shall  be  made  as  to  each  consignment  or 
shipment  regarding  which  said  statement  is  desired,  prior  to 
sale,  it  shall  be  sufficient  to  set  forth  in  said  statement  only 
so  many  of  said  matters  above  enumerated  as  said  commis- 
sion merchant,  broker,  factor,  or  consignee  may  be  able  to 
obtain  from  the  books  of  account  kept  by  him ;  and  that 
said  statement  shall  not  be  required  in  case  of  cash  sales 
where  the  amount  of  the  transaction  is  less  than  fifty  dollars. 
Any  person  violating  the  provisions  of  this  section  is  guilty 
of  a  misdemeanor." 

Act  of  the  Legislature,  approved  April  22,  1909. 

Real  Estate  Agents. 

Section  147.— EMPLOYMENT  MUST  BE  IN  WRIT- 
ING.— The  employment  of  a  real  estate  agent,  giving  him 
authority  to  sell  land  for  another,  is  required  by  the  law 
of  this  state  to  be  in  writing.  The  contract  or  some  mem- 
orandum of  it  must  be  in  writing.  The  contract  or  memo- 
randum need  not  state  that  the  agent  is  to  receive  a  com- 
mission for  his  service,  but  it  must  show  in  writing  that  the 
agent  was  employed. 

Civil  Code,  Section  1624. 

Section    148.— VERBAL     CONTRACT     INVALID.— 

A  verbal  contract  for  the  sale  of  real  property,  made  by  an 
agent  who  has  no  written  authority  from  another,  is  invalid. 
And  if  the  agent  without  authority  in  writing  allows  an 
intending  purchaser  to  take  possession  of  the  property,  such 


242  BUSINESS   LAWS   FOR   BUSINESS    MEN. 

possession  will  only  be  held  at  the  will  of  the  owner,  who 
can  bring  an  action  for  unlawful  detainer  against  the  party 
in  possession.  Verbal  authority  given  by  one  to  another, 
to  contract  with  reference  to  his  land,  is  in  law  no  authority. 
(Decided  by  the  Supreme  Court  of  California  in  the  case 
of  Nason  vs.  Lingle,  which  decision  is  printed  in  Volume 
27,  California  Decisions,  page  970.) 

Section  149.— WHEN  LETTER  NOT  SUFFICIENT. 

— A  letter  from  the  owner  of  real  estate  is  not  sufficient  to 
enable  the  agent  to  recover  a  commission,  unless  it  is  clearly 
seen  that  an  employment  was  intended,  from  the  language 
used  in  the  letter  itself.  A  real  estate  agent  in  Oakland 
received  a  letter  which  read  as  follows:  "Walter  E.  Logan: 
Sir — If  you  can  purchase  N.  W.  corner  of  13th  and  Franklin 
streets,  75x100,  for  $42,000,  I  think  we  would  be  ready  to 
purchase  same  by  Monday  next.  J.  C.  McMullen."  Logan 
sued  for  a  commission,  producing  the  above  letter  as  evidence 
of  his  employment  in  writing.  The  District  Court  of  Ap- 
peal decided  that  the  letter  was  not  sufficient  memorandum 
of  employment,  under  the  law.  The  Court  says  that  it  does 
not  purport  to  be  an  employment  of  the  plaintiff  as  a  broker 
or  agent  for  the  purchase  of  the  real  estate,  but  is  rather 
to  be  construed  as  merely  a  proposition  to  him  to  ascertain 
whether  it  could  be  purchased  at  the  designated  price.  But 
whatever  construction  is  to  be  given  to  its  terms,  inasmuch 
as  the  plaintiff  did  not  purchase  the  property,  or  obtain 
from  the  owner  an  agreement  for  its  sale  which  could  be 
enforced  by  the  defendant,  the  latter  did  not  become  liable 
to  him  for  any  service  as  broker  or  agent  in  the  matter. 
It  was  his  duty  to  procure  from  the  owners  and  deliver  to 
the  defendant  a  valid  contract  of  sale  which  could  be  en- 
forced by  the  defendant;  or,  if  he  could  obtain  from  the 
owners  a  verbal  agreement  to  make  the  sale,  he  should  have 
brought  the  owners  and  the  defendant  together,  thus  giving 
the  latter  an  opportunity  to  secure  a  written  contract.  The 
letter  alone  was  not  sufficient  to  show  an  employment  of  the 
agent,  or  to  give  him  any  right  to  commissions.     (Decided 


BUSINESS   CONTRACTS   AND  LEGAL  OBLIGATIONS.  243 

by  the  District  Court  of  Appeals,  First  District,  in  the  case 
of  Logan  vs.  McMullen,  which  decision  is  printed  in  Volume 
87  of  the  Pacific  Reporter,  page  285.) 

Section  150.— FORM  OF  WRITTEN  AUTHORITY 
TO  AGENT. — The  following  is  a  form  in  writing  author- 
izing an  agent  to  sell  land : 

San  Francisco,  Cal., ,  191. . 

I  hereby  authorize  and  employ ,  of 

,  State  of  California,  to  sell  the  following 

described  real  estate  belonging  to  me,  situate  in  the  County 
of ,   State  of  California,  to-wit    

(Here  describe  property.) 

for  the  sum  of  $ 

This  authority  is  for  the  term  of days  from 

date,  and  shall  be  exclusive. 

I  agree  to  pay  to  said , 

as  his  commission  for  making  a  sale  of  said  property,  the 
sum  of per  cent  of  the  selling  price. 

Ten  days  to  be  given  for  examination  of  abstract  of  title, 
which  I  agree  to  furnish. 

Time  is  of  the  essence  of  this  instrument. 

Owner. 

Section  151.— RIGHT  OF  AGENT  TO  COMMIS- 
SIONS WHEN  PROPERTY  WITHDRAWN  FROM 
SALE. — Where  the  contract  of  employment  provides  that 
if  the  owner  shall  before  the  expiration  of  the  contract 
withdraw  the  property  from  sale  the  agent  will  be  entitled 
to  his  commissions,  the  agent  is  entitled  to  recover  his 
commissions  as  a  debt  due  from  the  owner,  upon  his  with- 
drawing the  property  from  sale  within  the  time  named  in 
the  contract.  The  owner  who  withdraws  -the  property  from 
sale  will  be  liable  for  the  commissions,  even  though  the 
agent  has  not  found  a  purchaser  for  the  property.  For  by 
his  contract  he  gives  the  agent  the  opportunity  to  earn  the 
commissions  within  a  certain  time;  and  if,  during  the  term, 


244  BUSINESS  LAWS  FOR  BUSINESS   MEN. 

he  withdraws  the  property  from  sale,  he  thus  deprives  the 
agent  of  the  benefit  of  the  unexpired  time,  and  may  prevent 
his  opportunity  for  making  a  sale. 

Section  152.  — WHEN  CONTRACT  FULFILLED 
AND  COMMISSION  EARNED.— A  real  estate  agent  is 
never  entitled  to  commissions  for  unsuccessful  efforts.  When 
he  undertakes  to  find  a  purchaser,  the  risk  of  failure  is 
wholly  his.  The  reward  comes  only  with  his  success.  That 
is  the  plain  contract  and  contemplation  of  the  parties.  The 
agent  may  devote  his  time  and  labor  and  expend  his  money 
with  ever  so  much  devotion  to  the  interest  of  his  employer, 
and  yet  if  he  fails,  if,  without  eflfecting  an  agreement  or 
accomplishing  a  bargain,  he  abandons  the  effort,  or  if  his 
authority  is  fairly  and  in  good  faith  terminated,  he  gains 
no  right  to  commissions.  He  loses  the  effort  which  was 
staked  upon  success,  and  in  such  event  it  matters  not  that 
after  his  failure  and  the  termination  of  his  agency,  what  he 
has  done  proves  of  use  and  benefit  to  the  principal.  But, 
on  the  other  hand,  if  an  agent  authorized  to  negotiate  a 
sale  produces,  within  the  time  limited  by  his  contract,  a  pur- 
chaser, ready,  willing,  and  able  to  purchase  upon  the  terms 
stated  in  the  contract,  his  service  is  completed  and  he  is 
entitled  to  his  commissions.  He  is  entitled  to  his  commis- 
sions, notwithstanding  the  owner  backs  out,  and  refuses  to 
sell  to  the  purchaser  produced. 

Section  153.— WHAT  IS  SUFFICIENT  AUTHOR- 
ITY FROM  CORPORATION.  — Where  an  individual 
gives  authority  to  a  real  estate  agent  to  sell  his  land,  any 
writing,  in  any  form,  whether  memorandum,  agreenjent,  or 
letter,  or  telegram,  which  expresses  on  its  face  the  employ- 
ment of  the  agent  to  sell,  is  a  sufficient  authorization.  But 
in  the  case  of  a  'corporation  the  law  is  entirely  different. 
A  corporation  can  only  act  by  and  through  its  officers,  and 
a  writing,  though  signed  by  its  President,  Cashier,  or  Secre- 
tary, or  all  three  together,  stating  that  a  real  estate  agent 
had  been  employed  to  sell  lands  owned  by  the  corporation. 


BUSINESS   CONTRACTS   AND   LEGAL   OBLIGATIONS.  245 

would  not  give  any  authority  to  the  agent  whatever.  Cor- 
porations act  by  their  officers,  and  the  officers  must  transact 
their  business  in  the  manner  provided  by  law,  and  in  no 
other  way.  Therefore,  a  corporation  which  has  land  to  sell, 
and  wishes  to  employ  an  agent  to-  make  the  sale,  can  only 
act  upon  the  matter  through  its  Board  of  Directors,  when 
duly  assembled,  by  a  resolution  duly  passed  and  recorded. 
There  must  be  a  quorum  of  the  Directors  present,  and  a 
majority  of  the  Board  must  vote  in  favor  of  the  resolution 
to  employ  the  agent,  and  the  "aye"  and  "no"  vote  must  be 
entered  in  the  minutes.  The  agent  should  then  be  furnished 
with  a  copy  of  the  resolution,  which  will  be  a  sufficient  indi- 
cation of  his  authority.  When  the  By-Laws  of  the  corpora- 
tion provide  that  notice  to  Directors  of  meetings  of  the 
Board  be  given  in  a  certain  manner,  notice  must  be  given 
strictly  in  accordance  with  the  By-Laws,  or  the  resolution 
passed  will  not  be  be  valid.  It  will  make  no  difference  that 
all  the  Directors,  without  the  formality  of  a  meeting,  sign 
their  names  to  a  written  authorization  to  the  agent.  Such- 
writing  would  be  worthless.  Under  it  the  agent  would  have 
no  legal  authority  to  deal  with  the  land.  Under  it,  he 
could  neither  make  a  valid  contract  of  sale,  nor  collect 
any  commissions  from  the  corporation  for  his  services.  The 
Directors,  the  President,  the  Secretary,  the  Cashier,  the 
stockholders,  no  one  of  these  has  power,  by  virtue  of  his 
office  or  investment,  to  employ  an  agent  to  buy  or  sell  for 
the  corporation,  nor  have  all  together  the  power  which 
neither  has  separately.  The  powers  of  a  corporation  must 
be  exercised,  and  its  property  controlled,  by  its  Board  of 
Directors;  the  decision  of  the  majority  of  the  Directors, 
made  when  duly  assembled,  being  valid  as  a  corporate  act. 
The  Board  must  be  duly  assembled,  and  their  transactions 
should  be  recorded.  The  Directors  when  not  acting  as  a 
Board  have  not  the  necessary  power  to  employ  an  agent. 
The  absence  of  a  resolution  of  the  Board  renders  any  writ- 
ing purporting  to  employ  the  agent,  though  signed  by  the 
Directors  or  other  officers,  illegal  and  invalid. 
Civil  Code,  Sections  305,  308,  377. 


246  BUSINESS   LAWS   FOR   BUSINESS    MEN. 

Section  154.— RATIFICATION  OF  UNAUTHOR- 
IZED  EMPLOYMENT   BY   CORPORATION.— Where 

an  agent  acts  for  a  corporation,  without  having  received 
proper  authorization  by  resolution  of  the  Board  of  Directors, 
the  corporation  may  yet  ratify  the  act  of  the  agent  in  mak- 
ing a  sale;  provided,  the  ratification  must  be  in  the  same 
form  and  manner  as  the  original  authorization  should  have 
been,  that  is,  it  must  be  by  a  resolution  of  the  Board  law- 
fully adopted. 

Section  155.— OPTION  TO  AGENT  TO  SELL  FOR 
COMMISSION  ABOVE  A  FIXED  PRICE.— The  owner 
of  land  may  lawfully  make  a  contract  authorizing  real  estate 
agents  to  sell  the  land  for  a  special  sum  and  agreeing  to 
pay  them  a  commission  of  whatever  sum  they  realize  above 
that  amount.  Such  a  contract  is  binding  upon  both  parties. 
It  confers  an  option  upon  the  agents,  and  a  sale  by  the 
agents  under  such  a  contract  is,  as  the  law  regards  it,  a 
sale  made  by  them  in  the  capacity  of  vendors  upon  their 
own  account,  and  not  strictly  for  the  account  of  the  owner 
of  the  land.  If  the  agents  find  a  purchaser,  under  such  a 
contract  with  the  owner,  and  receive  a  deposit  to  bind  the 
bargain,  but  the  sale  does  not  go  through  because  a  title 
insurance  company  will  not  insure  the  title  to  the  land,  the 
owner  has  no  claim  on  the  deposit,  and  the  agents  have  a 
right  to  refund  the  money  to  the  intending  purchaser.  Such 
option  to  real  estate  agents,  with  relation,  also,  to  a  deposit 
received  upon  a  purchase  which  afterwards  failed  to  go 
through,  was  the  subject  of  a  Supreme  Court  decision  in 
this  state,  in  a  San  Francisco  case.  C.  H.  Robinson  and 
C.  B,  Hobson  executed  to  the  real  estate  firm  of  Easton, 
Eldridge  &  Co.  the  following  instrument:  "We  hereby 
authorize  Easton  &  Eldridge,  for  us  and  within  five  days 
from  date  hereof,  and  until  this  authority  is  canceled  in 
writing  by  us,  to  sell  for  the  sum  of  $10,000 — net  dollars — 
the  following  described  property  situated  in  the  City  and 
County  of  San  Francisco,  State  of  California,  to-wit:  All 
of  block  935,  outside  lands;  and  we  will  pay  the  said  Easton 


BUSINESS    CONTRACTS   AND   LEGAL   OBLIGATIONS.  247 

&  Eldridge  a  commission  of  all  over  said  sum  of  $10,000, 
net,  for  which  they  may  sell  said  property  with  our  consent. 
Witness  our  hand  and  seal  this  twenty-fourth  day  of  August, 
A.  D.  1887,  C.  B.  Hobson,  C.  H.  Robinson."  The  real 
estate  firm  found  a  purchaser,  receiving  from  him  $1,050  as 
a  deposit  on  the  purchase  price  of  $10,500,  with  30  days 
allowed  for  search  of  title,  and  upon  the  condition  that  the 
Title  Insurance  Company  would  insure  the  title.  The  Title 
Insurance  Company  refused  to  insure  the  title,  and  Easton 
&  Eldridge  repaid  the  deposit  to  the  purchaser.  Then 
Hobson  and  Robinson  commenced  a  suit  against  the  agents 
for  the  deposit,  claiming  that  the  money  was  received  for 
their  account,  and  that  the  agents  had  no  right  to  pay  it 
back  to  the  purchaser.  The  Supreme  Court  decided  the 
case  in  favor  of  Easton,  Eldridge  &  Co.,  the  decision  of 
the  Court  stating,  that  the  relation  of  the  defendants  to  the 
plaintiffs  was  not  that  of  a  mere  agent;  that  while  their 
authority  to  sell  the  land  was  derived  from  the  plaintiffs, 
yet  the  sale  was  to  be  made  for  their  own  account  and 
benefit,  as  well  as  for  that  of  their  principals.  By  the  terms 
of  the  authorization  from  their  principals,  Easton,  Eldridge 
&  Co.  acquired  such  a  right  to  a  portion  of  the  proceeds 
of  sale  as  to  enable  them  lawfully  to  make  a  contract  of 
sale  upon  terms  of  their  own  choosing.  The  principals,  in 
effect,  said  the  Supreme  Court,  gave  to  Easton,  Eldridge  & 
Co.  an  option  for  five  days  to  endeavor  to  sell  the  block  of 
land  for  whatever  sum  they  could  obtain,  and  upon  what- 
ever terms  they  might  make,  provided  they  should  receive 
therefor  the  sum  of  $10,000,  and  agreed  that  the  agents 
should  have  whatever  sum  they  could  realize  above  that 
amount.  The  relation  thus  created  between  them  was  rather 
that  of  a  vendor  and  purchaser  under  a  contract  of  sale 
than  one  of  principal  and  agent,  and  a  sale  by  the  agents 
under  such  a  contract  was  in  the  capacity  of  a  vendor  upon 
their  own  account,  and  not  solely  for  the  account  of  their 
principal.  The  agents  were  entitled  to  all  the  proceeds  of 
the  sale  in  excess  of  $10,000,  and  therefore  they  had  the 
right  to  make  the  sale  upon  such  terms  as  in  their  judgment 


248  BUSINESS   LAWS   FOR   BUSINESS    MEN. 

would  enable  them  to  realize  the  highest  price  for  the  land. 
Upon  a  sale  by  them,  the  owners  were  entitled  to  the  im- 
mediate payment  of  the  $10,000,  but  the  agents  could  sell 
the  land  either  for  cash  or  upon  time,  as  they  might  choose, 
so  long  as  the  owners  received  their  money,  and  the  terms 
of  sale  made  by  the  agents  did  not  require  any  ratification 
by  the  owners.  And  upon  the  disapproval  of  the  title  by 
the  Title  Insurance  Company,  the  Supreme  Court  decided, 
the  purchaser  had  the  right  to  demand,  and  these  agents 
had  the  right  to  refund,  the  money  that  had  been  received 
by  them  as  a  deposit  upon  the  sale.  (Decided  by  the  Su- 
preme Court  of  California,  in  the  case  of  Robinson  vs. 
Easton,  Eldridge  &  Co.,  reported  in  Volume  93  of  California 
Reports,  page  80.) 

Section  156.— FAILURE  OF  SALE  BY  DEFECTIVE 
TITLE. — Where  an  agent  is  employed  to  sell  land,  the  title 
to  prove  good  or  no  sale,  and  he  finds  a  purchaser,  ready, 
able,  and  willing  to  buy  upon  the  agreed  terms,  and  the  title 
proves  to  be  defective,  the  agent  is  nevertheless  entitled  to 
his  commissions.  The  failure  of  the  sale  by  reason  of  the 
defective  title  is  not  the  fault  of  the  agent,  but  is  the  fault 
of  the  owner,  and  he  must  pay  the  agent's  commissions.  (De- 
cided by  the  District  Court  of  Appeals,  in  the  case  of  Justy 
vs.  Erro,  which  decision  is  printed  in  Volume  13,  California 
Appellate  Decisions,  page  27.) 

Section  157.— FAILURE  OF  OWNER  TO  REMOVE 
DEFECTS. — Where  real  estate  agents  enter  into  a  contract 
with  an  intending  purchaser,  acknowledging  the  receipt  of 
a  deposit,  and  stipulating  that  the  title  is  to  prove  good 
or  no  sale,  in  which  case  the  deposit  is  to  be  returned,  and 
such  contract  is  ratified  by  the  owner  of  the  land,  even 
though  not  in  the  first  place  authorized,  the  owner  is  bound 
by  it;  and  if  it  appears  that  there  is  a  defect  in  the  title,  it 
is  the  duty  of  the  owner  to  remove  the  defect  and  perfect 
the  title  within  the  time  limited  by  the  contract,  and  if  he 
does  not  do  so,  the  purchaser  will  be  discharged  from  his 


BUSINESS    CONTRACTS   AND   LEGAL   OBLIGATIONS.  249 

obligation,  and  will  be  entitled  to  the  return  of  his  money 
paid  on  deposit. 

Section  157a.—  EVASION  OF  CONTRACT  BY 
OWNER. — If,  within  the  time  limited  in  a  contract  for  the 
sale  of  real  estate  on  commission,  the  broker  has  produced 
a  purchaser,  who  is  ready,  willing  and  able  to  purchase 
upon  the  terms  prescribed,  the  principal  cannot  evade  pay- 
ment of  the  broker's  commission  by  then  refusing  or  neglect- 
ing to  consummate  the  sale,  or  hy  changing  the  terms,  or  by 
selling  the  property  to  another,  or  by  negligently  dealing 
with  the  proposed  purchaser  so  as  to  lose  the  benefit  of 
the  sale. 

Refusal  of  Vendor's   Wife  to   Join   in   Conveyance. — 

The  refusal  of  the  principal's  wife  to  join  in  the  conveyance 
will  not  avoid  payment  of  the  commission. 

Refusal  of  Vendee  to  Purchase. — The  refusal  of  the 
purchaser  to  complete  the  sale  on  account  of  false  represen- 
tations made  by  the  principal  will  not  defeat  payment  of  the 
commission. 

Personal  Conduct  of  Sale  Unnecessary. — It  is  not  neces- 
sary that  the  broker  should  personally  have  conducted  the 
negotiations  between  his  principal  and  the  purchaser  leading 
to  the  sale,  nor  that  he  should  have  been  present  when  the 
bargain  was  completed,  or  even  that  the  principal  should, 
at  the  time,  have  known  that  the  purchaser  was  one  found 
by  the  broker. 

While  it  is  indispensable,  it  is  sufficient  that  the  broker's 
efforts  were  the  procuring  cause  of  the  sale;  that  through  his 
agency,  the  purchaser  was  brought  into  communication  with 
the  seller,  although  the  parties  negotiated  in  person. 

(Decided  by  the  District  Court  of  Appeals,  in  the  case  of 
Justy  vs.  Erro,  which  decision  is  printed  in  Volume  13, 
California  Appellate  Decisions,  page  27.) 

Section  158.— RATIFYING  AUTHORITY  OF  BROK- 
ERS.— The    owner   may    ratify   by    his    subsequent    conduct 


250  BUSINESS   LAWS   FOR  BUSINESS    MEN. 

the  unauthorized  act  of  the  brokers  in  stipulating  that 
the  title  shall  be  good  or  no  sale.  The  action  of  the 
owner  of  the  land  in  agreeing  to  the  contract  of  his  brokers 
with  the  intending  purchaser,  and  in  accepting  him  as  the 
purchaser  of  the  property  upon  the  terms  of  such  contract, 
is  a  waiver  of  objection  that  the  brokers  exceeded  their 
authority  in  providing  in  the  contract  that  the  title  should 
prove  good,  or  that  there  would  be  no  sale.  And  in  this 
case  it  is  not  necessary  that  such  ratification  shall  be  in 
writing  as  between  the  owner  of  the  land  and  the  brokers, 
as  it  relates  to  no  interest  in  the  land,  in  so  far  as  it  affects 
the  brokers,  but  only  to  the  owner's  obligation  to  pay  them 
their  commission  when  earned. 

Section  159.— WHAT  IS  GOOD  TITLE.— A  title  to 
land,  to  be  good,  should  be  free  from  litigation,  palpable 
defects,  and  grave  doubts;  and  it  should  consist  of  both 
legal  and  equitable  titles,  and  should  be  fairly  ascertainable 
from  the  records.  A  perfect  title  is  one  that  must  be 
good  and  valid  beyond  all  reasonable  doubt.  Whether  the 
title  in  any  particular  case  is  good  or  not  is  a  question 
which  it  is  often  difficult  to  determine,  and  one  upon  which 
lawyers  and  judges  often  disagree. 

Section  160.— SALE  BY  OWNER.— A  party  who  em- 
ploys a  real  estate  broker  to  sell  his  land  may,  notwith- 
standing, negotiate  a  sale  himself;  and  if  he  does  so  with- 
out any  agency  of  the  broker,  and  before  the  latter  has 
procured  a  purchaser,  he  is  not  liable  to  the  agent  for 
commissions.  But,  as  already  stated,  the  commission  of  a 
real  estate  agent  is  earned  by  finding  a  purchaser  ready, 
willing,  and  able  to  enter  into  a  valid  contract  for  the 
purchase  upon  the  terms  fixed  by  the  owner;  and  having 
introduced  such  a  one  to  the  owner,  the  agent  cannot  be 
deprived  of  his  right  to  commissions  by  the  owner  negotiat- 
ing a  sale  himself. 


BUSINESS   CONTRACTS   AND   LEGAL   OBLIGATIONS.  251 

Section  161.— COMMISSIONS  UPON  SALE  OR 
EXCHANGE  BY  OWNER.— Where  by  the  terms  of  a 
contract  for  the  sale  of  real  estate  through  brokers,  they 
are  authorized  to  sell  the  property  for  the  owners  at  any 
time  within  a  year,  and  it  is  agreed  that  the  commission  shall 
be  paid  if  the  owners  should  withdraw  the  property  from 
sale  or  effect  a  sale  in  any  way  during  the  year,  the  brokers 
are  entitled  to  commissions  upon  sale  or  exchange  of  the 
land  by  the  owners  themselves,  and  need  not  show  that  they 
had  procured  or  could  have  procured  a  purchaser  within 
the  time  fixed  in  the  contract.  The  sale  or  exchange  of  the 
land  by  the  owner  himself  puts  it  beyond  the  power  of  the 
agent  to  thereafter  make  a  sale,  and  this  entitles  the  agent 
to  the  same  commissions  he  would  have  earned  if  he  had 
sold  the  land  for  the  amount  realized  by  the  owners. 

Section  162.— SALE  BY  OWNER  THROUGH  AN- 
OTHER AGENT. — Where  by  the  terms  of  an  agreement 
conferring  a  sole  agency  for  the  sale  of  land,  the  principal 
agrees  to  pay  to  the  agent  the  same  commission  as  if  he 
had  procured  a  purchaser,  if  he  should  sell  or  agree  to  sell 
the  land  or  part  of  it  to  any  one  in  the  twelve  months  next 
ensuing,  an  immediate  obligation  to  pay  the  commission  is 
created  against  the  principal  by  virtue  of  the  contract,  when 
the  principal  himself  effects  a  sale  through  another  agent 
within  that  period.  The  agent  first  appointed  has  an  im- 
mediate right  of  action  to  recover  his  commissions.  And 
the  owner  cannot  deduct  from  the  commissions  agreed  to 
be  paid  to  his  exclusive  agent  the  amount  of  commissions 
paid  by  him  to  another  agent  for  effecting  a  sale. 

Section  163.— MISREPRESENTATION  BY  OWNER. 

— Where  by  means  of  a  fraudulent  misrepresentation  of  the 
principal  that  he  had  not  sold  the  land,  and  had  changed  his 
intention  as  to  selling  it,  the  agent  having  an  exclusive  right 
of  sale  was  induced  to  accept  part  payment  of  his  commission 
in  satisfaction  of  the  obligation  of  the  principal,  he  is 
entitled  to  rescind  the  agreement  for  satisfaction,  and  recover 


252  BUSINESS   LAWS   FOR  BUSINESS    MEN. 

the  full  amount  of  commission  which  had  previously  ma- 
tured in  his  behalf,  by  reason  of  a  sale  effected  by  the 
principal  of  which  he  was  ignorant. 

Section  164.— WHAT  CONSTITUTES  A  SALE  BY 
OWNER. — It  is  not  necessary,  in  order  to  constitute  a  sale 
by  the  owner  sufficient  to  entitle  the  agent  to  his  commis- 
sions, that  the  owner  should  sell  for  cash,  or  upon  the  same 
terms  the  agent  was  authorized  to  effect,  or  that  he  should 
make  a  conveyance,  or  that  a  legal  title  should  pass  to  his 
purchaser.      In   a   case   decided   by   the    Supreme   Court   of 
California,    Shainwald,    Buckbee   &    Co.    sued    M.    K.    Cady 
for  commissions  on  the  sale  of  the  townsite  of  Agua  Caliente. 
In   the    written    agreement   given    by    Cady    to    the    agents, 
authorizing  them  to  find  a  purchaser,  it  was  stipulated  that 
if   Cady   himself   made   a   sale   of   the   property   within   the 
term  of  the  agreement,  the  agents  were  to  be  allowed  two 
per  cent  commissions  upon  the  amount  of  such  sale;  Cady 
sold  the  land,  partly  on  credit,  and  the  purchaser  afterwards 
failed    to    make    stipulated    payments,    and    surrendered    the 
contract  and  delivered  up  possession  of  the  land;  and  at  the 
time  when  Shainwald,  Buckbee  &  Co.  sued  Cady  for  their 
commissions,    he    had    again    possession    of   the    land.      The 
Supreme    Court    decided    that    Shainwald,    Buckbee    &    Co. 
were  entitled  to  their  commissions,  because  Cady  had  abso- 
lutely placed  it  out  of  their  power  to  make  a  sale  of  the 
property  at  all.    Cady  had  received  a  portion  of  the  purchase 
price,  and  given  up  possession  of  the  property;  and  although 
the  purchaser  failed  to  keep  possession,  and  surrendered  the 
contract,  and  turned  the  possession  back  to  Cady,  the   Su- 
preme Court  said  that  a  sale  was  consummated  sufficient  in 
law  to  make  Cady  liable  to  the  agents  under  their  agreement. 
(Decided  by  the  Supreme  Court  of  California  in  the  case 
of  Shainwald,  Buckbee  &  Co.  vs.  M.  K.  Cady,  reported  in 
Volume  92,  California  Reports,  page  83.) 

Section  165.  —  LIABILITY  OF  AGENT  UNDER 
CONTRACT  TO  SELL  FOR  SPECIFIED  AMOUNT. 
— Where  an  agent  accepts  real  property  for  sale,  and  binds 


BUSINESS    CONTRACTS   AND   LEGAL   OBLIGATIONS.  253 

himself  in  writing-  to  sell  the  property  within  a  certain  time 
for  a  certain  amount,  and  to  accept  all  over  that  sum  as  his 
compensation,  he  makes  himself  absolutely  liable  to  the 
owner.  And  if  he  fails  to  make  a  sale  for  the  amount  stated 
in  his  contract,  within  the  term  stipulated,  the  owner  can 
sue  him  for  damages.  The  owner  will  be  entitled  to  recover 
from  the  agent  as  damages  the  difference  between  the  actual 
market  value  of  the  land,  at  the  end  of  the  term  within 
which  it  was  to  be  sold,  and  the  amount  the  agent  bound 
himself  to  realize  from  it  for  the  owner.     . 

Section  166.— LIABILITY  OF  OWNER  TO  AUC- 
TIONEER.— One  representing  himself  as  the  owner  of 
real  estate,  who  employs  an  auctioneer  to  sell  the  same  under 
an  agreement  that,  in  the  event  of  a  sale,  the  auctioneer 
shall  receive  for  his  services  a  percentage  on  the  amount 
bid,  cannot,  after  a  sale  by  the  auctioneer,  avoid  paying  him 
for  his  services  because  the  purchaser  refuses  to  take  the 
property,  owing  to  a  real  or  alleged  defect  in  the  title.  The 
auctioneer  in  such  a  case  is  entitled  to  compensation  for  his 
services,  unless  there  is  a  special  agreement  that  it  shall 
depend  on  the  consummation  of  the  sale. 

Section  167.— WHAT  AGENT  MUST  PROVE  IN 
SUIT     TO     RECOVER     COMMISSIONS.  — Where    an 

agent  is  compelled  to  sue  for  his  commissions,  for  effecting 
a  sale  of  real  estate,  to  entitle  him  to  judgment  in  his  favor, 
he  must  show  that  he  was  employed  by  or  on  behalf  of  the 
owner  to  make  the  sale,  and  that  his  authority,  or  some 
note  or  memorandum  thereof,  was  in  writing,  subscribed 
by  the  party  to  be  charged,  or  by  his  authorized  agent. 
And  before  an  agent  can  be  said  to  have  earned  his  com- 
mission, it  must  also  be  shown  that  he  produced  a  pur- 
chaser, who  was  ready  and  willing  and  able  to  make  the 
purchase  on  terms  satisfactory  to  his  employer,  and  that  he 
was  the  efficient  agent  or  procuring  cause  of  the  sale.  The 
duty  assumed  by  the  broker  is  to  bring  the  minds  of  the 
buyer  and  seller  to  an  agreement  for  a  sale,  and  the  price 


254  BUSINESS   LAWS   FOR  BUSINESS   MEN. 

and  terms  on  which  it  is  to  be  made,  and  until  this  is  done, 
his  right  to  commissions  does  not  accrue.  It  must  further 
appear  that  the  broker  performed  the  duty  assumed  by  him 
within  the  time  limited  in  his  contract,  or  within  such  exten- 
sion of  time  as  may  have  been  granted  by  his  employer.  If 
he  failed  to  do  that,  he  is  not  entitled  to  the  commission, 
even  though  he  made  efforts  to  sell  the  property,  and 
first  called  it  to  the  attention  of  the  party  who  subsequently 
made  the  purchase,  unless  the  delay  was  caused  by  the  negli- 
gence, fault,  or  fraud  of  the  owner. 
Civil  Code,  Section  1624. 

Section  168.— AGENT'S  MISTAKE  AS  TO   TITLE. 

— When  the  agent  has  received  a  deposit,  and  the  purchaser 
afterwards  claims  that  the  title  is  not  good  and  demands 
the  deposit  back,  the  agent,  if  he  be  a  simple  agent  to  sell, 
will  take  his  own  chances  if  he  returns  the  deposit  to  the 
purchaser.  For  if  the  owner  insists  upon  the  purchaser  tak- 
ing the  lands,  and  litigation  follows,  and  it  is  decided  that 
the  title  to  the  land  was  in  reality  good,  the  agent  will  be 
compelled  to  pay  the  amount  of  the  deposit  to  the  owner, 
less  his  commissions,  even  though  he  has  already  returned 
the  deposit  to  the  purchaser;  and  he  will  not  be  protected 
by  the  fact  that  he  obtained  the  opinion  of  an  attorney,  and 
acted  upon  it  in  good  faith,  that  the  title  was  not  good, 
before  returning  the  deposit.  His  liability  for  the  deposit 
to  his  principal  will  depend  upon  the  fact,  whether  the  title 
was  or  was  not  good,  and  not  upon  what  he  or  anybody  else 
may  have  thought  about  it,  and  the  only  way  to  determine 
the  matter  definitely  is  by  a  judgment  of  a  court. 

Section  169.— REPUDIATION  OF  CONTRACT  BY 
VENDOR. — Real  estate  agents  may  recover  from  their 
principal  the  commission  agreed  upon  for  a  sale  secured  by 
them,  if  the  proposed  contract  of  sale  was  not  beyond  their 
authority,  though  the  vendor  refuses  absolutely  to  consum- 
mate the  purchase  or  to  negotiate  with  reference  to  it.  It  is 
immaterial    whether   the   power   conferred   upon    real    estate 


BUSINESS   CONTRACTS   AND   LEGAL   OBLIGATIONS.  255 

agents  is  to  sell  or  merely  to  secure  a  purchaser,  so  far  as 
their  right  to  recover  the  agreed  commission  is  concerned, 
if  they  comply  with  their  part  of  the  contract  in  procuring 
a  purchaser,  to  whom  the  vendor  refuses  to  convey. 

Section  170.— TERMS  OF  PAYMENT,  AND  RE- 
FUSAL TO  ACCEPT  TENDER.— A  contract  between  a 
vendor  and  a  real  estate  agent,  providing  that  the  terms  of 
payment  are  to  be  as  buyer  and  seller  may  agree,  does  not 
impose  upon  the  agent  the  duty  of  selling  for  cash,  even 
if  it  be  construed  as  reserving  to  the  vendor  the  right  to 
agree  upon  the  terms  in  person ;  and  there  can  be  no  reason- 
able objection  to  the  terms  of  payment  as  a  defense  to  the 
recovery  of  commissions,  if  when  cash  was  tendered  by  the 
purchaser,  no  objection  was  made  on  account  of  the  terms. 
When  the  vendor  has  refused  to  accept  the  tender  of  the 
purchase  money,  and  repudiated  the  contract  made  by  his 
real  estate  agent  with  the  purchaser,  he  cannot  defend 
against  the  payment  of  commissions  on  the  ground  that  the 
purchase  money  was  not  paid. 

Section  171.— HUSBAND  GIVING  AGENT  PROP- 
ERTY OF  WIFE  TO  SELL.— Where  a  vendor  gives  to 
real  estate  agents  the  property  of  his  wife  to  sell  as  his  prop- 
erty, and  describes  it  in  the  contract,  and  they  procure  a 
purchaser  without  knowledge  that  the  title  was  not  in  the 
vendor,  his  want  of  title  cannot  affect  their  right  to  recover 
their  commissions  from  him. 

Section  172.— WHAT  CONSTITUTES  FINDING  A 
PURCHASER. — To  find  a  purchaser  means  more  than  to 
procure  some  one  who  will  offer  to  negotiate  for  the  pur- 
chase. It  implies  the  production  of  one  who  is  not  only  ready 
and  willing  to  comply  with  the  terms  of  the  purchase,  but 
who  has  also  the  present  ability  to  consummate  it,  and  to 
comply  with  all  of  its  terms,  and  who  is  also  willing  and 
ready  to  do  all  the  acts  that  may  be  required  to  make  an 
actual  purchase  of  the  land.    To  produce  one  who  makes  an 


256  BUSINESS  LAWS  FOR  BUSINESS   MEN. 

oflFer  to  purchase,  and  who  is  without  means,  or  who  is  not 
in  condition  to  comply  with  the  terms  of  the  sale,  and  against 
whom  a  claim  for  damages  resulting  from  a  failure  to  per- 
form the  contract  of  purchase  could  not  be  enforced,  does 
not  constitute  the  finding  of  a  purchaser  within  the  meaning 
of  the  law;  and  the  mere  statement  by  one  who  is  produced 
that  he  is  ready  and  willing  to  make  the  purchase,  is  not 
sufficient,  for  he  must  satisfy  the  owner  that  he  has  the 
ability  to  do  so.  Upon  the  production  of  such  purchaser,  if 
the  transaction  is  not  to  be  consummated  by  an  immediate 
delivery  of  the  deed  and  payment  of  the  purchase  price,  the 
owner  has  the  right  to  demand  that  a  valid,  enforceable 
contract  for  the  purchase  of  the  land  shall  be  executed  by 
him.  The  owner  may,  however,  waive  the  execution  of  such 
contract;  as,  if  after  the  broker  has  introduced  the  purchaser 
to  him,  he  himself  assumes  to  prepare  a  contract,  or  to  deal 
with  the  purchaser  upon  other  terms,  or  accepts  a  verbal 
obligation  from  him. 

Section    173.— OWNER   AND    PURCHASER    NEED 
NOT    BE    BROUGHT    FACE    TO    FACE.— It  is   not 

essential,  to  entitle  the  agent  to  his  commissions,  that  he 
should  bring  the  owner  and  purchaser  face  to  face.  If  the 
agent  secures  from  the  purchaser  a  valid  contract,  according 
to  the  terms  of  his  agreement  with  his  principal,  and  a 
deposit  of  money  if  required,  and  the  purchaser  is  really 
ready,  willing,  and  able  to  complete  the  purchase  according 
to  the  terms  proposed,  the  agent  has  performed  his  duty  as 
fully  as  though  the  parties  had  been  brought  together  in 
person. 

Section   174.— AMOUNT    OF    COMMISSIONS.— The 

amount  of  compensation  or  commissions  which  a  real  estate 
agent  shall  receive  will  in  all  cases  depend  upon  his  contract 
with  the  owner,  if  the  contract  makes  any  provision  in 
respect  to  it;  and,  in  the  absence  of  any  agreement  on  the 
amount  of  commission,  it  will  be  measured  by  the  value  of 


BUSINESS   CONTRACTS   AND   LEGAL  OBLIGATIONS.  257 

the  service  rendered,  and  the  agent  will  be  entitled  to  a  rea- 
sonable compensation,  to  be  ascertained  from  all  the  cir- 
cumstances. 

Section  175.—  PREVENTION  OF  SALE  BY 
OWNER. — If  the  owner  in  fact  has  a  good  title,  but  goes 
to  the  purchaser,  or  to  the  purchaser's  attorney,  and  makes 
representations  for  the  purpose  of  defeating  the  sale,  and 
makes  the  intended  purchaser  believe  that  the  title  is  bad, 
and  the  latter  refuses  to  proceed  with  the  transaction  in 
consequence,  the  broker  is  entitled  to  his  commission. 

Section  176.— WHEN  PURCHASER  AND  OWNER 
ARE  NOT  BROUGHT  TOGETHER,  PURCHASER 
MUST  SIGN  A  WRITTEN  CONTRACT.— If  the  agent 
does  not  produce  the  purchaser  before  the  owner  in  person, 
ready  and  willing  to  enter  into  a  contract,  the  purchaser 
must  sign  a  written  contract,  and  this  written  contract 
must  be  delivered  by  the  agent  to  the  owner.  This  im- 
portant rule  as  to  the  duty  of  the  agent  was  stated  by  the 
Supreme  Court  of  California  in  a  case  where  B.  M.  Gunn, 
a  real  estate  broker,  sued  the  Bank  of  California  for  com- 
missions. The  Superior  Court  of  San  Francisco  decided 
that  Gunn  was  entitled  to  commissions,  but  the  Supreme 
Court  set  the  judgment  aside,  and  decided  that  upon  the 
facts  the  broker  was  not  entitled  to  commissions.  Gunn 
had  a  contract  with  the  bank,  by  which  he  was  to  sell  certain 
property  within  a  certain  time  for  $41,000,  and  was  to 
receive  $1,000  as  his  commission  for  making  the  sale;  he 
found  one  Keating,  within  the  time,  who  was  ready,  able, 
and  willing  to  purchase  at  the  price  of  $41,000,  but  his 
agreement  with  Keating  was  oral  only,  and  Keating  signed 
nothing,  although  he  orally  agreed  to  buy  for  the  price 
stated  and  paid  $500  on  account,  and  took  a  receipt  signed 
by  Gunn  alone ;  the  receipt  recited  that  Keating  was  to  have 
twenty  days  within  which  to  examine  the  title  to  the  prop- 
erty. On  the  same  day  Gunn  sent  to  a  Mr.  Brown,  who 
was  acting  for  the  bank  in  the  matter,  the  following  letter: 


BUSINESS   LAWS   FOR  BUSINESS    MEN. 

"Dear  Sir:  I  beg  leave  to  inform  you  that  I  have  this  day 
sold  the  lot  and  improvements  known  as  the  Golden  Gate 
Flour  Mill  Property  for  the  sum  of  forty-one  thousand 
dollars,  less  one  thousand  dollars  commission,  and  have  given 
purchaser  twenty  days  to  examine  title  to  same.  Please  send 
me  abstract  and  approval  of  sale,  and  oblige."  This  letter 
was  returned  by  Brown  with  this  endorsement:  "I  here- 
with approve  above  sale.  The  Bank  of  California.  Thomas 
Brown."  Keating  refused  to  complete  the  sale,  on  account 
of  a  defect  in  the  title.  Keating  was  financially  able  to 
pay  the  price  he  orally  agreed  to  pay  for  the  land,  but  he 
signed  no  contract  which  bound  him  to  complete  the  purchase 
in  case  the  title  to  the  land  was  perfect,  and  Gunn  did  not 
introduce  him  to  Brown,  or  inform  Brown  who  was  the 
purchaser  referred  to  in  his  letter,  and  Brown  did  not  learn 
the  intended  purchaser's  name  until  about  the  time  the  title 
was  rejected  by  Keating's  attorney.  In  the  suit  brought  by 
Gunn  for  the  $1,000  commission,  the  Supreme  Court  held 
that,  as  Keating  had  not  signed  any  contract,  and  had  not 
been  produced  before  Brown  as  the  purchaser,  Gunn  had  not 
"found  a  purchaser,"  as  the  law  reads,  and  was  not  entitled 
to  the  commissions.  And  the  Supreme  Court,  in  its  decision 
of  the  case,  said:  "The  question  here  is.  What  is  'finding' 
or  'producing'  a  purchaser  within  the  meaning  of  the  law? 
Is  it  sufficient  for  a  broker  to  merely  find  a  person  financially 
able,  and  who  verbally  agrees  with  him  to  purchase  upon  the 
terms  of  the  vendor,  and  makes  a  deposit,  but  who  neither 
sig^s  a  binding  agreement  to  purchase  upon  the  terms  of  the 
vendor,  nor  is  produced  before  the  vendor  as  a  person  ready 
and  willing  to  enter  into  such  a  contract?  It  seems  to  us 
very  clear  that  this  question  must  be  answered  in  the  nega- 
tive. The  contract  of  the  broker  is  to  negotiate  a  sale,  that  is, 
to  procure  a  valid  contract  to  purchase,  which  can  be  en- 
forced by  the  vendor  if  his  title  is  perfect;  or  if  he  does 
not  procure  such  contract,  to  bring  the  vendor  and  the  pro- 
posed purchaser  together,  that  the  vendor  may  secure  such 
a  contract,  unless  he  is  willing  to  trust  to  an  oral  agreement. 
This  contract  on  the  part  of  the  broker  is  complete,  when  he 


BUSINESS   CONTRACTS   AND   LEGAL  OBLIGATIONS.  259 

delivers   or  tenders  to  the  owner  a  valid   written   contract, 
containing  the  terms  of  sale  agreed  on,  signed  by  a  party 
able  to  comply  therewith,  or  able  to  answer  in  damages  if 
he  should  fail  to  perform.    This  is  all  the  agent  can  do,  and 
when  it  is  done  he  is  entitled  to  his  commissions.     But  the 
necessity   of   a    written    contract    of    sale    may    be    rendered 
unnecessary  if  the  agent  bring  the  vendor  and  vendee  to- 
gether,   and   the    latter    is   able    and   willing,    and    offers    to 
complete  the  contract,   provided   the   vendor   will   make   the 
conveyance.     In  such  a  case  the  agent  has  done  all  that  he 
can  do,  and  if  the  vendor  under  such  circumstances  refuses 
to  complete  the  sale,  he   nevertheless   will   be  compelled   to 
pay  the  agent  his  commissions.     The  object  of  the  vendor 
is  to  effect  a  sale  of  his  property,  and  when  the  real  estate 
broker  produces  a  contract  executed  by  a  solvent  purchaser, 
he  is  then  entitled  to  pay  for  his  services,  whether  the  trade 
is  finally  consummated  or  not,  because  if  the  vendee  refuses 
to  take  the  property,  the  vendor  holds  the  contract,   which 
renders  the  vendee  liable   for  all  damages    (including  com- 
missions paid  by  the  vendor  to  the  broker)   for  a  failure  to 
comply.      The   right   of   Gunn   to   the    agreed   compensation 
depends  upon  the  performance  of  his  contract  to  procure  a 
purchaser,  and  as  he  did  not  do  this,  and  defendant  neither 
waived  nor  prevented  such  performance,  he  has  not  earned 
his  commission."     (Decided  by  the  Supreme  Court  of  Cali- 
fornia in  the  case  of  Gunn  vs.  Bank  of  California,  reported 
in  Volume  99,  California  Reports,  page  349.) 

Section  177.  — WHEN  OWNER  MUST  RETURN 
MONEY  PAID  ON  CONTRACT.  — A  vendor  under 
contract  for  the  sale  of  land,  who  has  received  a  part  of  the 
purchase  price  at  the  time  of  the  execution  of  the  contract, 
cannot  rescind  the  contract  on  account  of  the  non-payment 
of  the  balance  of  the  purchase  price  on  the  day  stipulated 
for  in  the  agreement,  without  returning  or  offering  to  return 
to  the  vendee  the  money  that  he  has  received  on  account  of 
the  contract.  When  a  contract  of  sale  and  purchase  of  lands 
is  abandoned  or  rescinded  by  the  parties,  the  vendee,  though 


260  BUSINESS   LAWS   FOR  BUSINESS    MEN. 

in  default,  may  recover  back  installments  of  the  purchase- 
money  paid,  less  the  actual  damage  to  the  vendor  occasioned 
by  his  breach  of  the  contract. 

Section  178.— AGREEMENT  BETWEEN  AGENTS 
TO  CO-OPERATE  IN  SELLING.— Real  estate  agents 
may  co-operate  in  the  selling  of  land,  for  a  share  of  the  com- 
missions, and  such  agreement  between  themselves  need  not 
be  in  writing.  The  agreement  will  be  sufficient,  if  made 
orally,  and  the  courts  will  enforce  it.  An  agreement  between 
brokers,  to  co-operate  in  making  sales  of  real  estate,  and  to 
share  the  commissions,  is  not  required  by  law  to  be  in  writ- 
ing. The  authority  from  the  owner  to  sell  must  be  in 
writing,  but  the  agreement  between  the  brokers  to  co-operate 
in  making  the  sale  may  be  made  verbally.  (Decided  by  the 
District  Court  of  Appeals  of  California,  in  the  case  of 
Saunders  vs.  Yoakum,  which  decision  is  printed  in  Volume 
X  of  the  California  Appellate  Decisions,  page  243.) 

Section  179.— AUTHORITY  TO  SELL  ON  CREDIT. 

— When  a  real  estate  agent  receives  authority  from  the 
owner  to  sell  land  on  credit,  the  time  of  credit  specified 
in  their  agreement  is  the  measure  of  the  agent's  authority. 
Where  the  agreement  authorizes  the  agent  to  sell  on  credit, 
but  does  not  specify  the  time  of  credit,  the  agent  must  use 
his  discretion  in  the  matter,  and  has  authority  to  give  the 
purchaser  a  reasonable  credit;  and  the  credit  given,,  to  be 
reasonable,  must  be  such  as  is  usual  and  customary  on  sales 
of  real  estate  in  the  particular  vicinity.  There  is  no  set 
rule  as  to  what  will  be  considered  a  reasonable  credit,  but 
the  question  must  be  determined  from  all  the  circumstances 
in  each  particular  case. 

Section  180.— POWER  OF  ATTORNEY  TO  AGENT 
TO  MAKE  DEED. — The  question  as  to  what  is  necessary 
in  a  power  of  attorney  for  the  sale  of  land,  to  authorize  the 
agent  to  execute  and  deliver  a  deed  to  the  purchaser,  must 


BUSINESS   CONTRACTS   AND   LEGAL  OBLIGATIONS.  261 

be  determined  in  each  case  upon  its  own  peculiar  circum- 
stances. As  between  the  parties  to  the  transaction,  it  is 
proper  to  consider  their  situation  at  the  time  of  the  execu- 
tion of  the  power  of  attorney,  and  their  intention  is  to  be 
gathered  from  the  words  of  the  instrument,  and  all  the 
circumstances  under  which  it  was  written.  A  power  of 
attorney  for  the  sale  of  land  is  sufficient  as  between  the 
parties  to  the  transaction,  whether  properly  acknowledged  or 
recorded,  or  not,  if  it  is  otherwise  valid. 

Section  181.— RISK  OF  PURCHASER  WHO  TAKES 
LAWYER'S  ADVICE  AS  TO  TITLE.— A  purchaser  of 
land  is  not  justified  in  refusing  to  accept  a  conveyance,  and 
in  demanding  back  a  deposit  paid  by  him  on  account  of 
purchase-money,  merely  because  of  the  opinion  of  his  lawyer, 
though  given  in  good  faith,  that  the  title  is  not  safe,  if  the 
opinion  is  erroneous,  and  the  record  title  is  in  fact  perfect. 
The  purchaser  must  take  the  risk  of  the  soundness  of  the 
advice  upon  which  he  acts. 

Section  182.— LIABILITY  OF  AUCTIONEER  FOR 
DEPOSIT  AT  AUCTION  SALE.— Although  by  the 
terms  of  an  auction  sale  a  deposit  of  a  percentage  of  the 
cash  payment  with  the  auctioneer  pending  the  examination 
of  the  title,  which  is  warranted  perfect,  makes  the  auctioneer 
a  stakeholder  for  the  parties ;  yet  when  the  title  is  shown 
to  be  perfect,  the  deposit  then  becomes,  according  to  the 
terms  of  the  sale,  a  portion  of  the  cash  payment,  and  the 
property  of  the  owner  of  the  land,  less  the  charges  and 
commissions  of  the  auctioneer ;  and  the  auctioneer  cannot 
thereafter  return  it  to  the  purchaser  except  at  his  own  risk. 

Section  183.— AGENT'S  KNOWLEDGE  OF  TITLE. 

— A  real  estate  agent  has  nothing  to  do  with  the  title  or 
ownership  of  the  property,  and  his  knowledge  as  to  the  title, 
or  the  equitable  estate  of  a  third  person  therein,  is  of  no 
consequence;  and  his   right  to  the  compensation  contracted 


BUSINESS   LAWS   FOR  BUSINESS    MEN. 

for  does  not  in  any  way  depend  on  the  validity  or  invalidity 
of  the  owner's  title  to  the  property. 

Section  184.— INTEREST  ALLOWED  BY  LAW  ON 
AGENT'S   COMMISSIONS.— A  demand  for  broker's  com- 
missions, which  is  capable  of  being  made  certain  by  computa- 
tion, draws  interest  from  the  time  when  it  became  due. 
Civil  Code,  Section  3287. 

Section  185.— HOW  AUTHORITY  OF  AGENT  CAN 
BE  EXTENDED. — When  the  term  of  a  real  estate  agent's 
employment  is  about  to  expire,  the  authority  of  the  agent 
cannot  be  extended  by  a  verbal  agreement.  The  extension 
of  the  term  of  his  employment,  like  the  original  agreement, 
must  be  in  writing. 

Section  186.  — COSTS  IN  SUIT  FOR  COMMIS- 
SIONS.— Where  a  real  estate  agent  sues  in  the  Superior 
Court  for  commissions,  he  will  have  to  pay  the  costs  of  the 
court  — Clerk's  fees,  Sheriff's  fees,  Reporter's  fees,  jury  fees 
— if  the  verdict  in  his  favor  be  for  less  than  $300.  In  other 
words,  the  agent  must  secure  a  judgment  for  at  least  $300, 
or  he  will  not  be  entitled  to  costs.  If  the  agent  sues  in  the 
Justice  Court,  for  less  than  $300,  the  judgment  in  his  favor 
will  carry  the  costs. 

Code  of  Civil  Procedure,  Section  1022. 

Section  187.— COMMISSIONS  OUT  OF  PURCHASE- 
MONEY. — Where  the  agreement  between  the  owner  and 
the  agent  is,  that  the  agent  is  to  receive  his  commissions 
"out  of  the  purchase-money,"  or  "out  of  the  first  money 
received"  on  the  sale,  the  agent  will  not  be  entitled  to  any 
commissions  at  all,  if  the  sale  does  not  go  through.  Under 
such  a  contract,  the  sale  must  be  completed,  and  the  money 
paid  by  the  vendee,  before  the  agent  is  entitled  to  com- 
missions. 


BUSINESS   CONTRACTS  AND  LEGAL  OBLIGATIONS.  263 

Section    188.— SELLING     LAND      ON      SHARES.— 

Under  an  agreement  between  a  land  owner  and  a  broker, 
whereby  the  latter  is  to  sell  the  land  for  a  share  of  the 
proceeds  above  the  cost  price  and  selling  expenses  after  all 
the  land  is  sold,  the  procuring  of  a  purchaser  for  all  the 
tract,  who  is  accepted  by  the  owner  and  with  whom  an 
executory  contract  is  made,  is  a  sufficient  performance  of  the 
agreement  to  entitle  the  broker  to  his  share  of  the  profits. 

Section  189.— PURCHASE  BY  AGENT  FROM  HIM- 
SELF.— An  agent  or  sub-agent  employed  to  assist  in  the 
consummation  of  a  sale  of  land  is  incapable  of  legally  pur- 
chasing the  property  from  himself  without  the  knowledge 
of  the  principal,  and  such  a  purchase  will  always  be  set 
aside,  at  the  option  of  the  principal.  The  reason  is,  that 
the  agent  should  not  unite  his  personal  and  his  representa- 
tive characters  in  the  same  transaction ;  he  cannot  serve  two 
masters;  and  the  law  will  not  permit  him  to  be  exposed  to 
the  temptation,  or  brought  into  a  situation  where  his  own 
personal  interests  conflict  with  the  interests  of  his  principal, 
and  with  the  duties  which  he  owes  to  his  principal.  The 
fiduciary  relations  between  a  principal  and  his  agent  preclude 
the  latter  from  having  any  interest  in  the  subject-matter  of 
his  agency  adverse  to  that  of  his  principal.  In  the  employ- 
ment of  an  agent  the  principal  bargains  for  his  disinterested 
skill  and  diligence,  and  whenever  the  interests  of  the  agent 
become  antagonistic  to  those  of  his  employer  he  violates  his 
obligation  by  continuing  to  act  in  his  behalf  without  dis- 
closing that  fact.  A  broker,  who  is  employed  by  the  owner 
to  sell  his  property,  is,  by  the  mere  fact  of  accepting  such 
employment,  precluded  from  acquiring  an  interest  in  the 
property  he  is  employed  to  sell.  He  cannot  act  as  such 
agent  in  making  a  sale  either  to  himself  or  where  he  is 
interested  in  the  purchase,  and  he  is  equally  precluded  from 
having  a  personal  interest  in  the  result  of  the  sale  of  which 
his  principal  is  ignorant.  Whenever  he  has  an  interest  in 
making  the  sale  which  is  antagonistic  to  that  of  his  principal, 
he  is  unable  to  discharge  his  full  duty  to  the  latter,  and  by 


264  BUSINESS   LAWS   FOR   BUSINESS   MEN. 

continuing  to  act  as  his  agent  without  disclosing  to  him 
the  fact  of  such  interest  he  commits  a  fraud  upon  him  which 
will  deprive  him  of  all  right  to  compensation  for  services. 
(Decided  by  the  District  Court  of  Appeals,  in  the  case  of 
Rauer's  Law  and  Collection  Co.  vs.  W.  B.  Bradbury,  which 
decision  is  printed  in  Volume  II  of  California  Appellate  De- 
cisions, No.  86,  page  377.) 

Section  190.  — PURCHASE  BY  AGENT  FROM 
PRINCIPAL. — While  an  agent  cannot  purchase  from  him- 
self, he  may,  where  all  the  circumstances  show  fair  dealing 
and  good  faith,  purchase  land  from  his  principal,  although  it 
was  placed  in  his  hands  to  sell  to  others.  There  is  no  law 
against  a  purchase  by  an  agent  from  his  principal,  where 
the  facts  are  fully  disclosed  to  the  principal,  and  the  agent 
acts  in  good  faith,  taking  no  advantage  of  his  situation.  The 
principal  may,  if  he  sees  fit,  deal  with  the  agent  as  with  any 
other  person.  The  agent  has  the  same  right  to  deal  directly 
with  his  principal  as  has  a  stranger.  And  when  the  agent 
deals  with  his  principal  at  arm's  length,  and  after  a  full 
disclosure  of  all  that  he  knows  with  respect  to  the  property, 
the  sale  will  be  as  valid  as  though  the  purchase  had  been 
made  by  a  stranger. 

Section  191.  — AGENT  BUYING  IN  HIS  OWN 
NAME. — When  the  agent  is  employed  by  his  principal  to 
buy  real  estate,  and  uses  the  principal's  money  in  making  a 
purchase  of  the  land,  but  has  the  deed  made  in  his  own  name, 
the  law  will  not  permit  him  to  gain  any  advantage  by  the 
transaction.  He  will  be  held  as  a  trustee  for  the  principal, 
and  will  be  compelled  to  convey  the  land  to  the  principal. 

Section  192.  — WHEN  AUTHORITY  OF  AGENT 
REVOCABLE. — Where  a  real  estate  agent  has  authority 
to  sell  land,  if  no  time  is  stated  within  which  the  sale  can 
be  made,  the  authority  is  revocable  at  the  will  of  the  owner, 
at  any  time  before  it  has  been  exercised. 


BUSINESS   CONTRACTS   AND   LEGAL  OBLIGATIONS.  265 

Section  192a.  — WHEN  OPTION  CAN  BE  RE- 
VOKED.— Where  an  option  to  sell  real  estate  is  without 
consideration,  the  owner  can  revoke  the  option  before  the 
expiration  of  the  time  given,  if  no  acceptance  has  been  com- 
municated to  him.  If  a  consideration  has  been  paid  for  the 
option,  the  owner  cannot  revoke  it  until  the  time  expires. 
(Decided  by  the  California  Court  of  Appeals,  in  the  case  of 
Canty  vs.  Brown,  which  decision  is  printed  in  Volume  IX 
of  California  Appellate  Decisions,  page  475.) 

Section  193.— WHICH  ONE  OF  TWO  BROKERS 
IS  ENTITLED  TO  COMMISSIONS.  — When  two 
brokers  have  been  employed  by  an  owner,  and  one  of  them 
in  fact  names  the  property  to  the  purchaser,  and  the  pur- 
chaser negotiates  solely  with  him  and  at  his  instance  with 
the  owner,  the  other  broker  is  not  entitled  to  commissions, 
notwithstanding  he  casually  learns  that  such  purchaser  is 
considering  the  expediency  of  making  the  purchase,  and 
therefore  calls  upon  him  and  urges  the  purchase,  and  reports 
his  name  to  the  owner.  Only  the  broker  whose  efforts  were 
the  procuring  cause  of  the  sale  is  entitled  to  the  commissions 
from  the  principal. 

Section  194.— AUTHORITY  OF  AGENT  MAKING 
LEASE  FOR  TERM  LONGER  THAN  ONE  YEAR.— 

Where  a  real  estate  agent  is  authorized  to  lease  land  of  his 
principal,  he  cannot  make  a  lease  for  a  term  longer  than 
one  year,  unless  his  authority  to  make  the  lease  is  in  writ- 
ing. The  authority  of  an  agent  to  make  a  lease  for  a  period 
in  excess  of  one  year  must  be  in  writing,  and  cannot  be 
conferred  by  oral  contract.  A  lease  by  an  agent  exceeding 
the  term  of  one  year  cannot  operate  as  a  valid  lease  for 
one  year,  the  agent's  authority  not  being  in  writing.  Where 
the  owner  of  land,  without  knowledge  of  a  lease  made  by 
an  agent  without  authority,  has  rented  the  land  to  another, 
no  power  remains  in  him  to  ratify  the  previous  unauthorized 
act  of  his  agent. 

Civil  Code,  Section  1624. 


266  BUSINESS   LAWS   FOR  BUSINESS   MEN. 

Section  195.— DEATH  OF  PRINCIPAL  REVOKES 
AUTHORITY  OF  AGENT.— The  death  of  the  principal 
revokes  the  authority  of  the  agent,  except  where  the  agent's 
authority  is  coupled  with  an  interest  in  the  land.  In  order 
that  the  agent's  authority  shall  survive  the  death  of  his 
principal,  it  is  necessary  that  such  an  interest  or  estate 
shall  have  passed  to  the  agent  as  will  entitle  him  to  execute 
the  authority  to  sell  in  his  own  name.  Sometimes,  the 
agent  will  hold  a  power  of  attorney,  from  which  it  can  be 
seen  that  he  has  an  interest  in  the  land,  and  that  it  was 
the  intention  of  his  principal  that  the  power  should  be  irre- 
vocable by  death.  But,  whatever  form  the  agent's  written 
authority  may  be  in,  his  right  to  commissions,  or  the  prin- 
cipal's promise  to  pay  commissions  on  the  sale,  will  not  of 
themselves  be  sufficient  to  create  an  agency  which  will  survive 
the  principal's  death.  The  agent  must  have  acquired  by 
his  power  from  the  principal  an  interest  in  the  land  itself. 
What  constitutes  an  interest  in  the  land,  sufficient  for  keep- 
ing alive  an  agent's  authority  after  the  principal's  death, 
depends  very  much  upon  the  circumstances  of  each  particular 
case — so  much  so  that  illustrations  of  the  rule  here  would 
not  be  of  value. 

Section  195a.  — COMMISSIONS  ON  SALES  OF 
REAL  PROPERTY  UNDER   ORDER   OF   COURT.— 

In  the  settlement  of  an  estate,  in  any  order  of  sale  of  real 
estate,  or  subsequent  to  making  any  such  order,  the  court 
may  authorize  any  executor  or  administrator  to  enter  into 
a  contract  with  any  bona  fide  real  estate  agent  to  secure  a 
purchaser,  providing  for  the  payment  by  the  estate  to  said 
agent  of  a  commission,  the  amount  of  which  shall  be  speci- 
fied, payable  out  of  the  proceeds  of  any  such  sale.  If  a  sale 
to  a  purchaser  obtained  by  such  agent  is  returned  to  the 
court  for  confirmation  and  said  sale  be  confirmed  to  such 
purchaser,  such  contract  will  be  binding  and  valid  as  against 
the  estate. 


BUSINESS   CONTRACTS   AND  LEGAL  OBLIGATIONS.  267 

By  the  execution  of  any  such  a  contract  no  personal  liabil- 
ity will  attach  to  the  executor  or  administrator,  and  no 
hability  of  any  kind  will  be  incurred  by  the  estate  unless  an 
actual  sale  is  made  and  confirmed  by  the  court. 

Act  of  the  Legislature,  approved  March  10,  1909. 

Section  195b.— PERSONAL  PROPERTY  BROKERS. 

— A  personal  property  broker  may  charge,  receive,  and  col- 
lect, for  money  loaned  or  advanced  on  personal  property, 
secured  by  chattel  mortgage,  bill  of  sale,  or  other  contract, 
or  secured  by  an  assignment  or  power  of  attorney  respecting 
wages,  salary,  earnings  or  income,  the  sum  of  two  per  cent 
per  month,  and  no  more. 

Act  of  the  Legislature,  approved  April  16,  1909. 

No  further  or  other  charges,  either  for  recording,  insuring 
or  examining  the  security  or  property,  or  for  the  drawing, 
executing  or  filing  of  papers,  or  for  any  services  or  upon 
any  pretext  whatsoever  beyond  the  aforesaid  charge  for 
interest  or  discount  shall  be  asked,  charged,  or  in  any  way 
received,  where  the  same  would  thereby  make  a  greater 
charge  for  the  money  or  thing  advanced  than  the  aforesaid 
rate  of  two  per  centum  per  month,  and  where  made,  all  such 
charges  shall  be  considered  and  be  of  the  same  effect  as  so 
much  added  interest;  provided,  however,  that  with  the  con- 
sent of  the  borrower  he  may  be  required  to  pay  the  fees 
or  charges  actually  expended  where  the  same  are  made 
necessary  by  law  to  give  full  legal  effect  to  any  instrument 
given  hereunder. 

No  contract  of  any  kind  or  nature  made  by  any  personal 
property  broker  which  comes  within  the  scope  of  business 
as  set  forth  herein,  or  which  in  any  way  involves  any  secur- 
ity given  to  secure  the  performance  of  such  contract,  shall 
be  valid  or  of  any  force,  virtue  or  effect,  either  at  law  or  in 
equity,  if  there  is  therein  or  thereon  directly  or  indirectly 
charged,  accepted  or  contracted  to  be  received  or  paid,  either 


268  BUSINESS   LAWS  FOR  BUSINESS   MEN. 

in  money,  goods,  discount,  or  thing  in  action,  or  in  any  other 
way,  a  greater  benefit,  rate  of  discount,  or  interest  than  the 
rate  of  two  per  centum  per  month;  and  if  a  greater  benefit, 
rate  of  discount  or  interest  than  two  per  centum  per  month 
is  directly  or  indirectly  advanced  or  paid  upon  any  such 
contract  as  is  in  this  section  designated,  the  excess  above 
the  said  rate  of  two  per  centum  per  month  so  advanced 
or  paid  may  be  demanded  and  recovered  by  the  person  or 
his  legal  representatives  or  assigns  who  advanced  or  paid 
the  same  from  the  person  or  corporation  either  to  whom  or 
for  whose  use  or  benefit  such  payment  or  advance  or  any 
part  thereof  was  made. 

The  failure  of  any  person  or  corporation,  or  any  employee, 
employees,  agent,  agents,  representative  or  representatives 
making,  renewing  or  extending  a  loan  or  advance  properly 
falling  within  the  scope  of  business  as  set  forth  herein,  to 
comply  with  any  part  of  the  provisions  hereof,  shall  be 
guilty  of  a  misdemeanor,  and  for  the  first  offense  punished 
by  imprisonment  in  a  county  jail  not  exceeding  six  months, 
or  by  a  fine  not  exceeding  $500,  or  by  both,  and  for  each  sub- 
sequent offense  by  a  fine  of  not  less  than  $50  or  more  than 
$500,  or  by  imprisonment  in  the  county  jail  of  not  less  than 
ten  days  and  not  to  exceed  six  months,  or  by  both  such  fine 
or  imprisonment. 

Penal  Code,  Section  19. 

Act  of  the  Legislature,  approved  April  21,  1911. 

Fire  Insurance. 

Section  196.— CONTRACT  BETWEEN  THE  PAR- 
TIES.— Insurance  against  loss  by  fire  constitutes  one  of 
the  common  and  important  contracts  in  the  business  of  every 
community.  In  California  the  fire  insurance  business  is 
carried  on  by  corporations,  nearly  all  having  ample  capital, 
and  fully  able  to  meet  such  losses  as  they  are  required 
to  pay.  Yet  so  many  and  so  varied  are  the  policies  issued, 
and  the  circumstances  and  causes  of  fires  and  losses,  and 
the  claims  and  adjustments  of  claims  after  fires  have  occurred, 


BUSINESS    CONTRACTS   AND   LEGAL   OBLIGATIONS.  269 

that  it  is  not  a  matter  for  wonder  that  conflicts  are  contin- 
ually arising  between  the  insurer  and  the  insured,  over  the 
terms  and  conditions  of  the  contract  and  the  rights  and 
obligations  of  the  parties.  The  Legislature  has  attempted 
in  our  statute  law  to  fix  the  mutual  obligations  and  liabilities 
of  the  parties  to  the  contract  of  fire  insurance,  and  the 
Supreme  Court  of  California  has  in  many  decisions  stated 
definite  rules  of  construction  which  must  be  applied  to  the 
policies  issued  by  insurance  companies.  The  contract  of 
insurance  is  generally  defined  by  the  statute  of  California  as 
being  a  contract  whereby  one  undertakes  to  indemnify  an- 
other against  loss,  damage,  or  liability  arising  from  an 
unknown  or  contingent  event.  Insurance  against  fire  is  a 
contract  whereby  the  insurer  becomes  bound,  for  a  definite 
premium  or  consideration,  to  indemnify  the  insured  against 
loss  or  damage  to  the  property  named  in  the  policy.  The 
policy,  and  the  conditions  contained  in  it,  fix  the  relations 
between  the  parties  to  the  contract,  and  furnish  the  measure 
of  their  respective  rights  and  liabilities. 
Civil  Code,  Section  2527. 

Section   197.— DESIGNATION    OF    PARTIES.— The 

party  who  issues  the  policy  of  fire  insurance  is  called  the 
insurer,  and  the  party  who  is  indemnified  is  called  the 
insured. 

Civil  Code,  Section  2538. 

Section  198.— INSURABLE  INTEREST.— Every  in- 
terest in  property,  or  relating  to  it,  or  liability  in  respect  to 
it,  of  such  a  nature  that  a  contemplated  peril  might  directly 
injure  the  insured,  is  an  insurable  interest,  in  the  law  of 
California.  The  contract  of  insurance,  being  one  of  in- 
demnity, the  insured  must  have  such  an  interest  in  the 
property  as  that  its  destruction  will  result  in  pecuniary  loss 
to  him.  But  it  is  not  necessary  he  shall  have  a  title, 
provided  his  interest,  whatever  it  may  be,  is  such  that  it 
would   be    impaired    or    injured    by   the    destruction    of   the 


270  BUSINESS   LAWS   FOR  BUSINESS    MEN. 

property.  Nor  is  it  necessary  that  the  interest  of  the  in- 
sured be  personal ;  for  if  he  has  an  interest  in  the  property 
as  trustee,  agent,  mortgagee,  commission  merchant,  common 
carrier,  warehouseman,  administrator,  pledgee,  lessor  or 
lessee,  consignee,  or  judgment  creditor,  the  courts  have  held 
that  this  is  an  insurable  interest.  And  it  has  been  held  that 
even  one  who  has  no  title,  legal  or  equitable,  in  the  prop- 
erty, and  no  present  possession  or  right  of  possession,  has 
an  insurable  interest  if  he  will  derive  benefit  from  the  con- 
tinued existence  of  the  property,  or  will  suffer  loss  by  its 
destruction. 

Civil  Code,  Section  2546. 

Section  199.— MEASURE  OF  INTEREST  IN  PROP- 
ERTY.— The  measure  of  an  insurable  interest  in  property 
is  the  extent  to  which  the  insured  might  be  damaged  by 
loss  of  or  injury  to  the-  property.  Therefore,  under  the 
provisions  of  our  law,  if  the  owner  of  a  building  insures  it 
for  more  than  it  is  worth,  he  will  not  be  entitled  to  the 
full  amount,  merely  because  the  company  has  issued  a  policy 
and  accepted  a  premium  on  a  fictitious  value ;  but  the 
amount  the  insurer  will  be  liable  to  pay,  in  all  cases,  will 
be  the  amount,  to  the  extent  of  the  policy,  necessary  to 
reimburse  the  insured  for  the  pecuniary  loss  he  has  sus- 
tained, unless  the  insurer  has  agreed  in  the  policy  that  in 
case  of  loss  the  property  shall  be  valued  at  a  given  sum. 
Where  the  interest  of  the  insured  is  less  than  a  whole  owner- 
ship, as  where  he  has  an  interest  only  as  mortgagee,  his 
insurable  interest  in  the  property  is  measured  by  the  amount 
of  the  debt,  and  no  more;  and  in  fact,  the  insured  can 
never  be  entitled  to  recover  more  than  his  actual  loss. 
Civil  Code,  Section  2550. 

Section  200.  — WHEN  INSURABLE  INTEREST 
MUST  EXIST.— The  law  of  California  provides,  that  the 
interest  insured  must  exist  when  the  insurance  takes  effect, 
and  when  the  loss  occurs,  but  need  not  exist  between  those 
two  dates.     The  meaning  of  this  is,  that  where  the  policy 


BUSINESS   CONTRACTS   AND   LEGAL  OBLIGATIONS.  271 

does  not  prohibit  it,  the  insured  may  dispose  of  his  interest 
in  the  insured  property,  after  the  policy  has  been  issued, 
and  if,  before  the  term  of  the  policy  ends,  he  becomes  again 
the  owner  of  his  interest  in  the  property,  and  owns  it  at 
the  time  of  the  loss,  he  may  recover  on  the  policy.  The 
interest  of  the  party  in  the  insurance  is  simply  suspended, 
when  he  has  disposed  -of  the  property  without  changing  the 
policy  to  another,  until  the  interest  in  the  property  and  the 
interest  in  the  insurance  are  again  vested  in  himself.  A 
change  in  interest  in  a  thing  insured,  after  the  loss,  does 
not  affect  the  right  of  the  insured  to  collect  the  insurance. 
Where  a  person  holds  a  policy  which  includes  several  articles 
separately  insured,  and  transfers  some  of  the  articles  only, 
his  insurance  upon  the  articles  not  transferred  is  still  good. 
A  policy  is  not  rendered  invalid  by  the  death  of  the  insured; 
for  his  administrator  will  hold  the  policy  for  the  benefit  of 
those  who  succeed  to  his  estate.  The  transfer  of  interest 
by  one  of  several  partners,  joint  owners,  or  owners  in  com- 
mon, who  are  jointly  insured,  to  the  others,  does  not  avoid 
an  insurance,  even  though  it  has  been  agreed  that  the  insur- 
ance shall  cease  upon  an  alienation  of  the  thing  insured. 

Civil   Code,    Sections   2552,   2553,   2554,   2555,   2556, 
2557. 

Section  201.— INSURANCE  WITHOUT  INTEREST 

ILLEGAL. — The  sole  object  of  insurance  is  the  indemnity 
of  the  insured,  and  if  he  has  no  insurable  interest  when 
the  policy  takes  effect,  the  policy  is  void;  and  if  he  has  no 
insurable  interest  when  the  loss  occurs,  he  cannot  collect 
the  insurance. 

Civil  Code,  Section  2551. 

Section    202.  — WAGER    POLICIES    VOID.  — Every 

policy  executed  by  way  of  gaming  or  wagering  is  void. 
Civil  Code,  Section  2558. 


272  BUSINESS    LAWS   FOR   BUSINESS    MEN. 

Section  203.  — DUTY  OF  PARTIES  IN  MAKING 
THE  CONTRACT.— Each  party  to  a  contract  of  fire  insur- 
ance, if  they  expect  the  policy  to  be  free  from  attack,  must 
deal  fairly  with  one  another,  and  must  not  be  guilty  of  mis- 
representation or  concealment  of  material  facts,  upon  enter- 
ing into  the  contract.  Insurance  companies  act  usually,  if 
not  always,  by  agents  sent  out  to  solicit  insurance,  or  by 
local  agents  residing  in  the  locality  where  the  property  to 
be  insured  is  situated.  The  company  is  bound  by  all  the 
acts  of  such  agents  done  within  the  scope  of  their  authority. 
The  insured  may  act  for  himself,  or  through  a  broker  or 
other  agent.  But  however  the  parties  come  together,  the 
law  requires  the  utmost  good  faith  on  the  part  of  both.  The 
law  of  California,  recognizing  this  principle,  provides  that 
each  party  to  a  contract  of  insurance  must  communicate  to 
the  other  in  good*  faith  all  facts  within  his  knowledge  which 
are  or  which  he  believes  to  be  material  to  the  contract,  and 
which  the  other  has  not  the  means  of  ascertaining;  there- 
fore, it  is  the  duty  of  the  company's  agent  to  disclose  fully 
to  the  insured  all  the  conditions  and  requirements  of  the 
policy  which  his  company  proposes  to  issue,  and  it  is  the 
duty  of  the  insured  to  communicate  to  the  agent  all  facts 
within  his  knowledge  respecting  the  situation  or  condition 
of  the  property;  but  neither  party  to  a  contract  of  insurance 
is  bound  to  volunteer  information  of  matters  which  the  other 
knows,  or  which  in  the  exercise  of  ordinary  care  the  other 
ought  to  know,  where  there  is  no  reason  to  suppose  him 
ignorant  of  them;  and  neither  party  is  bound  to  give  in- 
formation to  the  other  of  facts  of  which  the  other  waives 
communication ;  and  neither  party  is  bound  to  give  the  other 
information  of  matters  open  to  the  inspection  equally  of  both ; 
except,  that  either  party  must  answer  the  inquiries  of  the 
other,  as  to  any  fact  affecting  the  insurance,  though  it  would 
not  have  been  necessary  to  say  anything  about  it  if  no  inquiry 
had  been  made.  Where  inquiries  are  made  by  either  party 
of  the  other,  he  is  bound  to  answer  truthfully  and  in  good 
faith.  Both  parties  will  be  responsible  for  any  false  repre- 
sentations made  during  the  negotiations,  and  for  any  false 


BUSINESS    CONTRACTS    AND   LEGAL   OBLIGATIONS.  273 

representation    on    a    material    matter    the    policy    will    be 
rescinded.     The  law  deems  a  representation  false  when  the 
facts  fail  to  correspond  with  its  assertions  or  stipulations. 
Civil  Code,  Sections  2563,  2564,  2566,  2579. 

Section  204.— THE  POLICY  OF  INSURANCE.— The 
written  instrument  in  which  a  contract  of  insurance  is  set 
forth  is  called  the  policy  of  insurance.  The  policy  is  re- 
quired by  the  law  of  California  to  specify,  the  parties  be- 
tween whom  the  contract  is  made,  the  rate  of  premium,  the 
property  insured,  the  interest  of  the  insured  in  the  property, 
if  he  is  not  the  absolute  owner,  the  risks  insured  against,  and 
the  period  during  which  the  insurance  is  to  continue.  When 
an  insurance  is  made  by  an  agent  or  trustee,  the  fact  that 
his  principal  or  beneficiary  is  the  person  really  insured  may 
be  indicated  by  describing  him  as  agent  or  trustee,  or  by 
other  general  words  in  the  policy.  To  render  an  insurance 
effected  by  one  partner  or  part  owner  applicable  to  the 
interest  of  his  copartners  or  of  other  part  owners,  it  is 
necessary  that  the  terms  of  the  policy  should  be  made  to 
apply  to  the  joint  or  common  interest.  When  the  description 
of  the  insured  in  a  policy  is  so  general  that  it  may  com- 
prehend any  person  or  any  class  of  persons,  he  only  can 
claim  the  benefit  of  the  policy  who  can  show  that  it  was 
intended  to  include  him.  A  policy  may  be  so  framed  that 
it  will  inure  to  the  benefit  of  whomsoever,  during  the  continu- 
ance of  the  risk,  may  become  the  owner  of  the  interest 
insured.  The  mere  transfer  of  a  thing  insured  does  not 
transfer  the  policy,  but  suspends  it  until,  the  same  person 
becomes  the  owner  of  both  the  policy  and  the  thing  insured. 
Civil  Code,  Sections  2587,  2589,  2590,  2591,  2592, 
2593. 

Section  205.— OPEN    AND    VALUED    POLICIES.— 

A  policy  is  either  open  or  valued.  An  open  policy  is  one 
in  which  the  value  of  the  thing  insured  is  not  agreed  upon, 
but  is  left  to  be  ascertained  in  case  of  loss.     A  valued  policy 


274  BUSINESS   LAWS   FOR   BUSINESS    MEN. 

is  one  which  expresses  on  its   face  an  agreement  that  the 
thing  insured  shall  be  valued  at  a  specified  sum. 
Civil  Code,  Sections  2594,  2595,  2596. 

Section  206.— RUNNING  POLICY.— A  running  policy 
is  one  which  contemplates  successive  insurances,  and  which 
provides  that  the  object  of  the  policy  may  be  from  time 
to  time  defined,  especially  as  to  the  subjects  of  insurance, 
by  additional  statements  or  indorsements.  The  general  rule 
is  that  the  property  insured  must  be  specified  in  the  policy. 
But  open  and  running  policies  are  an  exception  to  this  rule. 
They  were  brought  into  use  to  enable  merchants  to  insure 
their  goods  shipped  at  distant  ports,  when  it  is  impossible 
for  them  to  know  the  precise  quantity  or  charactei  of  the 
goods,  or  the  particular  vessel  in  which  they  are  shipped, 
and  thus  unable  to  describe  accurately  or  particularly  the 
subject  of  insurance.  These  policies  generally,  if  not  uni- 
versally, require  that  the  risk  shall  be  declared  or  reported 
to  the  company  as  soon  aS  known  to  the  assured. 
Civil  Code,  Section  2597. 

Section  207.— ACKNOWLEDGMENT  IN  POLICY 
OF  RECEIPT  OF  PREMIUM.— An  acknowledgment  in 
a  policy  of  the  receipt  of  premium  is  conclusive  evidence  of 
its  payment,  so  far  as  to  make  the  policy  binding,  notwith- 
standing any  stipulation  therein  that  it  shall  not  be  binding 
until  the  premium  is  actually  paid. 
Civil  Code,  Section  2598. 

Section  208.— AGREEMENT  NOT  TO  TRANSFER. 

— An  agreement,  made  before  a  loss,  not  to  transfer  the  claim 
of  a  person,  insured  against  by  the  insurer,  after  the  loss 
has  happened,  is  void. 

Civil  Code,  Section  2599. 

Section  209.— CERTAIN  WARRANTIES.— A  warranty 
is  either  expressed  in  the  policy,  or  implied  from  circum- 
stances.    A  statement  in  a  policy,  of  a  matter  relating  to 


BUSINESS    CONTRACTS   AND   LEGAL   OBLIGATIONS.  275 

the  person  or  thing-  insured,  or  to  the  risk,  as  a  fact,  is  an 
express  warranty  of  the  fact.  A  statement  in  a  policy, 
which  imports  that  it  is  intended  to  do  or  not  to  do  a  thing 
which  materially  affects  the  risk,  is  a  warranty  that  such  act 
or  omission  shall  take  place;  as  that  a  watchman  will  be 
kept  on  the  premises,  or  that  a  supply  of  water  will  be  kept 
on  the  building  ready  for  use. 

Civil  Code,  Sections  2607,  2608. 

Section  210.— WHAT  ACTS  AVOID   POLICY.— The 

violation  of  a  material  warranty,  or  other  material  provision 
of  a  policy,  on  the  part  of  either  party  thereto,  entitles  the 
other  to  rescind.  A  policy  may  declare  that  a  violation  of 
special  provisions  shall  avoid  it,  otherwise  the  breach  of  an 
immaterial  provision  does  not  avoid  the  policy. 
Civil  Code,  Sections  2610,  2611. 

Section  211.— EXONERATION    OF    INSURER.— An 

insurer  is  not  liable  for  a  loss  caused  by  the  wilful  act  of 
the  insured;  but  the  insurer  is  not  exonerated  by  the  mere 
negligence  of  the  insured,  or  of  his  agents,  or  others. 
Civil  Code,  Section  2629. 

Section  211a.— PROXIMATE  AND  REMOTE  CAUSE 
OF  LOSS. — A  new  law  was  passed  by  the  Legislature  of 
1907,  which  was  intended  to  have  some  bearing  upon  suits 
for  losses  in  the  San  Francisco  fire.  The  language  of  the 
law  is  not  clear,  and  it  would  probably  be  difficult  for  the 
legislator  who  prepared  it  to  tell  just  what  it  was  intended 
to  mean.    Such  as  it  is,  however,  it  is  quoted  below: — 

"In  an  action  to  recover  upon  a  contract  of  insurance 
wherein  the  defendant  claims  exemption  from  liability  upon 
the  ground  that,  although  the  proximate  cause  of  the  loss 
was  a  peril  insured  against,  the  loss  was  remotely  caused 
by  or  would  not  have  occurred  but  for  a  peril  excepted  in 
the  contract  of  insurance,  the  defendant  shall  in  his  answer 
set   forth   and   specify   the   peril   which   was   the   proximate 


276  BUSINESS   LAWS   FOR  BUSINESS    MEN. 

cause  of  the  loss,  in  what  manner  the  peril  excepted  con- 
tributed to  the  loss  or  itself  caused  the  peril  insured  against, 
and  if  he  claim  that  the  peril  excepted  caused  the  peril  in- 
sured against,  he  shall  in  his  answer  set  forth  and  specify 
upon  what  premises  or  at  what  place  the  peril  excepted  caused 
the  peril  insured  against. 

"This  act  shall  apply  to  all  pleadings  filed  after  the  passage 
of  this  act,  as  well  as  actions  then  pending  as  in  those  there- 
after begun."     (In  effect  March  21,  1907.) 

Section  212.— NOTICE  OF  LOSS.— In  case  of  loss  by 
fire,  the  insured  must  give  notice  to  the  company  of  the  loss, 
without  unnecessary  delay.  If  the  policy  fix  the  time  within 
which  notice  of  loss  must  be  given  to  the  company,  the 
insured  must  give  notice  within  that  time;  if  the  policy  does 
not  fix  the  time,  the  insured  must  give  notice  of  the  loss 
within  a  reasonable  time.  The  notice  may  be  given  to  an 
agent  of  the  company,  or  it  may  be  sent  to  the  office  of  the 
company,  and  it  may  be  sent  by  the  most  available  means, 
by  mail,  or  in  person.  If  the  policy  provides  that  the  notice 
must  be  in  writing,  it  must  be  so  given,  but  verbal  notice  will 
be  sufficient  without  such  provision. 
Civil  Code,  Section  2633. 

Section  213.--PRELIMINARY  PROOFS  OF  LOSS.— 

When  preliminary  proofs  of  loss  are  required  by  a  policy, 
the  insured  is  not  bound  to  give  such  proofs  as  would  be 
necessary  in  a  court  of  justice;  but  it  is  sufficient  for  him 
to  give  the  best  evidence  which  he  has  in  his  power  at  the 
time.  All  defects  in  a  notice  of  loss,  or  in  preliminary  proof 
of  loss,  which  the  insured  might  remedy,  and  which  the 
insurer  omits  to  specify  to  him  without  unnecessary  delay 
as  grounds  of  objection,  are  waived.  Delay  in  the  presenta- 
tion to  an  insurer  of  notice  or  proof  of  loss  is  waived,  if 
caused  by  an  act  of  the  insurer,  or  if  he  omits  to  make 
objection  promptly  and  specifically  upon  that  ground.  If  a 
policy  requires,  by  way  of  preliminary  proof  of  loss,  the  certi- 
ficate or  testimony  of  a  Justice  of  the  Peace,  or  other  person. 


BUSINESS   CONTRACTS   AND   LEGAL  OBLIGATIONS.  277 

it  is  sufficient  for  the  insured  to  use  reasonable  diligence  to 
procure  it,  and  in  case  of  the  refusal  of  such  person  to  give 
it,  then  to  furnish  reasonable  evidence  to  the  insurer  that 
such  refusal  was  not  induced  by  any  just  ground  of  disbelief 
in  the  facts  necessary  to  be  certified  to. 

Civil  Code,  Sections  2634,  2635,  2636,  2637. 

Section  214.— DOUBLE  INSURANCE.— A  double  in- 
surance exists  where  the  same  interest  in  property  is  insured 
by  several  insurers  separately.  In  cases  of  double  insurance, 
the  several  companies  must  contribute  ratably  toward  the 
loss,  without  regard  to  the  dates  of  the  several  policies. 
Civil  Code,  Section  2642. 

Section  215.— ALTERATION  INCREASING  RISK.— 

An  alteration  in  the  use  or  condition  of  a  thing  insured 
from  that  to  which  it  is  limited  by  the  policy,  made  without 
the  consent  of  the  insurer,  by  means  within  the  control  of  the 
insured,  and  increasing  the  risk,  entitles  an  insurer  to  rescind 
a  contract  of  fire  insurance. 

Civil  Code,  Section  2753. 

Section  216.— ALTERATION  WHICH  DOES  NOT 
INCREASE  RISK. — An  alteration  in  the  use  or  condition 
of  a  thing  insured  from  that  to  which  it  is  limited  by  the 
policy,  which  does  not  increase  the  risk,  does  not  affect  a 
contract  of  fire  insurance. 

Civil  Code,  Section  2754. 

Section  217.  — VERBAL  CONTRACT  TO  ISSUE 
POLICY. — A  verbal  contract  to  issue  a  policy,  made  by 
the  owner  of  the  property  and  the  agent  of  the  company, 
is  a  valid  agreement.  Therefore,  if  the  owner  of  a  building 
applies  to  an  agent,  or  if  the  agent  solicits  the  insurance, 
and  a  verbal  agreement  is  made  for  a  consideration  that  a 
policy  will  be  issued  for  a  certain  amount  covering  the  prop- 
erty, and  the  company  then  refuses  to  issue  the  policy,  it  will 
be  liable  for  the  loss,  whether  the  policy  is  issued  or  not. 


278  BUSINESS   LAWS  FOR  BUSINESS   MEN. 

If  a  fire  occurs  and  destroys  the  property,  the  owner  can  sue 
the  company  for  damages,  for  its  failure  to  issue  the  policy, 
and  recover  his  loss  on  the  property,  not  exceeding  the 
amount  of  insurance  verbally  agreed  upon. 

Section  218.— CERTIFICATE  OF  NOTARY.— Under 
a  provision  of  a  fire  insurance  policy  requiring  that  in  case 
of  loss  by  fire  the  assured  must  obtain  the  certificate  of  the 
Notary  nearest  the  insured  building,  not  concerned  in  the 
loss  as  a  creditor  or  otherwise,  nor  related  to  the  assured, 
as  to  the  justice  of  the  claim,  where  it  appears  that  the 
nearest  Notary  refused  to  act,  on  the  ground  that  he  was 
employed  by  the  insurance  company  in  ascertaining  the 
facts  and  taking  affidavits  concerning  the  fire,  the  assured 
is  relieved  of  the  necessity  of  obtaining  his  certificate,  and 
need  not  inform  the  company  of  the  reason  for  obtaining  the 
certificate  of  another  Notary.  (Decided  by  the  Supreme 
Court  in  case  of  Noone  vs.  Transatlantic  Fire  Insurance  Co., 
which  decision  is  printed  in  Volume  88  of  the  California  Re- 
ports, page  152.) 

Section  219.— FALSITY  OF  MATERIAL  REPRE- 
SENTATIONS BY  INSURED.— One  who  makes  an 
application  for  fire  insurance  must  not  make  false  representa- 
tions, as  to  any  material  fact  upon  which  the  insurance  de- 
pends, for  if  he  does  the  company  may  cancel  the  policy. 
This  the  company  may  do  by  making  a  tender  of  the  prem- 
ium back  to  the  insured,  and  notifying  him  that  the  policy  is 
canceled  on  account  of  the  false  representation.  And  if  the 
company,  where  a  false  representation  has  been  really  made, 
tenders  the  premium  back  and  gives  the  insured  notice  of 
the  cancellation  of  the  policy,  before  the  commencement  of  a 
suit  on  the  policy,  this  will  operate  as  a  rescission  of  the 
policy  and  will  defeat  the  suit.  As  an  illustration,  it  may 
be  cited,  that  a  condition  in  a  policy  of  insurance  upon  a 
mill,  that  during  such  time  as  the  mill  is  idle  a  watchman 
shall  be  employed  by  the  insured  "to  be  in  and  about  the 


BUSINESS   CONTRACTS   AND  LEGAL  OBLIGATIONS.  279 

premises  day  and  night,"  is  broken  if  during  the  time  the 
mill  is  idle  but  one  watchman  is  employed,  who  was  not 
instructed  to  watch  the  mill  at  night,  and  who  slept  every 
night  in  a  building  three  or  four  hundred  feet  from  the  mill. 
A  man  employed  to  watch  in  the  daytime,  and  who  is  per- 
mitted to  sleep  at  night,  is  not  a  watchman  at  night.  And  to 
entitle  the  insured  to  recover  upon  such  a  policy  it  must 
be  shown  that  he  has  in  good  faith  employed  a  watchman  to 
perform  the  duties  required  by  the  terms  of  the  policy.  (De- 
cided by  the  Supreme  Court  in  the  case  of  Rankin  vs. 
Amazon  Insurance  Co.,  which  decision  is  printed  in  Volume 
89  of  the  California  Reports,  page  203.) 

Section  220.— STATEMENTS  AS  TO  VALUA- 
TIONS.— A  provision  in  the  policy  that  the  application  shall 
be  considered  a  warranty,  and  if  the  property  is  overvalued 
in  it,  the  policy  shall  be  void,  applies  only  where  the  state- 
ments as  to  value  are  intentionally  false. 

If  there  is  no  valuation  in  the  policy,  the  measure  of  in- 
demnity in  an  insurance  against  fire  is  the  expense  it  would 
be  to  the  insured,  at  the  time  of  the  commencement  of  the 
fire,  to  replace  the  thing  lost  or  injured  in  the  condition  in 
which  it  was  at  the  time  of  the  injury. 

Act  of  the  Legislature,  approved  April  15,  1909. 

Section  221.— RIGHTS  OF  MORTGAGEE— EFFECT 
OF  SALE  UNDER  FORECLOSURE.— A  mortgagee  of 
insured  property,  to  whom  the  loss  is  made  payable,  is  en- 
titled to  recover  the  loss  to  the  full  extent  of  the  mortgage 
debt,  although  the  fire  occurs  after  a  foreclosure  sale  and 
purchase  by  the  mortgagee,  but  before  the  time  for  redemp- 
tion has  expired  and  before  the  execution  of  a  sheriff's  deed 
to  the  mortgagee.  (Decided  by  the  Supreme  Court  in  the 
case  of  National  Bank  vs.  Union  Insurance  Co.,  which  de- 
cision is  reported  in  Volume  88  of  the  California  Reports, 
page  497.) 


280  BUSINESS   LAWS   FOR   BUSINESS    MEN. 

Section  222.—  INSURANCE  BY  COMMISSION 
MERCHANT— INCORRECT  STATEMENT  AS  TO 
OWNERSHIP.— The  Springfield  Fire  and  Marine  Insur- 
ance Co.  insured  against  loss  by  fire  a  stock  of  goods,  the 
property  of  a  corporation  in  which  F.  H.  McCormick  and 
F.  N.  Delanoy  were  stockholders;  McCormick  and  Delanoy 
held  the  goods  as  security  for  advances  made  to  the  corpor- 
ation, but  in  the  application  for  the  insurance  they  described 
the  property  as  their  own.  The  policy  referred  to  the  appli- 
cation, and  made  it  a  part  of  the  policy,  and  provided  that 
if  the  insured  were  not  the  sole,  absolute,  and  unconditional 
owners  of  the  property,  and  if  their  interest  was  not  truly 
stated  in  the  policy,  then  the  policy  should  be  void.  McCor- 
mick and  Delanoy  sued  the  company  for  the  insurance,  but 
the  Supreme  Court  decided  that  the  policy  was  invalid,  be- 
cause the  ownership  was  not  truly  stated  in  the  application. 
(Decided  by  the  Supreme  Court  in  the  case  of  McCormick  vs. 
The  Springfield  Fire  and  Marine  Insurance  Co.,  which  de- 
cision is  printed  in  Volume  66  of  the  California  Reports, 
page  361.) 

Section  223.— RIGHT    OF   ARBITRATION.— When  a 

policy  of  fire  insurance  provides  for  arbitration  upon  the 
written  request  of  either  party,  in  case  of  diflference  touch- 
ing any  loss  or  damage  after  the  proof,  the  arbitration  is 
not  a  condition  precedent  to  the  right  of  action,  unless  de- 
manded after  proof  of  loss ;  and  if  no  demand  for  arbitration 
is  made  within  a  reasonable  time,  or  until  after  a  right  of 
action  has  become  complete  by  the  lapse  of  sixty  days  from 
the  proofs  of  loss,  the  right  to  demand  arbitration  is  waived. 
No  right  of  arbitration  exists  under  a  fire  insurance  policy 
when  the  stipulation  for  arbitration  does  not  definitely  fix 
the  number  of  arbitrators  nor  provide  a  mode  of  selection. 
(Decided  by  the  Supreme  Court  in  the  case  of  Case  vs.  Manu- 
facturers' Insurance  Co.,  which  decision  is  printed  in  Volume 
82  of  the  California  Reports,  page  263.) 


BUSINESS   CONTRACTS   AND   LEGAL  OBLIGATIONS.  281 

Section  224.— WAIVER  OF  PROOF  OF  LOSS  BY 
ARBITRATION. — A  provision  in  a  policy  of  fire  insurance, 
requiring-  the  assured  in  case  of  loss  to  forthwith  give  notice 
thereof  to  the  insurer,  and  produce  a  certificate  of  prelimi- 
nary proof  from  a  notary  or  magistrate,  is  waived,  if  the 
insurer,  after  learning  of  the  loss,  makes  no  objections  to  the 
absence  of  the  notice  and  preliminary  proof,  but  joins  in  pro- 
ceedings for  determining  the  loss  by  arbitration,  which  pro- 
ceedings are  required  by  the  policy  to  be  taken  after  proof 
of  the  loss  has  been  received  in  due  form.  In  such  a  case, 
the  company  cannot  deny  the  authority  of  its  agents  to  waive 
the  provision  of  the  policy  as  to  notice  and  preliminary  proof, 
when  it  adopts  their  acts  in  that  regard,  and  relies  on  the 
award  as  a  defense  to  an  action  to  recover  for  the  loss. 
(Decided  by  the  Supreme  Court  in  the  case  of  Carroll  vs. 
Girard  Fire  Insurance  Co.,  which  decision  is  printed  in 
Volume  72  of  the  California  Reports,  page  297.) 

Section  225.— WAIVER  OF  CONDITION  AS  TO 
PREPAYMENT  OF  PREMIUM.— An  express  provision 
in  a  policy  of  insurance  that  the  company  shall  not  be  liable 
on  the  policy  until  the  premium  is  actually  paid  is  waived 
by  the  unconditional  delivery  of  the  policy  to  the  assured, 
as  a  completed  and  executed  contract,  under  an  agreement 
that  a  credit  shall  be  given  for  the  premium,  and  the  company 
is  liable  for  a  loss  which  may  occur  during  the  period  of 
credit.  If  an  insurance  policy  contains  a  formal  receipt  of 
premium,  its  unconditional  delivery  is  conclusive  evidence 
of  payment,  so  far  as  to  estop  the  company  issuing  it  from 
denying  the  validity  of  the  policy,  notwithstanding  a  declara- 
tion in  the  policy  that  it  shall  not  be  binding  until  the 
premium  is  actually  paid.  (Decided  by  the  Supreme  Court 
in  the  case  of  Farnum  vs.  Phoenix  Insurance  Co.,  which 
decision  is  printed  in  Volume  83  of  the  California  Reports, 
page  246.) 


282  BUSINESS   LAWS    FOR   BUSINESS    MEN. 

Section  226.  —  REMEDY  FOR  UNAUTHORIZED 
TERM  OF  CREDIT.— The  giving  of  any  credit  by  author- 
ity of  the  insurance  company  being  a  waiver  of  actual  pay- 
ment as  a  condition  precedent  to  liability,  the  only  remedy 
for  an  unauthorized  term  of  credit  is  for  the  company  to 
personally  notify  the  assured,  who  is  obliged  to  pay  the 
premium,  that  he  must  pay  at  the  end  of  the  authorized  term 
of  credit,  or  that  the  policy  will  be  canceled  for  non-payment 
of  premium.  If  the  notice  is  sent  by  mail,  and  is  not 
received,  the  cancellation  for  non-payment  of  premium  is 
ineffective. 

Section  227.  —  INSURANCE  OF  UNOCCUPIED 
BUILDING. — Insurance  companies  may  by  their  acts  and 
conduct  be  estopped  from  availing  themselves  of  a  defense 
which  they  might  otherwise  interpose  to  an  action  upon  their 
policies,  or  may  waive  their  right  to  avail  themselves  of  such 
defense.  If  a  building  is  insured  against  loss  by  fire  under 
a  policy  containing  a  proviso  that  it  shall  be  or  become  void  in 
case  the  building  is  or  shall  become  vacant  or  unoccupied, 
when  it  was  well  known  to  the  company's  agents  at  the  date 
of  the  policy  and  subsequently  that  it  was  and  remained  un- 
occupied, the  company  will  be  presumed  to  have  waived  the 
clause  as  to  occupancy.  (Decided  by  the  Supreme  Court  in 
the  case  of  West  Coast  Lumber  Co.  vs.  State  Investment  and 
Insurance  Co.,  which  decision  is  printed  in  Volume  98  of  the 
California  Reports,  page  502.) 

Section  228.— LIABILITY  OF  INSURANCE  COM- 
PANY FOR  FIRES   CAUSED   BY  EARTHQUAKES. 

— The  property  of  the  insured  was  consumed  in  a  general 
conflagration  in  San  Francisco  which  had  its  origin  in  the 
earthquake  of  1906.  The  fire  was  started  at  several  points 
in  the  city  and  spread  to  the  insured  property.  The  policy 
provided  that  the  company  should  not  be  liable  for  loss  caused 
directly  or  indirectly  by  invasion,  or  for  loss  or  damage 
occasioned  by  or  through  any  earthquakes.  In  Williamsburgh 
City  Fire  Ins.  Co.  v.  Willard,  Volume  164,  Federal  Reporter, 


BUSINESS   CONTRACTS  AND  LEGAL  OBLIGATIONS.  283 

page  404,  it  was  decided  by  the  Circuit  Court  of  Appeals 
that  although  the  words  "directly  or  indirectly"  applied  to 
invasions,  they  could  not  be  made  to  embrace  earthquakes; 
"occasioned"  was  equivalent  to  "caused" ;  and  a  loss  in- 
directly caused  by  the  progress  af  a  fire  from  a  distance, 
originally  started  by  an  earthquake,  is  a  loss  which  the  insur- 
ance company  must  pay.  The  Supreme  Court  of  the  United 
States  affirmed  the  decision  of  the  Circuit  Court  of  Appeals. 

Section  229.— CONDITION  AS  TO  CHANGE  OC- 
CURRING IN  BUILDING.— If  a  policy  of  insurance 
against  fire  contains  a  clause,  that  if  the  building  shall  fall 
except  by  fire,  the  insurance  shall  immediately  cease,  and 
the  walls  of  the  building  are  of  brick,  and  a  portion  falls, 
leaving  more  than  three-fourths  standing,  the  building  is  not 
a  fallen  building  within  the  condition  of  the  policy,  and  if 
destroyed  by  fire  in  that  condition  the  insurance  company  is 
liable  for  the  loss.  A  clause  in  an  insurance  policy  that 
it  shall  be  void  if  any  change  occurs  in  the  building  by 
which  the  risk  is  increased  without  the  consent  of  the  com- 
pany, has  reference  only  to  a  change  produced  by  the  act 
of  the  insured.  It  does  not  mean  a  change  occasioned  by 
accident,  or  by  any  cause  over  which  the  insured  had  no 
control.  (Decided  by  the  Supreme  Court  in  the  case  of 
Breuner  vs.  Liverpool  and  London  and  Globe  Insurance 
Co.,  which  decision  is  printed  in  Volume  51  of  the  California 
Reports,  page   101.) 

Section  230.— RULES  FOR  INTERPRETING  CON- 
TRACT OF  INSURANCE.— A  contract  of  insurance  must 

be  interpreted  by  the  same  rules  as  apply  to  any  other  con- 
tract. It  must  be  so  interpreted  as  to  give  effect  to  the 
mutual  intention  of  the  parties  as  it  existed  at  the  time  of 
contracting,  so  far  as  that  intention  can  be  ascertained.  If 
the  contract  for  insurance  is  in  writing,  as  where  an  appli- 
cation has  been  signed  and  a  policy  issued,  the  intention  of 
the  parties  is  to  be  ascertained  from  the  application  and  the 


284  BUSINESS   LAWS   FOR  BUSINESS    MEN. 

policy  alone,  if  possible.     The  whole  contract  is  to  be  taken 
together.     When  it  is  partly  written  and  partly  printed,  the 
written  parts  control  the  printed  parts,  and,  if  there  is  any 
conflict  between  the  two,  the  printed  part  must  be  disregarded. 
The  contract  may  be  explained  by  reference  to  the  circum- 
stances under  which  it  was  made,  and  in  cases  of  uncertainty 
it  is  to  be  interpreted  most  strongly  against  the  party  who 
caused  the  uncertainty  to  exist.     Where  the  policy  provides 
for  the  forfeiture  of  the  contract,  upon  failure  to  perform 
conditions  named,  the  policy  is  to  be  interpreted  most  strongly 
in  favor  of  the  insured.    The  law  does  not  favor  forfeitures, 
and  the  insurance  company  must  make  out  a  very  strong  case 
showing  that  a  condition  has  not  been  complied  with,  before 
a  court  will  declare  the  policy  forfeited.     The  suit  of  Yoch 
vs.  Home  Mutual  Insurance  Company,  decided  by  our  Su- 
preme Court  in  1896,  illustrates  the  rules  which  are  to  be 
applied  to  the  interpretation  of  contracts  of  insurance,  where 
the  effort  is  to  ascertain  the  intention  of  the  parties  at  the 
time  of  contracting.    The  policy  contained  a  printed  condition 
that,  unless  otherwise  provided  by  agreement  indorsed  thereon, 
it  should  be  void  if   (any  usage  of  trade  to  the  contrary) 
gasoline  was  kept  on  the  premises.    Testimony  was  given  at 
the  trial  of  the  case  tending  to  show  that  gasoline  is  one 
of  the  articles  of  merchandise  usually  kept  in  country  stores, 
but  that  it  is  customary  to  keep  it  in  a  room  or  building 
by  itself.    It  was  also  shown  that,  during  the  month  prior  to 
the   fire,   the    insured   would,    in    the    daytime,    bring    small 
quantities  of  gasoline — one  or  two  cans — from  a  building  on 
another  lot,  which  was  used  for  storing  it,  into  a  room  within 
the  insured  building  and  adjacent  to  the  store,  for  the  purpose 
of  selling  it  at  retail  to  her  customers.    The  Supreme  Court 
decided  the  case  against  the  insurance  company,  and  said: 
"It  must  be  held  that  it  was  the  intention  of  the  defendant 
to  insure  gasoline,  if  it  was  an  article  usually  kept  in  the 
country  stores,  and  that,  if  such  was  its  intention,   it  was 
no  violation  of  the  policy  for  the  insured  to  keep  gasoline 
upon  the  premises  as  a  part  of  the  stock  of  merchandise. 
When  the  defendant  agreed  to  insure  a  stock  of  merchandise 


BUSINESS   CONTRACTS   AND   LEGAL  OBLIGATIONS.  285 

'such  as  is  usually  kept  in  country  stores,'  it  must  be  pre- 
sumed to  have  known  the  character  of  the  merchandise  which 
is  usually  kept  in  country  stores,  and  that  gasoline  is  one 
of  these  articles,  and,  consequently,  that  the  policy  covered 
all  such  merchandise.     When  it  was  shown  that  gasoline  is 
one  of  the  articles  which  is  usually  kept  in  country  stores, 
the  court  correctly  held  that  it  was  a  part  of  the  subject 
of  the  insurance,   and  that  the  insured  did  not  violate  the 
policy  by  keeping  it  in  stock.     The  defendant,  when  it  issued 
the  policy  in  question,  knew  the  character  of  country  stores, 
and  that  Mrs.  Brooks  kept  for  the  purpose  of  retailing  to  her 
customers  all  of  the  articles  kept  by  her,  and  that  the  gasoline 
which  she  kept  was  to  be  disposed  of  by  retail  in  the  same 
way  as  the  other  portion  of  her  stock.    To  give  to  the  policy 
the   construction   now   claimed   by   the   defendant   would   be 
to  hold  that,  although  it  agreed  with  her  to  insure  all  the 
stock  she  usually  kept  in  her  store,  yet,  if  she  continued  to 
keep   that  stock,   she   forfeited   all   rights   under   the   policy. 
The  clause  in  the  policy  above  quoted,  and  which  is  relied 
on  by  the  appellant,  cannot  be  construed  as  having  this  effect. 
The    qualification    therein    which    excepts    the    policy    from 
becoming  void,  viz.,  'unless  otherwise  provided  by  agreement 
indorsed  thereon,'  is  found  in  the  policy  itself.     The  subject- 
matter   of   the    risk — the   stock   of   merchandise   'such    as    is 
usually  kept  in  country  stores' — was  written  in  the  policy  by 
the  insurer;  and,  as  the  defendant  must  be  deemed  to  have 
intended  thereby  to  insure  all   such   articles   as   are  usually 
kept  in  a  country  store,  it  must  be  held  that  this  was  an 
'agreement   indorsed'   upon   the   policy,   which   removed   the 
exemption  from  liability  that  would  otherwise  have  existed. 
If  there  be  any  repugnance  between  the  written  phrase,  'such 
as  is  usually  kept  in  country  stores,'  and  the  printed  clause, 
'any  usage  or  custom  of  trade  or  manufacture  to  the  contrary 
notwithstanding,'  the  former  controls  the  latter,  as  being  the 
more  deliberate  expression  of  the  contracting  parties."     (De- 
cided by  the  Supreme  Court  in  the  case  of  Yoch  vs.  Home 
Mutual  Insurance  Co.,  which  decision  is  printed  in  Volume 
107  of  the  California  Reports,  page  327.) 


286  BUSINESS   LAWS   FOR   BUSINESS    MEN. 

Section  231.— TIME  WHEN  POLICY  TAKES  EF- 
FECT.— The  general  rule  is  that  a  policy,  if  delivered,  takes 
effect  from  its  date,  unless  it  be  otherwise  stated  in  the 
policy,  or  unless  there  is  evidence  of  a  contrary  intent.  If 
the  premium  be  paid,  and  the  policy  be  not  delivered  till 
afterward,  the  policy  yet  takes  effect  as  of  its  date,  even 
though  a  loss  intervenes.  The  circumstances  and  the  intent 
of  the  parties  are  to  control.  Where  the  exact  time  of  the 
commencement  and  termination  of  the  risk  are  specified  in 
the  policy,  or,  if  no  policy  has  been  written,  in  the  contract, 
such  specification  governs  in  all  cases ;  where  no  time  has 
been  expressly  indicated,  the  circumstances  of  the  case  will 
be  considered  for  the  purpose  of  determining  it;  if  there  are 
no  circumstances  indicating  the  intention  of  the  parties,  and 
no  time  is  specified  in  the  contract,  the  risk  will  be  deemed 
to  have  commenced  at  the  date  of  the  contract.  In  the  case 
last  mentioned,  if,  before  the  contract  of  insurance  is  made, 
the  property  has  ceased  to  exist,  although  unknown  to  the 
parties,  the  risk  never  attaches. 

Section  232.— CONTRACT  OF  REINSURANCE- 
EFFECT  OF  PRIOR  LOSS.— Where  an  insurance  com- 
pany, which  has  insured  the  property  of  a  lumber  company 
against  loss  by  fire,  contracts  for  reinsurance  by  way  of 
partial  indemnity  with  another  insurance  company,  in  the 
absence  of  any  circumstances  indicating  the  mutual  intention 
of  the  parties  to  give  to  the  contract  of  reinsurance  a  retro- 
spective effect,  the  company  agreeing  to  insure  is  not  liable 
if  the  property  insured  had  been  destroyed  by  fire  prior  to 
the  agreement,  though  at  the  time  of  the  application  and 
agreement  neither  of  the  insurance  companies  knew  of  the 
prior  destruction  of  the  property.  (Decided  by  the  Supreme 
Court  in  the  case  of  Union  Insurance  Company  vs.  American 
Fire  Insurance  Company,  which  decision  is  printed  in  Volume 
107  of  the  California  Reports,  page  327.) 

Section  233.— WARRANTIES.— Warranties,  in  insur- 
ance, are  distinguished  into  two  kinds:    Affirmative,  or  those 


BUSINESS    CONTRACTS   AND    LEGAL   OBLIGATIONS.  287 

which  allege  the  existence  at  the  time  of  the  insurance  of 
a  particular  fact,  and  avoid  the  contract  if  the  allegation  be 
untrue;  and  promissory,  or  those  which  require  that  some- 
thing shall  be  done  or  omitted  after  the  insurance  takes  effect 
and  during  its  continuance,  the  doing  or  omission  of  which 
will  avoid  the  contract.    An  express  warranty  is  a  stipulation 
inserted  in  writing  on  the  face  of  the  policy,  on  the  literal 
truth  or  fulfilment  of  which  the  validity  of  the  entire  con- 
tract depends.     By  a  warranty  the  insured  stipulates  for  the 
absolute  truth  of  the  statement  made,  and  the  strict  compli- 
ance with  some  promised  line  of  conduct,  upon  penalty  of 
forfeiture  for  non-compliance  with  the  warranty.    A  warranty 
must  be  strictly  complied  with.     Whether  the  fact  stated  or 
the  act  stipulated  for  be  material  to  the  risk  or  not  is  of  no 
consequence,  the  contract  being  that  the  matter  is  as  repre- 
sented,  or   shall   be    as    promised;   and   unless   it   prove   so, 
whether  from  fraud,  mistake,  negligence,  or  other  cause,  not 
proceeding  from  the  insurance  company,  and  not  caused  by 
the  intervention  of  the  law  or  act  of  God,  the  insured  can 
have  no  claim.     One  of  the  very  objects  of  the  warranty  is 
to  preclude  all  controversy  about  whether  the  statement  was 
material  or  not.    The  only  question  in  such  cases  is.  Has  the 
warranty  been  kept?    If  the  warranty  be  a  statement  of  facts, 
it  must  be  literally  true;  if  a  stipulation  that  a  certain  act 
shall  or  shall  not  be  done,   it  must  be  literally  performed. 
Illustrating  the  law,  it  may  be  said,  that  if  a  house  be  insured 
against  fire,  and  the  language  of  the  policy  is,  "Warranted, 
during  the  policy,  to  be  covered  with  thatch,"  the  insurance 
company  will  be  discharged  from  liability  if  during  the  insur- 
ance   the    house    should    be    covered    with    wood    or    metal, 
although  the  risk  is  diminished;  for  a  warranty  excludes  all 
argument   in   regard  to   its   reasonableness,   or  the   probable 
intent  of  the  parties.     Parties  may  contract  as  they  please. 
When    a    warranty    is    adopted    by   them    in    their    contract, 
the  courts  will  not  inquire  as  to  its  wisdom  or  folly,  but  must 
exact  its  observance  as  agreed  to.     The  Supreme  Court  of 
California  construed  a  "watchman  clause"  in  a  policy  issued 
by  the   Scottish  Union  and  National   Insurance  Co.,  which 


288  BUSINESS   LAWS    FOR   BUSINESS    MEN. 

read:  "Warranted  by  the  insured  that  during  such  times 
as  the  within  buildings  or  works  are  idle  or  not  in  operation, 
whether  closed  for  repairs  or  during  the  absence  of  workmen, 
or  otherwise  (except  as  otherwise  herein  stated),  one  or 
more  watchmen  shall  be  on  duty  constantly,  day  and  night, 
in  and  immediately  about  said  buildings  or  works,  or  this 
policy  shall  be  null  and  void."  The  insurance  was  on  a 
sawmill,  which  was  destroyed  by  fire.  The  watchman  of  the 
insured  worked  about  the  mill  during  the  day,  and  slept  at 
night  in  a  house  about  350  yards  distant,  and  visited  the 
buildings  several  times  during  the  night.  The  Supreme  Court 
held  that  this  was  not  a  sufficient  compliance  with  the  war- 
ranty in  the  policy  that  a  watchman  should  be  kept  on  duty 
"constantly  day  and  night  in  and  immediately  about"  the 
insured  buildings.  There  was  also  a  controversy  in  the  case 
as  to  whether  the  mill  was  "shut  down,"  within  the  meaning 
of  the  warranty  in  the  policy,  and  the  Supreme  Court  held 
that  a  sawmill  which  had  stopped  running  for  the  winter  is 
shut  down,  within  the  meaning  of  such  term  in  a  policy, 
though  men  are  employed  about  the  premises  shipping  lumber, 
and  though  the  machinery  has  not  been  dismanteled  and 
put  in  shape  for  the  winter.  (Decided  by  the  Supreme 
Court  of  California  in  the  case  of  McKenzie  vs.  Scottish 
Union  and  National  Insurance  Co.,  which  decision  is  printed 
in  Volume  112  of  the  California  Reports,  page  548.) 

Section  234.  — PROVISION  AS  TO  BRINGING 
SUIT. — The  policies  of  very  many  insurance  companies  have 
provisions  similar  to  the  following:  "No  suit  or  action  on 
this  policy  for  the  recovery  of  any  claim  shall  be  sustainable 
in  any  court  of  law  or  equity  until  after  a  full  compliance 
by  the  insured  with  all  the  requirements  of  this  policy,  nor 
unless  commenced  within  twelve  months  next  after  the  fire." 
And,  also,  that  "proof  of  loss  shall  be  made  to  the  company 
within  sixty  days  after  the  fire."  Where  a  policy  contains 
these  provisions,  a  suit  on  a  policy  cannot  be  maintained  if 
the  proofs  of  loss  were  made  after  sixty  days,  and  there  is 
no  evidence  of  a  waiver  by  the  company  of  the  condition. 


BUSINESS   CONTRACTS   AND   LEGAL  OBLIGATIONS.  289 

Section  235.— PROOFS  OF  LOSS  TO  REINSUR- 
ING COMPANY. — Where  the  risks  of  a  fire  insurance 
company  are  reinsured  in  another  company,  under  a  contract 
whereby  the  latter  assumes  the  management  and  control  of 
the  business  of  the  original  insurer,  and  agrees  to  make  ad- 
justment and  prompt  payment  of  its  losses,  proofs  of  loss 
under  a  policy  issued  by  the  original  insurer  may  be  made 
to  the  reinsuring  company.  (Decided  by  the  Supreme  Court 
of  California  in  the  case  of  Whitney  vs.  American  Insurance 
Co.,  which  decision  is  printed  in  Volume  128  of  the  California 
Reports,  page  121.) 

Section  236.  — LIABILITY  OF  HEIR  FOR  PREM- 
IUM.— A  policy  procured  by  an  heir,  "on  the  estate"  of 
deceased,  protects  the  interest  of  the  heir  in  the  property, 
though  the  administrator  of  the  estate  repudiates  the  con- 
tract and  has  nothing  in  fact  to  do  with  it.  Having  pro- 
cured the  policy,  the  heir  is  liable  for  the  premiums,  and 
will  be  compelled  to  pay  them,  no  matter  what  action  the 
administrator  may  take  with  regard  to  them.  (Decided  by 
the  Supreme  Court  of  California  in  the  case  of  Phoenix  In- 
surance Co.,  vs.  Hancock,  which  decision  is  printed  in  Volume 
123  of  the  California  Reports,  page  222.) 

Section  237.—  INSURANCE  ON  HARVESTER 
WHILE  IN  USE. — A  policy  of  insurance  on  a  harvester 
"while  in  use"  does  not  cover  a  loss  occurring  while  it  is 
stored  in  a  shed,  and  is  not  being  actually  used  for  harvesting 
purposes.  (Decided  by  the  Supreme  Court  of  California  in 
the  case  of  Slinkard  vs.  Manchester  Fire  Assurance  Co., 
which  decision  is  printed  in  Volume  122  of  the  California 
Reports,  page  595.) 

Section  238.  — LIABILITY  OF  COMPANY  ON 
POLICY  WRITTEN  BUT  NOT  DELIVERED  UN- 
TIL AFTER  FIRE. — A  liability  may  attach  to  an  insur- 
ance company,  when  the  policy  has  been  written  but  not 
delivered  until  after  the  fire.     If  the  policy  is  the  memorial 


290  BUSINESS   LAWS   FOR   BUSINESS    MEN. 

of  a  contract,  which  in  its  essentials  has  been  agreed  upon 
verbally  before  the  fire,  and  which  the  parties  intended 
should  take  effect  according  to  its  terms,  the  fact  that  the 
policy  was  not  delivered  to  the  insured  until  after  the  fire 
will  make  no  difference  in  the  company's  liability;  and  if 
the  terms  of  the  contract  to  insure,  as  verbally  entered  into, 
and  afterwards  embraced  in  the  undelivered  policy,  are 
clearly  shown,  the  company  would  be  liable  without  any 
delivery  of  the  policy  at  all.  If,  however,  there  has  not  been 
any  verbal  agreement,  before  the  fire,  that  the  company 
should  insure  the  building  and  issue  i*^s  policy  accordingly, 
then  delivery  of  the  policy  after  the  building  has  been 
destroyed,  to  the  knowledge  of  the  parties,  will  not  give  to 
the  policy  a  binding  effect.  It  is  therefore  in  all  such  cases 
a  very  important  question,  whether  the  insurance  company 
considered  or  admitted  at  any  time  that  the  contract  was 
complete,  and  the  risk  had  attached;  and  in  this  connection, 
the  courts  will  always  consider  as  strong  evidence  in  favor 
of  the  insured  the  declarations  and  admissions  of  the  agents 
of  the  insurance  company,  while  engaged  in  the  transaction 
with  the  insured,  and  up  to  the  time  the  policy  is  delivered. 
Such  statements  and  admissions  of  the  agents,  to  bind  the 
company,  must  be  made  at  the  very  time  of  the  negotiations 
and  transactions  for  the  insurance,  and  while  acting  in  the 
business  with  the  insured.  (Decided  by  the  Supreme  Court 
of  California  in  the  case  of  Crawford  vs.  Transatlantic  Fire 
Insurance  Co.,  which  decision  is  printed  in  Volume  25  of 
the  California  Reports,  page  609.) 

Section  238a.— STANDARD  FORM  OF  FIRE  IN- 
SURANCE POLICY.— The  Legislature  of  1909  passed  a 
law  adopting  a  standard  form  of  fire  insurance  policy  for 
the  State  of  California.  The  following  form  was  adopted, 
for  use  by  all  insurance  companies  after  August  1st,  1909: 


BUSINESS   CONTRACTS   AND  LEGAL  OBLIGATIONS.  291 

CALIFORNIA  STANDARD  FORM  FIRE  INSURANCE 

POLICY. 

No Amount,  $ 

Rate 


No     other  insurance  permitted 
except  by  agreement  endorsed  hereon  and  added  hereto. 

(Here  insert  name  of  company,  and  place  of  its  main  office 
in  California,  and  name  of  state  or  country  under  which 
incorporated  or  organized.) 

IN  CONSIDERATION  of  the  stipulations  herein  named 

and  of dollars  premium  does  insure 

for  the  term  of from  the day  of 

191. .,  at  noon,  to  the day  of 191. .,  at 

noon,  against  all  loss  or  damage  by  fire,  except  as  hereinafter 
provided. 

To  an  amount  not  exceeding dollars  to  the 

following  described  property  while  located  and  contained  as 
described  herein,  and  not  elsewhere,  to  wit: 

The  company  will  not  be  liable  beyond  the  actual  cash 
value  of  the  interest  of  the  insured  in  the  property  at  the 
time  of  loss  or  damage  nor  exceeding  what  it  would  then 
cost  the  insured  to  repair  or  replace  the  same  with  material 
of  like  kind  and  quality;  said  cash  value  to  be  estimated 
without  allowance  for  any  increased  cost  of  repair  or  recon- 
struction by  reason  of  any  ordinance  or  law  regulating 
repair  or  construction  of  buildings,  and  without  compensa- 
tion for  loss  resulting  from  interruption  of  business  or 
manufacture. 

This  policy  is  made  and  accepted  subject  to  the  foregoing 
stipulations  and  conditions  and  those  hereinafter  stated, 
which  are  hereby  specially  referred  to,  and  made  part  of 
this  policy,  together  with  such  other  provisions,  agreements, 
or  conditions  as  may  be  endorsed  hereon  or  added  hereto, 
and  no  officer,  agent,  or  other  representative  of  this  com- 
pany shall  have  power  to  waive  any  provision  or  condition 
of  this  policy  except  by  writing  endorsed  hereon  or  added 
hereto,  and  no  person,  unless  duly  authorized  in  writing,  shall 
be  deemed  the  agent  of  this  company. 

This  policy  shall  not  be  valid  until  countersigned  by  the 
duly  authorized  agent  of  the  company,  at 


292  BUSINESS   LAWS   FOR   BUSINESS    MEN. 

In  Witness  Whereof,  this  company  has  executed  and  at- 
tested these  presents  (here  insert  name  of  company). 

By 

Countersigned  at this day  of 191. . 

Agent. 

Stipulations  and  Conditions  Specially  Referred  to. 

Property  Not  Covered,  (a)  This  company  shall  not  be 
liable  for  loss  to  accounts,  bills,  currency,  evidences  of  debt 
or  ownership  or  other  documents,  money,  notes  or  secur- 
ities, nor,  (b)  unless  liability  is  specifically  assumed  hereon, 
for  loss  to  bullion,  casts,  curiosities,  drawing,  dies,  jewels, 
manuscripts,  medals,  models,  patterns,  pictures,  scientific 
apparatus,  business  or  store  or  office  furniture  or  fixtures, 
sculptures,  frescoes,  decorations,  or  property  held  on  storage 
or  for  repair. 

Hazards  Not  Covered.  This  company  will  not  be  liable 
for  loss  by  (a)  theft;  or  (b)  by  neglect  of  the  insured  to 
use  all  reasonable  means  to  save  and  preserve  the  property 
at  and  after  a  fire,  or  when  the  property  is  endangered  by 
fire;  or  (c)  (unless  fire  ensues,  and  in  that  event  for  the 
damage  by  fire  only)  by  explosion  of  any  kind  or  lightning; 
or  (d)  by  invasion,  insurrection,  riot,  civil  war,  or  commotion, 
or  (except  as  hereinafter  provided)  by  military  or  usurped 
power,  or  order  of  any  civil  authority,  but  the  company  will  be 
liable  (unless  otherwise  provided  by  endorsement  hereon  or 
added  hereto)  if  the  property  is  lost  or  damaged,  by  fire  or 
otherwise,  by  civil  authority  or  military  or  usurped  power  ex- 
ercised to  prevent  the  spread  of  fire  not  originating  from  a 
cause  excepted  hereunder  and  which  fire  otherwise  probably 
would  have  caused  the  loss  of  or  damage  to  the  insured 
property. 

Matters  Avoiding  Policy.  This  entire  policy  shall  be 
void,  (a)  if  the  insured  has  concealed  or  misrepresented  any 
material  fact  or  circumstances  concerning  this  insurance  or 
the  subject  thereof;  or  (b)  in  case  of  any  fraud  or  false 
swearing  by  the  insured  touching  any  matter  relating  to 
this  insurance  or  the  subject  thereof,  whether  before  or  after 
a  loss. 

Unless  otherwise  provided  by  agreement  endorsed  hereon 
or  added  hereto,  this  entire  policy  shall  be  void,  (a)  if  the 
insured    now    has    or    shall    procure    any    other    insurance, 


BUSINESS   CONTRACTS   AND  LEGAL  OBLIGATIONS.  293 

whether  valid  or  not,  on  property  covered  in  whole  or  in 
part  by  this  policy,  or  (b)  if  the  interest  of  the  insured  be 
other  than  unconditional  and  sole  ownership,  or  (c)  if  the 
subject  of  insurance  be  a  building  on  ground  not  owned  by 
the  insured  in  fee  simple,  or  (d)  if  with  the  knowledge 
of  the  insured  foreclosure  proceedings  be  commenced  or 
notice  given  of  sale  of  any  property  covered  by  this  policy 
by  virtue  of  any  mortgage  or  trust  deed,  or  (e)  if  this  policy 
be  assigned  before  a  loss. 

Matters  Suspending  Insurance.  Unless  otherwise  pro- 
vided by  agreement  endorsed  hereon  or  added  hereto  this 
company  shall  not  be  liable  for  loss  or  damage  occurring 
(a)  while  the  hazard  be  materially  increased  by  any  means 
within  the  control  of  the  insured;  or  (b)  if  the  subject  of 
insurance  be  a  manufacturing  establishment,  while  it  is 
operated  in  whole  or  in  part  at  night  later  than  ten  o'clock, 
or  while  it  ceases  to  be  operated  beyond  the  period  of  ten 
consecutive  days;  or  (c)  while  mechanics  or  artisans  are 
employed  in  building  or  altering  or  repairing  the  described 
premises  for  more  than  fifteen  days  at  any  one  time;  or  (d) 
while  illuminating  gas  or  vapor  be  generated  in  the  de- 
scribed building    (or   adjacent  thereto)    for   use  therein;   or 

(e)  while  there  be  kept,  used  or  allowed  on  the  described 
premises  (any  usage  or  custom  of  trade  or  manufacture  to 
the  contrary  notwithstanding)  calcium  carbide,  phosphorus, 
dynamite,  nitroglycerine,  fireworks,  or  other  explosives ;  or 
exceeding  one  quart  each  of  benzine,  gasoline,  naphtha  or 
ether;  or  more  than  twenty-five  pounds  of  gunpowder;   or 

(f)  while  a  building  herein  described  whether  intended  for 
occupation  by  owner  or  tenant  is  vacant  or  unoccupied  beyond 
the  period  of  ten  (10)  consecutive  days;  (g)  while  the  inter- 
est in  title  to  or  possession  of  the  subject  of  insurance  is 
changed  excepting: — (1)  by  the  death  of  the  insured;  (2)  a 
change  of  occupancy  of  building  without  material  increase 
of  hazard;  and  (3)  transfer  by  one  or  more  several  co- 
partners or  co-owners  to  the  others. 

Such  suspension  shall  not  extend  the  term  of  this  policy 
nor  create  any  right  for  refund  of  the  whole  or  any  portion 
of  premium,  nor  affect  the  respective  rights  of  cancellation. 

Chattel  Mortgage.  Unless  otherwise  provided  by  agree- 
ment in  writing  endorsed  hereon  or  added  hereto,  this  com- 
pany shall  not  be  liable  for  loss  or  damage  to  any  property 
insured  hereunder  while  encumbered  by  a  chattel  mortgage. 


294  BUSINESS   LAWS   FOR   BUSINESS    MEN. 

but  the  liability  of  the  company  upon  other  property  hereby 
insured  shall  not  be  affected  by  such  chattel  mortgage. 

Fallen  Building  Clause.  Unless  otherwise  provided  by 
agreement  endorsed  hereon  or  added  hereto,  if  a  building 
or  any  material  part  thereof  fall,  except  as  the  result  of  fire, 
all  insurance  by  this  policy  on  such  building  or  its  contents 
shall  immediately  cease. 

Removal  When  Endangered  by  Fire.  Should  any  of 
said  property  be  necessarily  removed  because  of  danger  from 
fire,  and  there  is  no  other  insurance  thereon,  that  part  of 
this  policy  in  excess  of  the  value  of  the  insured  property 
remaining  in  the  original  location,  or,  if  there  is  other 
insurance  thereon,  that  part  of  this  policy  in  excess  of  its 
proportion  of  the  value  of  the  insured  property  remaining 
in  the  original  location,  shall,  for  the  ensuing  five  days  only, 
cover  said  removed  property  in  its  new  location  or  locations. 

Cancellation.  This  policy  shall  be  cancelled  at  any  time 
at  the  request  of  the  insured,  in  which  case  the  company  shall, 
upon  surrender  of  this  policy,  refund  the  excess  of  paid 
premium  above  the  customary  short  rates  for  the  expired 
time.  This  policy  may  be  cancelled  at  any  time,  without 
tender  of  unearned  portion  of  premium,  by  the  company  by 
giving  five  (5)  days'  written  notice  of  cancellation  to  the 
insured  and  to  any  mortgagee  or  other  party  to  whom,  with 
the  written  consent  of  the  company,  this  policy  is  made 
payable,  in  which  case  the  company  shall,  upon  surrender 
of  the  policy  or  relinquishment  of  liability  thereunder,  refund 
the  excess  of  paid  premium  above  the  pro  rata  premium  for 
the  expired  time. 

Duty  of  Insured  in  Case  of  Loss.  When  a  loss  occurs 
the  insured  must  give  to  this  company  written  notice  thereof 
without  unnecessary  delay;  and  shall  protect  the  property 
from  further  damage;  forthwith  separate  the  damaged  and 
undamaged  personal  property  and  put  it  in  the  best  possible 
order;  and  without  unnecessary  delay  make  a  complete  in- 
ventory stating  as  far  as  possible  the  quantity  and  cost  of 
each  article,  and  the  amount  claimed  thereon. 

Within  sixty  days  after  the  commencement  of  the  fire 
the  insured  shall  render  to  the  company  at  its  main  office 
in  California  named  herein  preliminary  proof  of  loss  con- 
sisting of  a  written  statement  signed  and  sworn  to  by  him 
setting  forth: — (a)  his  knowledge  and  belief  as  to  the  origin 


BUSINESS    CONTRACTS   AND   LEGAL   OBLIGATIONS.  295 

of  the  fire;  (b)  the  interest  of  the  insured  and  of  all  others 
in  the  property;  (c)  the  cash  value  of  the  diflferent  articles 
or  properties  and  the  amount  of  loss  thereon;  (d)  all  incum- 
brances thereon;  (e)  all  other  insurance,  whether  valid  or 
not,  covering  any  of  said  articles  or  properties;  (f)  a  copy 
of  the  descriptions  and  schedules  "in  all  other  policies  unless 
similar  to  this  policy,  and  in  that  event,  a  statement  as  to 
the  amounts  for  which  the  different  articles  or  properties 
are  insured  in  each  of  the  other  policies ;  (g)  any  changes 
of  title,  use,  occupation,  location,  or  possession  of  said 
property  since  the  issuance  of  this  policy;  (h)  by  whom 
and  for  what  purpose  any  building  herein  described,  and  the 
several  parts  thereof,  were  occupied  at  the  time  of  the  fire. 

If  the  company  claims  that  the  preliminary  proof  of  loss 
is  defective  and  within  five  days  after  the  receipt  thereof 
(without  admitting  the  amount  of  loss  or  any  part  thereof) 
notifies  in  writing  the  insured,  or  the  party  making  such 
proof  of  loss,  of  the  alleged  defects  (specifically  stating 
them)  and  requests  that  they  be  remedied  by  verified 
amendments  the  insured  or  such  party  within  ten  days  after 
the  receipt  of  such  notification  and  request  must  comply 
therewith,  or,  if  unable  so  to  do,  present  to  the  company  an 
affidavit  to  that  efifect. 

The  insured  shall  also  furnish,  if  required,  as  far  as  it  is 
practicable  to  obtain  the  same,  verified  plans  and  specifica- 
tions of  any  buildings,  fixtures,  or  machinery  destroyed  or 
damaged ;  and  the  insured  shall  exhibit  to  any  person 
designated  in  writing  by  this  company  all  that  remains  of 
any  property  herein  described  and  shall  submit  to  examina- 
tion under  oath,  as  often  as  required,  by  any  such  person, 
and  subscribe  to  the  testimony  so  given  and  shall  produce 
to  such  person  for  examination  all  books  of  account,  bills, 
invoices,  and  other  vouchers,  and  permit  extracts  and  copies 
thereof  to  be  made,  and  in  case  the  originals  are  lost  certified 
copies,  if  obtainable,  shall  be  produced. 

Ascertainment  of  Amount  of  Loss,  This  company  shall 
be  deemed  to  have  assented  to  the  amount  of  the  loss 
claimed  by  the  insured  in  his  preliminary  proof  of  loss, 
unless  within  twenty  days  after  the  receipt  thereof,  or,  if 
verified  amendments  have  been  requested,  within  twenty 
days  after  their  receipt,  or  within  twenty  days  after  the 
receipt  of  an  affidavit  that  the  insured  is  unable  to  furnish 
such  amendments,  the  company  shall  notify  the  insured  in 
writing  of  its  partial  or  total  disagreement  with  the  amount 


296  BUSINESS   LAWS   FOR   BUSINESS    MEN. 

of  loss  claimed  by  him  and  shall  also  notify  him  in  writing 
of  the  amount  of  loss,  if  any,  the  company  admits  on  each 
of  the  different  articles  or  properties  set  forth  in  the  pre- 
liminary proof  or  amendments  thereto. 

If  the  insured  and  this  company  fail  to  agree,  in  whole 
or  in  part,  as  to  the  amount  of  loss  within  ten  days  after 
such  notification,  this  company  shall  forthwith  demand  in 
writing  an  appraisement  of  the  loss  or  part  of  loss  as  to 
which  there  is  a  disagreement  and  shall  name  a  competent 
and  disinterested  appraiser,  and  the  insured  within  five  days 
after  receipt  of  such  demand  and  name,  shall  appoint  a 
competent  and  disinterested  appraiser  and  notify  the  com- 
pany thereof  in  writing,  and  the  two  so  chosen  shall  before 
commencing  the  appraisement,  select  a  competent  and  dis- 
interested umpire. 

The  appraisers  together  shall  estimate  and  appraise  the 
loss  or  part  of  loss  as  to  which  there  is  a  disagreement, 
stating  separately  the  sound  value  and  damage,  and  if  they 
fail  to  agree  they  shall  submit  their  differences  to  the  umpire, 
and  the  award  in  writing  duly  verified  of  any  two  shall  deter- 
mine the  amount  or  amounts  of  such  loss. 

The  parties  to  the  appraisement  shall  pay  the  appraisers 
respectively  appointed  by  them  and  shall  bear  equally  the 
expenses  of  the  appraisement  and  the  charges  of  the  umpire. 

If  for  any  reason  not  attributable  to  the  insured,  or  to  the 
appraiser  appointed  by  him,  an  appraisement  is  not  had  and 
completed  within  ninety  days  after  said  preliminary  proof 
of  loss  is  received  by  this  company,  the  insured  is  not  to  be 
prejudiced  by  the  failure  to  make  an  appraisement,  and  may 
prove  the  amount  of  his  loss  in  an  action  brought  without 
such  appraisement. 

Options  of  Company  in  Case  of  Loss.  This  company 
may,  at  its  option,  take  all  or  any  part  of  the  property  for 
which  insurance  hereunder  is  claimed  at  its  ascertained  or 
appraised  value,  and  may  also,  at  its  option,  in  satisfaction 
of  its  liability  hereunder,  repair,  rebuild  or  replace  any 
building  or  structure  or  machine  or  machinery  used  therein, 
with  other  of  like  kind  and  quality,  within  a  reasonable  time, 
upon  giving  notice  within  twenty  days  of  its  intention  so  to 
do  after  the  receipt  by  it  of  the  preliminary  proof  of  loss, 
or,  if  verified  amendments  have  been  requested,  within  twenty 
days  after  their  receipt,  or,  within  twenty  days  after  the 
receipt  of  an  affidavit  that  the  insured  is  unable  to  furnish 
such  amendments. 


BUSINESS   CONTRACTS   AND   LEGAL  OBLIGATIONS.  297 

There  can  be  no  abandonment  to  this  company  of  any 
property. 

Apportionment  of  Loss.  This  company  shall  not  be 
liable  under  this  policy  for  a  greater  proportion  of  any  loss 
on  the  described  property,  or  for  loss  by,  and  expenses  of, 
removal  from  the  premises  endangered  by  fire,  than  the 
amount  hereby  insured  bears  to  the  entire  insurance  cover- 
ing such  property  whether  valid  or  not,  or  by  solvent  or 
insolvent  insurers. 

Loss,  when  Payable.  A  loss  hereunder  shall  be  payable 
in  thirty  days  after  the  amount  thereof  has  been  ascertained 
either  by  agreement  or  by  appraisement;  but  if  such  ascer- 
tainment is  not  had  or  made  within  sixty  days  after  the 
receipt  by  the  company  of  the  preliminary  proof  of  loss, 
then  the  loss  shall  be  payable  in  ninety  days  after  such 
receipt. 

Non-waiver  by  Appraisal  or  Examination.  This  com- 
pany shall  not  be  held  to  have  waived  any  provision  or  con- 
dition of  this  policy  or  any  forfeiture  thereof,  by  assenting  to 
the  amount  of  the  loss  or  damage  or  by  any  requirement,  act, 
or  proceeding  on  its  part  relating  to  the  appraisal  or  to  any 
examination  herein  provided  for. 

Subrogation.  If  this  company  shall  claim  that  the  fire 
was  caused  by  the  act  or  neglect  of  any  person  or  corpora- 
tion, this  company  shall,  on  payment  of  the  loss,  be  sub- 
rogated to  the  extent  of  such  payment  to  all  right  of  recovery 
by  the  insured  for  the  loss  resulting  therefrom,  and  such 
right  shall  be  assigned  to  this  company  by  the  insured  on 
receiving  such  payment. 

Time  for  Commencement  of  Action.  No  suit  or  action 
on  this  policy  for  the  recovery  of  any  claim  shall  be  sus- 
tained, until  after  full  compliance  by  the  insured  with  all 
of  the  foregoing  requirements,  nor  unless  begun  •  within 
fifteen  months  next  after  the  commencement  of  the  fire. 

Definitions.  Whenever  in  this  policy  the  word  "insured" 
occurs,  it  shall  be  held  to  include  the  legal  representatives 
of  the  insured  in  case  of  his  death,  and  wherever  the  word 
"loss"  occurs,  it  shall  be  deemed  the  equivalent  of  "loss  or 
damage,"  and  wherever  the  words  "the  time  of  loss  or 
damage"  are  used  they  shall  be  deemed  the  equivalent  of 
"the  time  of  the  commencement  of  the  fire." 


298  BUSINESS   LAWS   FOR  BUSINESS    MEN. 

Sec.  2.  There  shall  be  printed  on  the  outside  fold  of  said 
policy  in  type  not  smaller  than  small  pica  the  following  words 
in  this  form: 

READ   THIS    POLICY. 

Ins.  Co.  is  liable  only  for  actual  cash  value. 

Policy  is  void  in  case  of  any  fraud,  false  swearing,  mis- 
representation or  concealment  about  material  facts. 

Policy  is  void,  unless  otherwise  agreed  in  writing,  if 

1st.    It  is  assigned  before  loss; 

2nd.  Insured  has  or  shall  procure  other  insurance; 

3rd.    Any  change  occurs  in  location  of  property; 

4th.  Insured  building  is  on  ground  not  owned  in  fee 
simple  by  insured; 

5th.     Insured  is  not  sole  and  unconditional  owner. 

Policy  is  suspended,  unless  otherwise  agreed  in  writ- 
ing, if 

6th.  Described  building  becomes  vacant  or  unoccupied 
for  10  days; 

7th.  Mechanics  are  employed  more  than  15  days  in  re- 
pairing same; 

8th.  Property  is  or  becomes  encumbered  by  chattel 
mortgage ; 

9th.  Illuminating  gas  or  vapor  is  generated  in  or  adjacent 
to  described  building; 

10th.  Explosives  or  prohibited  quantities  of  gasoline,  etc., 
are  kept  on  premises. 

Insurance  ceases  if  described  building  or  any  material 
part  falls  except  as  result  of  fire. 

Policy  does  not  cover  certain  enumerated  personal  property. 

Note  particularly  duty  of  insured  in  case  of  loss; 

Also  provisions  avoiding  or  suspending  policy,  including 
changes  of  ownership  or  possession. 

Section  238b.  — CONTRACTS  FOR  INDEMNITY 
AMONG  INDIVIDUALS,  PARTNERSHIPS  OR  COR- 
PORATIONS.— Individuals,  partnerships  or  corporations 
may  exchange  reciprocal  or  inter-insurance  contracts,  provid- 
ing indemnity  among  each  other  from  fire  loss  or  from  other 
damage  to  their  own  property,  in  accordance  with  the  follow- 
ing provisions  of  this  act;  provided  that  no  individual, 
partnership  or  corporation  thus  exchanging  indemnity  shall 
assume  on  any  single  risk  an  amount  greater  than  ten  per 


BUSINESS   CONTRACTS   AND  LEGAL  OBLIGATIONS.  299 

cent  of  the  net  financial  rating  of  such  individual,  partner- 
ship or  corporation;  such  financial  rating  to  be  shown  by 
the  reports  of  a  commercial  agency  having  at  least  one  hun- 
dred thousand  members. 

1.  Attorney — Certificate. — Such  individuals,  partnerships 
or  corporations  so  contracting  among  themselves  shall  have 
the  power  to  appoint  an  attorney,  agent  or  other  representa- 
tive, and  shall,  through  their  attorney,  agent  or  other  repre- 
sentative, file  with  the  insurance  commissioner  of  this  state 
a  certificate  in  writing,  verified  by  the  oath  of  said  attorney, 
agent  or  other  representative,  setting  forth: 

(a)  The  name  or  title  by  which  said  individuals,  partner- 
ships or  corporations  intending  to  make  such  contracts  shall 
be  known.  The  insurance  commissioner  may  reject  any  name 
or  title  so  submitted  when  the  same  is  an  interference  with  or 
too  similiar  to  one  already  appropriated  or  likely  to  mislead 
the  public  in  any  respect  and,  in  such  case,  a  name  not  liable 
to  such  objection  must  be  chosen.  * 

(b).  A  verified  copy  of  the  form  of  policy,  contract  or 
agreement  under  or  by  which  such  indemnity  is  to  be 
exchanged. 

(c)  A  verified  copy  of  the  form  of  power  of  attorney  or 
other  authority  of  any  said  attorney,  agent  or  other  repre- 
sentative setting  forth  the  character  of  such  representation 
and  the  authority  of  the  such  representative. 

(d)  The  location  of  the  office  or  offices  through  which 
said  policies,  contracts  or  agreement  are  to  be  issued. 

(e)  Such  attorney  in  fact  shall  also  file  a  stipulation  or 
agreement  in  writing  that  any  notice,  provided  by  law  or  by 
any  insurance  policy,  proof  of  loss,  summons  or  other  process 
may  be  served  upon  the  attorney  in  fact  or  upon  the  insurance 
commissioner  of  the  State  of  California,  in  all  actions  or  in 
other  legal  proceedings  against  such  individuals,  partnerships 
or  corporations  thus  exchanging  indemnity  under  the  provi- 
sions of  section  1  of  this  act.  All  notices,  proofs  of  loss,  sum- 
mons or  other  legal  process  so  served  shall  give  jurisdiction 


300  BUSINESS   LAWS   FOR   BUSINESS    MEN. 

over  the  persons  of  such  individuals,  partnerships  or  corpora- 
tions thus  exchanging  indemnity.  Whenever  such  service  of 
notice,  proofs  of  loss,  summons  or  other  process  shall  be 
made  upon  the  insurance  commissioner,  he  must  within 
ten  days  thereafter,  transmit  by  mail,  postage  paid,  a  copy 
of  such  notice,  proof  of  loss,  or  summons  or  other  process 
to  the  attorney  in  fact  so  appointed  by  such  individuals,  part- 
nerships or  corporations  so  contracting  among  themselves  and 
shall  be  addressed  to  such  attorney  in  fact  at  the  home  or 
principal  office  through  which  such  policies  are  to  be  issued. 
The  sending  of  such  copy  by  the  insurance  commissioner  shall 
be  a  necessary  part  of  the  service  of  the  notice,  proof  of 
loss,  summons  or  other  process.  When  any  notice,  summons 
or  other  legal  process  is  served  upon  the  insurance  commis- 
sioner pursuant  to  the  provisions  of  this  section,  the  service 
as  to  such  individuals,  partnerships,  or  corporations  thus 
exchanging  indemnity  shall  be  deemed  complete  at  the  end 
of  sixty  days  after  the  date  of  the  mailing  of  such  copy  of 
such  notice,  proof  of  loss,  summons  or  other  legal  process 
to  the  attorney  in  fact  as  herein  provided  for. 

2.  Examination  of  Rating  of  Subscribers. — The  attorney, 
agent  or  other  representative  shall,  whenever  and  as  often 
as  the  same  shall  be  requested,  file  with  the  insurance  com- 
missioner a  statement  verified  by  his  oath  to  the  effect  that 
he  has  examined  the  commercial  rating  of  the  individuals, 
partnerships  or  corporations,  composing  the  subscribers  in 
such  reciprocal  or  inter-insurance  exchange  as  shown  by  a 
commercial  agency  having  at  least  one  hundred  thousand 
subscribers,  and  that,  from  such  examination,  it  appears  that 
no  subscriber  of  such  exchange  has  assumed  on  any  single 
risk  an  amount  of  liability  greater  than  ten  per  cent  of  the 
net  financial  rating  of  such  subscriber  when  such  risk  was 
assumed. 

There  shall  also  be  filed  with  the  insurance  commissioner 
by  any  said  attorney,  agent  or  other  representative,  a  written 
stipulation  to  the  effect  that  all  insurance  written  by  him  upon 
property   situated   within  this   state   shall   be   deeemd   to   be 


BUSINESS   CONTRACTS   AND  LEGAL  OBLIGATIONS.  301 

business  done  in  this  state  and  within  the  terms  and  subject 
as  to  taxation  to  the  provisions  of  the  constitution  of  this 
state. 

3.  Attorney's  Certificate  of  Authority. — The  agent,  at- 
torney or  other  representative  shall  procure  from  the  insur- 
ance commissioner  a  certificate  of  authority  stating  that  all 
the  requirements  of  this  act  have  been  complied  with,  and 
upon  such  compliance  and  the  payment  of  a  fee  of  fifty 
dollars  the  insurance  commissioner  shall  issue  such  certificate. 
Such  certificate  must  be  renewed  annually,  for  which  a  fee 
of  ten  dollars  shall  be  paid.  Any  such  cerificate  may  be 
revoked  or  suspended  by  the  insurance  commissioner  if  any 
of  such  individuals,  partnerships  or  corporations  exchanging 
indemnity  under  the  provisions  of  this  act  fail  to  comply 
with  any  or  all  of  the  requirements  of  the  law. 

4.  Annual  Statement. — The  attorney  in  fact  of  such  in- 
dividuals, partnerships  or  corporations  composing  such  re- 
ciprocal or  inter-insurance  exchange  shall  file  with  the 
insurance  commissioner,  of  this  state,  on  or  before  the  first 
of  March  of  each  year,  upon  forms  to  be  prepared  by  the 
insurance  commissioner,  a  statement  which  must  exhibit  the 
condition  and  affairs  of  such  exchange  on  the  31st  day  of 
December  then  next  preceding. 

5.  Examination  by  Insurance  Commissioner. — The  in- 
surance commissioner,  whenever  he  deems  necessary,  must 
make  an  examination  of  the  condition  and  affairs  relating 
to  the  exchange  of  indemnity  of  such  individuals,  partner- 
ships or  corporations  composing  such  reciprocal  or  inter- 
insurance  exchange,  and  must  make  such  an  examination 
before  issuing  its  original  certificate  of  authority  to  do  busi- 
ness in  this  state;  or  where  the  home  office  of  the  inter- 
insurance  or  reciprocal  exchange  is  located  outside  of  the 
State  of  California,  and  when  such  inter-insurance  or 
reciprocal  exchange  is  licensed  by  the  insurance  commis- 
sioner or  department   of  the   state   where   such   home   office 


302  BUSINESS   LAWS   FOR  BUSINESS  MEN. 

is  located,  the  insurance  commissioner  shall  accept  as  satis- 
factory a  certificate  of  compliance  issued  by  the  insurance 
commissioner  or  department  of  the  state  where  said  home 
office  is  located.  Such  examination  shall  verify  the  certificate 
and  statement  filed  by  the  attorney  in  fact.  Such  exchange 
must  open  its  books  and  papers  for  the  inspection  of  the 
insurance  commissioner,  and  shall  otherwise  facilitate  such 
examination,  and  the  commissioner  may  administer  oaths 
and  examine  under  oath  any  person  relative  to  the  con- 
tracts of  such  exchange,  and  if  he  finds  the  books  to  have 
been  carelessly  or  improperly  kept  or  posted  he  must  employ 
sworn  experts  to  rewrite,  post  and  balance  the  same  at  the 
expense  of  such  individuals,  partnerships  or  corporations 
composing  such  reciprocal  or  inter-insurance  exchange.  Such 
examination  must  be  conducted  in  the  county  where  such 
individuals,  partnerships  and  corporations  composing  such 
reciprocal  or  inter-insurance  exchange  has  its  principal  office, 
and  must  be  private.  Whenever  the  commissioner  shall  make 
such  examination,  the  same  must  be  at  the  expense  of  the 
individuals,  partnerships  and  corporations  composing  such 
reciprocal  or  inter-insurance  exchange;  such  expense  to  be 
paid  in  advance,  and  in  the  event  of  refusal  to  pay  such 
expenses  the  insurance  commissioner  may  refuse  to  issue 
any  such  certificate  of  authority,  and  must  revoke  any  exist- 
ing certificate  of  authority  authorizing  such  individuals, 
partnerships  and  corporations  composing  such  reciprocal  or 
inter-insurance  exchange  to  execute  such  contracts  of 
indemnity. 

Unincorporated  inter-indemnity  companies  who  do  not 
issue  policies  of  insurance,  who  do  not  charge  expenses  of 
management  except  in  liquidation  of  losses,  nor  accept 
premiums  from  its  members  shall  be  exempt  from  the 
provisions  of  this  act. 

6.  Void  Policies. — All  policies  and  insurance  contracts 
or  contracts  of  indemnity  upon  a  risk  or  risks  situated  in 
the   State  of  California,  held  by  an  individual,  partnership 


BUSINESS    CONTRACTS    AND   LEGAL   OBLIGATIONS.  303 

or  corporations  as  a  subscriber  of  any  reciprocal  or  inter- 
insurance  exchange,  which  exchange  is  not  authorized  to  do 
business  in  the  State  of  California,  shall  be  null  and  void; 
provided,  that  any  insurance  agreement  or  agreement  for  in- 
demnity on  goods  in  transit  or  the  property  of  common 
carriers  used  by  such  common  carriers  in  the  transaction  of 
their  business  shall  be  deemed  not  rendered  void. 

Act  of  the  Legislature,  approved  May  1,  1911;  in  effect 
July   1,   1911. 

Fire  Insurance  Agents. 

Section  239.— APPOINTMENT  AND  AUTHORITY 
OF  AGENTS. — It  is  not  necessary  that  the  agent  of  a 
fire  insurance  company  should  have  or  produce  a  written 
appointment,  for  his  agency  may  be  shown  in  many  other 
ways.  The  fact  of  his  agency  may  be  inferred  from  the 
relations  he  sustains  to  the  company,  from  the  course  of 
prior  dealings  and  transactions  connected  with  it,  and  from 
the  acts  of  the  company  with  reference  to  the  particular 
policy  in  question.  The  agent's  authority  may  be  actual  or 
ostensible.  He  may  possess  or  show  an  appointment  in 
writing,  or  the  company  may  accept  the  fruits  of  his  labors, 
and  knowingly  permit  him  to  hold  himself  out  publicly  as 
the  company's  agent.  In  either  case  the  company  will  not 
be  allowed  to  shield  itself  behind  the  defense  that  he  was 
not  really  an  agent.  The  powers  of  the  agent  are  prima 
facie  coextensive  with  the  business  intrusted  to  his  care, 
and  will  not  be  narrowed  by  Hmitations  not  communicated 
to  the  person  with  whom  he  deals.  An  insurance  company, 
establishing  a  local  agency,  must  be  held  responsible  to  the 
parties  with  whom  it  transacts  business  for  the  acts  and 
declarations  of  the  agent  within  the  scope  of  his  employment. 

Section  239a.— SURPLUS  LINE  BROKERS.— A  sur- 
plus line  broker  is  one  licensed  by  the  insurance  commis- 
sioner to  act  as  broker  in  soliciting,  negotiating,  and  effecting 


804  BUSINESS    LAWS   FOR   BUSINESS   MEN. 

insurance  under  conditions  hereinafter  stated,  to  be  procured 
from  or  placed  with  companies  not  authorized  to  transact 
such  business  in  this  state. 

1.  License  of  Surplus  Line  Broker. — The  insurance 
commissioner  may  issue  a  license  authorizing  any  individual 
to  act  as  surplus  line  broker  from  its  date  until  the  first 
of  July  following,  on  the  following  conditions: 

(a)  Payment  to  the  insurance  commissioner  of  a  fee  of 
twenty-five    ($25.00)    dollars  in  advance. 

(b)  Delivery  to  the  insurance  commissioner  of  a  bond  to 
the  State  of  California  in  the  sum  of  five  thousand  ($5000) 
dollars. 

A  surplus  line  broker,  after  having  procured  from  and 
placed  with  authorized  companies  the  total  amount  of  insur- 
ance obtainable  on  any  property  from  a  majority  of  all 
authorized  companies,  may  place  the  excess  of  insurance 
desired  over  such  amount  with  unauthorized  companies.  No 
insurance  is  to  be  procured  from  or  placed  with  unauthorized 
companies  by  any  one  except  by  a  surplus  line  broker  and 
under  such  conditions. 

2.  Duties  of  Surplus  Line  Broker. — ^The  following  are 
the  duties  of  a  surplus  line  broker  with  which  he  is  required 
to  comply: 

(a)  To  maintain  in  good  faith  an  office  in  this  state. 

(b)  To  keep  in  said  office  books  of  account  correctly 
showing  in  separate  accounts  all  business  transacted  with 
unauthorized  companies.  Said  books  are  to  specify  the 
dates  of  such  insurance  going  into  effect,  the  name  of  the 
insurers  and  of  the  insured,  the  gross  premiums  payable 
therefor,  the  terms,  character  of  insurance  and  locations  of 
the  insured  property.  They  shall  also  contain  statements  in 
the  same  detail  of  all  such  insurance  canceled,  or  on  which 
premiums  have  been  increased  or  reduced  and  the  amounts 
of  additional  or  of  return  premiums  thereon.  Such  books 
are  to  be  open  at  all  times  for  the  inspection  of,  and  exam- 
ination by,  the  insurance  commissioner,  or  any  one  appointed 
by  him  for  said  purpose. 


BUSINESS    CONTRACTS   AND   LEGAL   OBLIGATIONS.  305 

(c)  Within  one  week  aftei  the  surplus  line  brokers  shall 
have  obtained  knowledge  of  the  completion  of  the  procure- 
ment of  insurance  on  any  property  from  an  unauthorized 
company,  he  shall  file  with  the  insurance  commissioner  a 
true  report  showing  the  name  of  the  insured  and  of  the 
insurers,  the  character  of  the  insurance,  location  of  the  prop- 
erty, gross  premium  payable  therefor,  and  the  date  of  such 
insurance  taking  effect  and  the  term  thereof;  also  a  list 
of  authorized  companies  comprising  a  majority  thereof  from 
whom  the  insurance  so  effected  was  not  obtainable.  As 
soon  as  practicable  after  any  such  insurance  has  been  canceled 
or  any  premium  thereon  has  been  increased  or  reduced,  such 
surplus  line  broker  shall  file  with  the  insurance  commissioner 
a  report  thereof  in  the  same  detail  as  above  required  in  the 
case  of  the  report  above  referred  to. 

(d)  On  or  before  the  first  day  of  March  of  each  year  he 
shall  file  with  the  insurance  commissioner  a  sworn  statement 
of  all  business  transacted  under  his  license  during  the  last 
preceding  calendar  year  ending  December  31st.  Such  state- 
ments shall  contain  true  accounts  of  the  gross  amount  of 
insurance  procured  from  and  placed  with  unauthorized  com- 
panies during  said  calendar  year,  the  gross  premiums  charged 
therefor  including  additional  insurance  premiums,  and  the 
gross  amount  of  all  insurance  canceled  during  said  year,  and 
the  gross  return  premiums  thereon.  Such  statements  shall 
also  include  additional  premiums  charged  during  said  calendar 
year  on  insurance  previously  effected  and  the  gross  return 
premiums  during  said  calendar  year  on  insurance  previously 
effected. 

(e)  All  such  reports  and  statements  shall  be  made  on 
blanks  to  be  furnished  surplus  line  brokers  by  the  insurance 
commissioner  on  application  therefor. 

(f)  On  or  before  the  1st  day  of  June  of  each  year  said 
surplus  line  broker  shall  pay  to  the  insurance  commissioner 
for  the  use  of  the  State  of  California  three  (3%)  per  cent 
of  the  gross  premiums  charged,  less  three  (3%)  per  cent 
of  all  return  premiums  on  policies  canceled,  or  upon  which 


306  BUSINESS   LAWS   FOR   BUSINESS   MEN. 

the  premiums  have  been  reduced  during  the  year  ending  De- 
cember 31st  last  preceding. 

3.  Revoking  License. — The  insurance  commissioner  shall 
revoke  the  license  of  any  surplus  line  broker  who  wilfully 
fails  or  refuses  to  perform  any  of  his  duties  hereinabove 
specified. 

If  in  the  opinion  of  the  insurance  commissioner  the  solv- 
ency of  any  surety  on  a  bond  hereby  required  has  become 
impaired  or  doubtful,  he  shall  notify  the  surplus  line  broker 
in  writing,  and  unless  within  ten  (10)  days  after  receipt  of 
such  notice  the  solvency  of  such  surety  is  proved  to  the 
satisfaction  of  the  insurance  commissioner,  or  a  new  bond  is 
substituted  therefor,  said  insurance  commissioner  shall  revoke 
the  license  of  the  surplus  line  broker. 

The  removal  of  the  office  of  the  surplus  line  broker  from 
this  state,  or  the  removal  therefrom  of  his  accounts  of  his 
business  as  such,  or  the  closing  of  his  said  office  for  a  period 
of  more  than  twenty  (20)  consecutive  days,  shall  constitute 
a  termination  of  the  authority  of  said  surplus  line  broker, 
and  shall  be  tantamount  to  an  express  revocation  of  his 
license,  whether  or  not  the  insurance  commissioner  thereafter 
revokes  the  same. 

No  new  license  shall  be  issued  to  any  surplus  line  broker 
whose  license  has  been  revoked  for  any  reason  other  than  the 
insufficiency  of  his  sureties,  within  the  period  of  one  year 
after  such  revocation,  and  until  all  indebtedness  of  said  sur- 
plus line  broker  on  former  business  has  been  paid  to  said 
insurance  commissioner. 

4.  Examination  of  Policies. — Every  insured  for  whom 
insurance  has  been  effected  with  unauthorized  companies  shall 
produce  for  examination  by  the  insurance  commissioner, 
whenever  requested  by  him,  in  writing,  so  to  do,  all  policies, 
contracts,  and  other  documents  evidencing  such  insurance, 
and  disclose  to  him  the  true  amount  of  the  gross  premiums 
paid  or  agreed  to  be  paid  therefor,  or  upon  refusal  so  to  do, 
he  shall  forfeit  to  the  State  of  California,  the  sum  of  two 
hundred  ($200)  dollars  for  each  refusal. 


BUSINESS    CONTRACTS    AND   LEGAL   OBLIGATIONS.  307 

All  policies  and  other  contracts  of  insurance  issued  without 
full  compliance  by  all  parties  concerned  with  the  laws  of 
this  state,  shall  be  null  and  void. 

Act  of  the  Legislature,  approved  May  1,  1911 ;  in  effect 
July  1,   1911. 

Section  240.— BROKERS  OR  AGENTS.— The  question 
arises  as  to  the  difference  between  a  broker  and  an  agent, 
in  suits  where  a  company  makes  the  defense  that  the  person 
claimed  to  have  acted  as  its  agent  was  not  such  in  fact,  but 
did  act  for  the  owner  of  the  property.  Where  it  is  shown 
that  the  owner  of  the  property  solicits  an  insurance  agent 
to  procure  insurance  for  him,  and  himself  pays  the  commis- 
sion, such  agent  will  be  deemed  not  the  agent  of  the  com- 
pany, but  of  the  insured.  He  will  be  deemed  a  mere  broker, 
making  a  bargain  for  the  insured,  and  receiving  a  commission 
from  him  for  so  doing.  But  where  the  company  employs  a 
person  to  solicit  insurance,  and  provides  him  with  blanks  and 
other  papers,  and  pays  him  a  commission  on  the  business  he 
brings  in,  he  will  be  deemed  the  agent  of  the  company,  and 
not  of  the  insured.  In  following  sections  will  be  found  illus- 
trations of  some  leading  principles  of  agency  in  fire  insur- 
ance, as  decided  by  the  Supreme  Court  of  California. 

Section  241.— AGENT   WAIVING    FORFEITURE.— 

Simon  Silverberg  sued  the  Phenix  Insurance  Company  upon 
a  policy  of  fire  insurance.  When  the  case  was  tried,  it 
appeared  that  soon  after  the  occurrence  of  the  fire,  the  com- 
pany being  notified  of  the  fact,  directed  the  proofs  to  be 
made  out,  which  was  done,  and  subsequently  required  Silver- 
berg to  present  witnesses  and  vouchers.  After  these  witnesses 
and  vouchers  had  been  examined  at  length,  the  company  said 
the  proofs  were  satisfactory,  instructed  Silverberg  to  make 
out  formal  proofs  of  loss,  and  said  that  the  money  would 
be  paid  at  the  expiration  of  the  sixty  days  allowed  by  the 
policy  for  the  payment  of  the  loss.  Upon  the  expiration  of 
sixty  days,  a  demand  being  made  for  the  money,  the  com- 
pany declared  that  the  policy  had  been  avoided  by  a  breach 


308  BUSINESS   LAWS   FOR  BUSINESS   MEN. 

of  its  conditions,  and  refused  to  pay.  The  question  was 
whether  the  company's  agents  had  waived  the  condition  of 
the  poHcy  of  which  it  was  claimed  there  had  been  a  breach. 
The  facts  were,  that  the  agents  of  the  company  had  full 
knowledge  of  all  the  facts  upon  which  the  forfeiture  was 
based,  and  with  this  knowledge  informed  Silverberg  that 
the  insurance  would  be  paid,  and  then  refused  to  pay  and 
claimed  forfeiture.  The  Supreme  Court  held  that  the  acts 
of  the  company's  agents  in  examining  witnesses  and  vouch- 
ers, and  then  expressing  satisfaction  and  a  willingness  to 
pay,  after  full  knowledge  of  all  the  facts,  constituted  a 
waiver  of  any  forfeiture  by  Silverberg  resulting  from  a 
breach  of  the  conditions  of  the  policy.  The  agents  of  the 
company  were  authorized,  there  being  no  provision  in  the 
policy  to  the  contrary,  to  modify  or  altogether  waive  a 
condition  of  the  policy.  (Decided  in  the  case  of  Silverberg 
vs.  Phenix  Insurance  Company,  which  decision  is  printed  in 
Volume  67  of  the  California  Reports,  page  36.) 

Section  242.— AUTHORITY  OF  LOCAL  AGENT.— 

A  local  agent  of  a  fire  insurance  company,  who  has  authority 
to  make  a  consummated  and  binding  contract  of  insurance 
by  countersigning  and  delivering  its  policy,  and  to  extend 
a  limited  credit  for  the  premium,  has  the  power  of  the  com- 
pany to  waive  a  condition  in  the  policy  that  it  shall  not  be 
binding  until  the  premium  is  actually  paid,  and  does  waive 
such  condition  by  delivering  the  policy  unconditionally  under 
an  agreement  for  credit,  though  the  term  of  credit  given  be 
in  excess  of  his  actual  authority. 

Section  243.— OSTENSIBLE  GENERAL  POWER 
OF  LOCAL  AGENT.— A  local  agent  of  a  fire  insurance 
company  who  is  clothed  with  ostensible  general  authority 
to  solicit  applications,  receive  proposals,  make  contracts  for 
insurance,  receive  first  premiums,  and  to  countersign  and 
deliver  policies  within  certain  limits,  is  presumed  to  have 
the  general  power  of  the  company  within  those  limits  to 
waive  conditions  precedent  to  the  liability  of  the  company 


BUSINESS   CONTRACTS   AND   LEGAL  OBLIGATIONS.  309 

Upon  policies  which  he  is  authorized  to  countersign  and 
deHver.  Such  local  agent  is  presumed  to  have  power  co- 
extensive with  the  business  intrusted  to  his  care,  and  his 
powers  will  not  be  narrowed  by  limitations  not  communicated 
to  the  person  with  whom  he  deals ;  and  he  may  bind  his 
principal  by  any  acts  or  contracts  within  the  general  scope 
of  his  apparent  authority. 

Section  244.— KNOWLEDGE  OF  AGENT  IS  THE 
KNOWLEDGE  OF  COMPANY.— Whether  an  agent  has 
general  or  only  particular  powers  is  not  determined  by  simply 
calling  him  an  agent.  Where  any  fact  which  would  consti- 
tute a  breach  of  a  condition  precedent  to  any  liability  of  the 
company  on  the  policy  is  fully  known  to  an  agent  of  the 
company,  local  or  general,  who  is  authorized  to  consummate 
the  contract  of  insurance,  the  knowledge  of  such  agent  is 
the  knowledge  of  the  company;  and  if  the  agent,  with  a 
knowledge  of  the  breach  of  the  condition,  still  recognizes  the 
validity  of  the  policy,  this  constitutes  a  waiver  by  the  com- 
pany of  the  forfeiture,  and  also  a  waiver  of  the  general 
requirement  that  conditions  can  only  be  waived  in  writing 
indorsed  on  the  policy  itself.  (Decided  by  the  Supreme 
Court  of  California  in  the  case  of  Farnum  vs.  Phoenix  In- 
surance Company,  which  decision  is  printed  in  Volume  83 
of  the  California  Reports,  page  260.) 

Section  245.— ORAL  WAIVER  OF  INDORSEMENT 
BY  LOCAL  AGENT.— A  local  agent  who  is  clothed  with 
general  power  to  consummate  contracts  of  insurance  within 
a  certain  territory  stands  in  the  stead  of  the  insurance  com- 
pany, and  represents  its  whole  power  to  give  validity  to  the 
contracts  which  he  is  authorized  to  execute  and  deliver,  and 
to  waive  conditions  precedent  to  its  liability  by  oral  agree- 
ment, so  far  as  to  estop  the  company  from  questioning  its 
original  liability  by  reason  of  non-indorsement  of  the  waiver 
upon  the  policy  when  delivered. 


810  BUSINESS   LAWS   FOR  BUSINESS   MEN. 

Section  246.  —  APPLICATION  MADE  OUT  BY 
AGENT  OF  COMPANY. — Insurance  companies  who  do 
business  through  the  medium  of  agents  are  responsible  for 
their  acts  within  the  general  scope  of  the  business  intrusted 
to  their  care,  and  no  limitations  of  their  authority  will  be 
binding  on  parties  with  whom  they  deal,  which  are  not 
brought  to  their  notice.  When  the  agent  undertakes  to 
prepare  the  application  for  the  insured,  he  will  be  regarded 
in  doing  so  as  the  agent  of  the  insurance  company,  and  not 
of  the  insured ;  and  any  misstatements  contained  in  the  appli- 
cation, of  which  the  insured  is  ignorant,  will  not  be  fatal 
to  the  policy.  (Decided  by  the  Supreme  Court  of  California 
in  the  case  of  Wheaton  vs.  North  British  and  Mercantile 
Insurance  Company,  which  decision  is  printed  in  Volume  16 
of  the  California  Reports,  page  415.) 

Section  247.  — FRAUD  OF  AGENT  — DISOBEDI- 
ENCE OF  INSTRUCTIONS.— A  fire  insurance  company 
is  bound  by  the  acts,  omissions,  or  frauds  of  its  agent  when 
acting  within  the  scope  of  his  employment,  though  he  may 
have  disobeyed  the  instructions  received;  and  the  company 
cannot  be  permitted  to  derive  any  advantages  from  the  fraud 
of  the  agent  in  the  manner  of  transacting  its  business,  upon 
the  claim  that  the  agent's  fraudulent  conduct  was  not  author- 
ized. Therefore,  fraudulent  concealment  of  facts,  or  fraud- 
ulent representations  of  an  agent  to  the  insured,  binds  the 
company  he  represents,  when  the  insured  has  no  notice  of 
any  limitations  upon  the  authority  of  the  agent  in  the  trans- 
action. (Decided  by  the  Supreme  Court  of  California  in 
the  case  of  Stockton  Harvester  Works  vs.  Glenn's  Falls  In- 
surance Co.,  which  decision  is  printed  in  Volume  98  of  the 
California  Reports,  page  557.) 

Section  248.— WAIVER  OF  PETROLEUM  CLAUSE 
BY  AGENT. — A  condition  in  a  policy  for  loss  occurring 
while  petroleum  is  kept  or  used  on  the  insured  premises  is 
waived,  if  the  general  agent  of  the  insurer,  having  knowledge 
at  the  time  the  insurance  was  effected  that  petroleum  was 


BUSINESS    CONTRACTS   AND   LEGAL   OBLIGATIONS.  311 

kept  and  used,  consented  thereto,  and  represented  to  the 
insured  that  such  use  would  not  vitiate  the  policy.  (Decided 
by  the  Supreme  Court  of  California  in  the  case  of  Herman 
Kruger  vs.  Western  Fire  and  Marine  Insurance  Company, 
which  decision  is  printed  in  Volume  72  of  the  California  Re- 
ports, page  91.) 

Section  249.— WAIVER  CONTINUES  DURING  RE- 
NEWAL OF  POLICY.— A  waiver  of  conditions  in  the 
policy,  made  by  the  agent  of  the  company  at  the  time  the 
insurance  was  originally  effected,  continues  during  the  subse- 
quent renewals  of  the  policy. 

Section  250.— AUTHORITY  OF  SPECIAL  AGENT. 

• — Power  given  to  a  special  agent  of  a  fire  insurance  company 
to  receive  proposals  for  insurance,  and  to  receive  premiums, 
subject  to  the  rules  of  the  company  and  instructions  given  by 
its  general  agent,  includes  power  to  make  a  verbal  contract 
for  insurance,  sanctioned  by  instructions  from  the  general 
agent. 

Section    251.— ORAL     PROMISE     OF     POLICY.— A 

declaration  by  the  special  agent  to  the  insured,  made  at  the 
time  of  his  application  for  insurance,  that  it  was  unnecessary 
for  him  to  make  a  written  application,  as  the  general  agent 
was  asking  for  the  insurance,  and  a  promise  by  the  special 
agent  that  a  policy  should  be  given  to  the  insured  which 
would  cover  the  insurance  applied  for  to  the  date  of  the 
oral  application,  taken  in  connection  with  letters  from  the 
general  agent  asking  if  the  insurance  would  be  required, 
is  sufficient  proof  of  the  special  agent's  authority  to  bind 
the  company  for  insurance  from  the  date  of  the  oral  appli- 
cation. (Decided  by  the  Supreme  Court  of  California  in 
the  case  of  Harron  vs.  City  of  London  Fire  Insurance  Co., 
which  decision  is  printed  in  Volume  88  of  the  California 
Reports,  page  16.) 


312  BUSINESS   LAWS    FOR   BUSINESS    MEN. 

Section  252.— AGENT'S  KNOWLEDGE  OF  FORM- 
ER INSURANCE. — Many  policies  contain  the  provision, 
that  "if  any  other  insurance  has  been  or  shall  hereafter  be 
made  upon  the  said  property  and  not  consented  to  by  this 
company  in  writing  hereon,  this  policy  shall  be  null  and 
void."  But  notwithstanding  this  provision,  where  there  is 
former  insurance,  which  is  not  noted  on  the  policy  in  ques- 
tion, if  the  agent  of  the  company  knows  of  the  former 
insurance,  and  the  policy  is  issued,  such  knowledge  of  the 
agent  is  knowledge  of  the  company,  and  the  policy  is  valid. 

Section  253.— OFFER  TO  RENEW  POLICY.— Where 
the  local  agent  of  a  fire  insurance  company  has  no  actual 
or  ostensible  authority  to  contract  for  the  renewal  of  a  policy, 
a  proposal  made  to  such  agent  for  a  renewal  is,  until  com- 
municated to  and  accepted  by  the  insurance  company,  nothing 
more  than  a  mere  offer  to  renew  the  policy;  and  the  fact 
that  the  agent  promised  to  communicate  the  offer  to  the 
company,  and  did  not  do  so  until  after  the  loss,  does  not 
create  a  binding  contract  of  renewal.  (Decided  by  the 
Supreme  Court  of  California  in  the  case  of  Stewart  vs.  The 
Helvetia  Swiss  Fire  Insurance  Co.,  which  decision  is  printed 
in  Volume  102  of  the  California  Reports,  page  218.) 

Section  254.  — UNAUTHORIZED  CONTRACT  OF 
LOCAL  AGENT.— The  local  agent  of  the  New  Zealand 
Insurance  Company  at  Fresno  was  not  authorized  to  make 
contracts,  but  sent  all  applications  to  the  company  at  San 
Francisco  for  acceptance;  he  received  an  application,  how- 
ever, and  told  the  insured  that  the  insurance  would  begin 
at  that  time ;  before  the  application  was  mailed  from  Fresno 
the  building  was  burned;  the  company  was  sued  for  the  loss, 
but  the  Supreme  Court  said,  that  as  the  local  agent  had  no 
actual  or  ostensible  authority  to  make  a  contract  of  insur- 
ance, and  the  building  being  a  saloon,  which  class  of  risks 
the  company  did  not  take,  the  company  was  not  liable  for 
loss;  and  it  made  no  difference  that  at  the  time  when  the 
application    was    made    the    special    agent    of    the    company, 


BUSINESS    CONTRACTS    AND   LEGAL   OBLIGATIONS.  313 

who  had  no  authority  to  enter  into  contracts,  was  present 
and  approved  of  it.  (Decided  by  the  Supreme  Court  of 
California  in  the  case  of  O'Brien  vs.  New  Zealand  Insurance 
Company,  which  decision  is  printed  in  Volume  108  of  the 
California  Reports,  page  227.) 

Section  255.— WAIVER  FROM  KNOWLEDGE  OF 
AGENT. — The  act  of  the  agent  of  a  fire  insurance  company, 
in  issuing  a  policy  on  an  application  alleging  unconditional 
ownership,  is  a  waiver  of  such  condition,  where  the  agent 
knows  at  the  time  that  the  property  is  mortgaged,  and  that 
a  foreclosure  suit  is  pending.  (Decided  by  the  Supreme 
Court  of  California  in  the  case  of  Breedlove  vs.  Norwich 
Union  Fire  Insurance  Co.,  which  decision  is  printed  in 
Volume  24  of  the  California  Reports,  page  164.)  A  is  the 
true  owner  of  property  which  stands  in  the  name  of  B. 
A  informs  the  "insurance  company  of  the  condition  of  the 
title,  and  has  the  property  insured  in  the  name  of  B,  and  the 
loss  made  payable  to  A  "as  his  interest  may  appear."  It 
was  stipulated  in  the  policy  that  it  should  be  void  if  the 
interest  of  the  insured  should  be  other  than  unconditional 
and  sole  ownership.  Held  by  the  District  Court  of  Appeals, 
that  the  issuance  of  the  policy  upon  the  known  facts  was  a 
waiver  of  all  conditions  inconsistent  therewith,  and  the  true 
owner  was  entitled  to  recover  the  amount  of  the  policy, 
although  the  title  to  the  property  stood  in  the  name  of  an- 
other. The  company  was  informed  of  this  before  the  policy 
was  issued,  and  was  bound  by  that  knowledge.  (Decided 
by  the  California  District  Court  of  Appeals  in  the  case  of 
Loring  vs.  Duchess  Insurance  Company,  which  decision  is 
printed  in  Volume  I,  California  Appellate  Decisions,  page 
128.) 

Life  Insurance. 

Section  255a.— INSURABLE  INTEREST.— The  con- 
tract of  life  insurance  must  be  based  upon  an  insurable  inter- 
est, and  this  insurable  interest  must  arise  from  the  relation 


814  BUSINESS  LAWS   FOR  BUSINESS  MEN. 

of  the  party  taking  the  insurance  to  the  insured,  either  as 
surety  or  debtor,  or  from  the  ties  of  blood  or  marriage,  so  that 
from  the  relation  thus  established  there  may  be  some  expecta- 
tion of  benefit  or  advantage  in  the  continuance  of  the  insured 
life.  Every  person  has  an  insurable  interest  in  the  life  of 
himself;  and  in  the  life  of  any  person  on  whom  he  depends 
wholly  or  in  part  for  education  or  support;  and  in  the  life 
of  any  person  under  a  legal  obligation  to  him  for  the  pay- 
ment of  money,  or  respecting  property  or  services,  of  which 
death  might  delay  or  prevent  the  performance;  and  in  the 
life  of  any  person  upon  whose  life  any  estate  or  interest 
vested  in  him  depends.  A  person  who  is  not  related  to 
another  has  no  insurable  interest  in  his  life,  unless  the  latter 
is  his  debtor,  or  in  some  other  pecuniary  way  so  connected 
with  him  as  to  aflford  reasonable  ground  for  expecting  some 
relief  or  advantage  from  the  continuance  of  the  life  of  the 
insured.  The  result  of  this  rule  is,  a  person  cannot  take 
insurance  upon  the  life  of  a  mere  stranger,  not  related,  or 
under  obligation  in  some  pecuniary  way;  for  such  a  policy 
would  be  nothing  more  nor  less  than  a  wager  or  gambling 
policy,  which  the  law  does  not  allow.  Husband  and  wife 
have  an  insurable  interest  in  the  lives  of  each  other,  and  so 
do  father  and  child.  It  has  been  held  by  the  courts  that  a  step- 
son has  no  insurable  interest  in  the  life  of  his  stepfather, 
where  he  has  a  separate  home  and  family  of  his  own,  and  is 
not  a  creditor,  nor  in  any  way  dependent  upon  or  responsible 
for  the  support  of  the  stepfather.  An  interest,  to  be  insurable, 
must  be  an  interest  in  favor  of  the  continuance  of  the  life, 
and  not  an  interest  in  its  loss  or  destruction.  Public  policy 
does  not  allow  any  one  having  no  insurable  interest  to  be  the 
owner  of  a  policy  of  insurance  upon  the  life  of  a  human 
being.  The  public  has  an  interest,  independent  of  the  con- 
sent and  concurrence  of  the  parties,  that  no  inducement  shall 
be  offered  to  one  man  to  take  the  life  of  another. 

A  person  has  such  an  insurable  interest  in  his  own  life 
that  he  may  insure  it  for  the  benefit  of  his  heirs,  or  even  for 
the  benefit  of  a  stranger. 

Civil  Code,  Section  2763. 


BUSINESS    CONTRACTS   AND   LEGAL   OBLIGATIONS.  315 

Section  255b.— CREDITOR'S  INTEREST.— A  creditor 
may  lawfully  take  out  a  policy  on  the  life  of  his  debtor  in 
an  amount  sufficient  to  cover  the  debt,  with  interest. 

Section  255c.— DELIVERY  OF  POLICY.— Actual  de- 
livery of  the  policy  into  the  hands  of  the  insured  is  not 
necessary  in  order  to  bind  the  company.  If  the  first  premium 
is  paid  to  and  accepted  by  the  company,  and  a  policy  issued 
with  intent  to  deliver  to  the  insured,  it  is  valid  and  binding 
even  though  the  insured  dies  before  the  policy  reaches  him. 
An  unconditional  delivery  of  a  policy  by  the  company  to  its 
agent,  for  delivery  to  the  insured,  binds  the  company, 
although  the  agent  never  parts  with  possession  of  the  policy. 
Possession  of  the  policy  by  the  insured,  at  his  death,  is  prima 
facie  proof  that  it  was  duly  delivered  to  him. 

Section  255d.— PLACE  OF  CONTRACT.— It  is  some- 
times important  to  determine  where  the  law  puts  the  loca- 
tion of  a  contract,  the  place  where  it  is  deemed  to  have  been 
made.  The  rule  on  this  subject  is,  that  the  contract  is  deemed 
to  have  been  made  where  the  policy  is  issued.  For  instance, 
if  the  application  is  sent  to  the  office  of  the  company  in 
New  York,  and  the  policy  is  executed  and  issued  there,  it 
is  a  New  York  contract,  to  be  construed  according  to  the 
laws  of  New  York.  If,  on  the  other  hand,  the  policy  is 
executed  and  issued  from  the  office  of  the  company  in  the 
State  of  California,  it  is  a  California  contract,  to  be  construed 
according  to  the  laws  of  California.  It  is  to  be  understood,  in 
this  connection,  however,  that  it  is  within  the  power  of  the 
contracting  parties,  by  the  express  terms  of  their  contract, 
to  establish  the  place  where  it  shall  have  effect,  and  under 
what  laws  it  shall  be  construed.  If  anything  appears  in  the 
application  upon  which  the  policy  is  issued,  or  in  the  policy 
itself,  that  discloses  an  intention  that  the  policy  shall  be 
construed  according  to  the  laws  in  force  in  any  other  state 
than  the  one  in  which  it  was  actually  made  and  delivered, 
such  intention  must  govern,  and  will  have  the  effect,  so  far 
as  the  construction  of  the  contract  is  concerned,  to  change 


316  BUSINESS   LAWS   FOR  BUSINESS   MEN. 

the  place  of  its  execution  so  as  to  correspond  with  the  inten- 
tion of  the  parties. 

Section  255e.— INTERPRETATION    OF   POLICY.— 

A  policy  of  life  insurance  must  be  interpreted  and  construed 
according  to  the  principles  which  govern  other  contracts. 
The  intention  of  the  parties  is  the  first  thing  to  be  consid- 
ered, and  that  intention  is  to  be  ascertained  from  the  policy 
itself,  if  possible.  The  courts  do  not  favor  forfeitures,  and 
a  policy  of  insurance  will  always  be  construed  in  favor  of 
upholding  the  contract,  if  such  construction  is  possible  from 
the  language  used.  All  conditions  involving  forfeitures  will 
be  construed  strictly  as  against  the  company,  and  most  favor- 
ably for  the  insured.  When  a  policy  is  capable  of  two  mean- 
ings, that  which  is  most  favorable  to  the  insured  will  be 
adopted  by  the  courts. 

Section  255f.— CONDITIONS  IN  POLICY.— The  con- 
ditions in  a  life  insurance  policy,  to  be  observed  by  the 
insured — as,  for  payment  of  premiums,  or  against  use  of 
alcoholic  beverages,  and  other  stipulations — must  be  adhered 
to  by  the  insured,  at  the  risk  of  rendering  the  policy  void 
if  he  does  not  observe  them.  But  the  courts  construe  the 
conditions  named  in  a  p(5licy  most  strongly  against  the  com- 
pany, and  in  favor  of  the  insured.  There  are  conditions 
stated,  too,  the  violation  of  which  does  not  render  the  policy 
absolutely  void,  but  only  make  it  voidable,  at  the  option  of 
the  insurance  company.  Of  these,  the  conditions  prohibiting 
the  insured  from  traveling,  or  living  in  certain  places,  may 
be  cited  as  illustrations  of  the  kind  of  conditions  the  breach 
of  which  renders  the  policy  voidable,  and  not  void.  The 
company,  upon  the  breach  of  such  conditions,  may  proceed 
to  declare  a  forfeiture,  and  cancel  the  policy;  or  it  may,  by 
accepting  further  premiums,  or  recognizing  the  continued 
life  of  the  policy,  evidence  a  waiver  on  its  part  of  the 
voidable  conditions. 


BUSINESS    CONTRACTS    AND   LEGAL   OBLIGATIONS.  317 

Section    255g.  — WAIVER    OF    CONDITIONS.  — A 

waiver  of  the  conditions  in  a  policy  may  be  either  verbal  or 
in  writing.  If  in  writing,  the  writing  speaks  for  itself.  But 
a  waiver  may  be  shown  by  acts  and  circumstances.  Where 
the  agent  of  a  life  insurance  company,  having  knowledge  of 
some  act  on  the  part  of  the  insured  constituting  a  breach 
of  condition,  proceeds  to  treat  the  policy  as  valid,  by  accept- 
ing premiums,  or  in  some  other  way  ignoring  the  breach, 
the  breach  of  condition  will  be  considered  as  having  been 
waived  by  the  company.  If  an  insurance  company,  having 
knowledge  of  facts  rendering  its  policy  voidable,  deliberately 
claims  and  exercises  a  right  under  the  policy,  it  waives  all 
right  to  avoid  it  because  of  such  facts.  An  insurance  com- 
pany is  not  permitted  to  collect  premiums  with  full  knowledge 
of  facts  which  might  avoid  the  policy  (and  knowing  that  the 
insured  continues  to  disregard  a  provision  working  a  for- 
feiture), and  then  to  deny  the  validity  of  the  policy  when 
a  loss  occurs.  The  company  will  always  be  bound  by  its 
waiver  of  the  conditions  in  a  policy.  If  an  insurance  com- 
pany, after  knowledge  of  any  default  for  which  it  might 
terminate  the  policy,  enters  into  negotiations  or  transactions 
with  the  insured  which  recognize  the  continued  validity  of 
the  policy  and  treat  it  as  still  in  force,  the  right  to  claim 
a  forfeiture  for  such  previous  default  is  waived. 

Section  255h.— REPRESENTATIONS  BY  INSURED. 

— A  person  who  makes  an  application  for  life  insurance  must 
not  make  false  representations  about  any  material  matter,  for 
if  he  does  do  so  the  policy  can  be  canceled.  False  answers 
about  the  health  of  the  applicant  will  render  a  policy  voidable. 
Concealing  the  truth,  as  when  the  applicant  states  that  he 
is  in  good  health,  when  in  fact  he  is  suffering  from  disease, 
will  be  good  reason  for  canceling  a  policy. 

The  law  presumes  that  all  the  answers  to  questions  con- 
tained in  an  application  are  true  and  correct,  and  it  is  for 
the  company  to  show  that  the  statements  which  it  claims  as 
false  really  are  so,  if  it  seeks  to  avoid  a  policy  on  the  ground 
of  false  representations  by  the  insured. 


318  BUSINESS   LAWS   FOR   BUSINESS   MEN. 

Section  255i.— EFFECT  OF  DISEASE  OF  APPLI- 
CANT ON  POLICY. — A  disease  known  to  the  applicant 
for  a  policy,  but  not  discovered  by  the  agents  of  a  company, 
and  concealed  by  the  applicant,  will  be  ground  for  forfeiture. 
But,  if  the  applicant  is  afflicted  with  a  disease  and  does  not 
know  it,  his  failure  to  communicate  the  fact  will  not  be 
regarded  as  a  fraud  upon  the  insurance  company. 

Section  255j.— MEANING  OF  "GOOD   HEALTH."— 

The  health  of  body  required  at  the  time  of  making  applica- 
tion for  life  insurance  is  not  perfect  and  absolute  health,  nor 
is  it  necessary  that  it  should  exclude  all  disorders  and  in- 
firmities which  may  possibly  shorten  life.  Only  an  ordinary 
and  reasonable  degree  of  health  is  required,  in  order  to  make 
the  insurance  effective.  The  term  "good  health,"  when  used 
in  an  application  for  a  policy  of  life  insurance,  means  that 
the  applicant  has  no  grave,  important,  or  serious  disease,  and 
is  free  from  any  ailment  that  seriously  affects  the  soundness 
and  healthfulness  of  the  system.  A  mere  temporary  indis- 
position, which  does  not  tend  to  weaken  or  undermine  the 
constitution  of  the  person  at  the  time  of  insuring,  does  not 
render  a  policy  void. 

Section  255k.— MALT  AND  SPIRITUOUS  BEVER- 
AGES.— The  question,  "Do  you  use  malt  or  spirituous 
beverages?"  asked  of  an  applicant  for  life  insurance  refers 
to  a  customary  and  habitual  use,  and  not  to  a  single  or 
occasional  act  or  use;  and  the  question,  "Have  you  always 
been  temperate?"  means  moderation,  and  an  abstinence  from 
excessive  or  injurious  use,  and  not  total  abstinence  from 
the  use  of  malt  or  spirituous  liquors. 

Section  255  1.— PAYMENT    OF    PREMIUMS.— Notice 

must  be  given  to  the  insured  of  the  time  when  premiums 
become  due,  and  the  premiums  must  be  paid  promptly,  in 
order  to  save  the  policy  from  forfeiture,  unless  the  company 
waives  payment  when  due  and  extends  the  time. 


BUSINESS    CONTRACTS   AND   LEGAL   OBLIGATIONS.  319 

Section  255m.— CREDIT  FOR  PREMIUMS.— A  pro- 
vision in  a  policy  of  insurance,  that  the  company  shall  not 
be  liable  until  the  premium  is  actually  paid,  is  waived  by  an 
unconditional  delivery  of  the  policy  to  the  insured  as  a  com- 
pleted contract  under  an  express  or  implied  agreement  that 
credit  shall  be  given. 

Section  255n.— FORFEITURE  FOR  NON-PAYMENT 
OF  PREMIUM. — If  the  premium  is  not  paid,  after  notice 
from  the  company,  the  policy  will  be  forfeited.  But  when 
an  insurance  company  receives  payments  of  premiums  when 
they  are  overdue,  and  when  it  might  refuse  payment  and 
declare  the  policy  forfeited  under  its  "by-laws,"  it  cannot 
accept  and  keep  the  money,  and  still  insist  upon  a  forfeiture. 

Forfeiture  of  a  life  insurance  policy  for  non-payment  of 
premium  when  it  becomes  due  cannot  be  insisted  upon  by 
the  company,  when  by  the  terms  of  the  policy  the  insured 
is  entitled  to  share  in  the  profits,  and  therefore  cannot  know 
without  notice  what  amount  he  is  required  to  pay,  and  no 
notice  has  been  given  to  him  of  what  sum  the  company 
claims  to  be  due  on  the  policy. 

Section  255  o.— REVIVAL  OF  FORFEITED  POL- 
ICY.— A  policy  of  life  insurance,  forfeited  for  non-payment 
of  premium  at  maturity,  can  only  be  revived,  as  far  as  the 
insured  is  concerned,  by  the  actual  payment  and  acceptance 
of  the  overdue  premium,  or  by  a  contract  with  the  company 
based  upon  a  sufficient  consideration  to  revive  and  reinstate 
the  insurance. 

A  reinstatement  of  the  insurance  after  a  forfeiture  is  not 
the  making  of  a  new  contract,  where  no  diflferent  terms  are 
agreed  upon.     It  simply  restores  the  old  policy. 

Section  255p.— PROOF  OF  DEATH.— The  require- 
ments of  the  policy  as  to  proof  of  death  must  be  complied 
with  by  the  beneficiary  before  he  can  collect  the  insurance. 
If  the  policy  states  the  proof  which  must  be  furnished,  and 
the  time,  its  directions  must  be  obeyed.     If  the  policy  does 


320  BUSINESS   LAWS   FOR  BUSINESS   MEN. 

not  State  the  particular  proof,  or  the  manner  of  making  proof, 
the  fact  of  death  must  be  shown  to  the  company  with  reason- 
able definiteness  and  certainty,  in  any  reasonable  manner. 

Failure  to  furnish  proof  of  death  within  the  time  limited 
by  a  life  insurance  policy  is  waived,  when  the  company 
makes  a  proposal  to  settle,  or  absolutely  refuses  to  pay,  or 
denies  all  liability,  or  asks  for  additional  proof  without 
making  objection  that  the  proof  given  was  not  furnished  in 
time. 

Section  255q. — SUICIDE. — In  the  law  of  insurance, 
suicide  is  not,  as  a  rule,  recognized  as  a  ground  of  exemption 
from  liability,  or  for  the  forfeiture  of  a  policy  issued  for  the 
benefit  of  a  third  person,  unless  it  is  expressly  so  provided 
in  the  policy.  Where  a  policy  of  life  insurance  contains  a 
condition  that  in  case  the  insured  shall  die  by  his  own  hand, 
whether  sane  or  insane,  the  policy  shall  become  null  and 
void,  the  suicide  of  the  insured  will  prevent  a  recovery  on 
the  policy.  But  the  presumption  is  against  the  suicide  of 
the  insured,  and  the  company,  if  it  refuses  to  pay  on  that 
ground,  must  itself  furnish  satisfactory  proof  that  the  insured 
did  die  by  his  own  hand.  Nothing  appearing  to  the  contrary, 
the  legal  presumption  is  that  a  man  died  from  a  natural 
cause,  and  not  from  an  act  of  self-destruction.  The  mere 
fact  of  death  in  an  unknown  manner  creates  no  presumption 
of  suicide. 

Section  255r.— ASSIGNMENT  OF  POLICY.— A  policy 

of  life  insurance  may  be  assigned  and  transferred,  and  the 
assignee  will  stand  in  the  place  of  the  insured,  be  subject 
to  his  liabilities,  and  entitled  to  his  benefits.  The  assignment 
may  be  an  absolute  sale  and  transfer,  or  the  policy  may  be 
assigned  as  security  for  a  debt.  Notice  of  the  assignment 
is  not  required  to  be  given  to  the  company,  unless  the  policy 
contains  a  condition  requiring  such  notice  to  be  given. 

A  policy  on  the  life  of  the  insured  payable  to  his  legal 
representatives  may  be  assigned  by  him,  with  the  consent 
of  the  company;  and  in  such  case  the  rights  of  the  assignee 


BUSINESS   CONTRACTS   AND  LEGAL  OBLIGATIONS.  321 

are  paramount  to  the  claims  of  the  heirs  or  personal  repre- 
sentatives of  the  insured. 

The  assignment  may  be  to  relatives  of  the  insured,  or  it 
may  be  to  a  stranger  who  has  no  insurable  interest  in  the 
life  of  the  insured. 

If  a  policy  of  insurance  expressly  stipulates  that  no  assign- 
ment shall  be  valid  without  the  consent  of  the  company,  an 
assignment  without  such  consent  is  without  effect.  The 
insured,  in  this  case,  is  presumed  to  have  taken  out  the 
insurance  with  knowledge  of  the  stipulation,  and  is  bound 
by  it. 

Assignment  of  a  policy,  made  payable  to  certain  described 
beneficiaries,  should  be  with  the  consent  of  the  beneficiaries. 
Civil  Code,  Sections  2764,  2765. 

Section  255s.— BENEFICIARIES  OF  LIFE  INSUR- 
ANCE.  The  insured  may  have  the  policy  made  payable 

to  his  estate,  or  to  particular  persons  named  in  the  policy  as 
beneficiaries. 

A  policy  of  life  insurance  creates  vested  interests  in  the 
beneficiaries  named  therein,  and  although  the  contract  may 
be  canceled  by  the  company  in  case  the  insured  fails  to  keep 
the  stipulations,  the  insured  himself  cannot  revoke  the  con- 
tract without  the  consent  of  the  beneficiaries. 

The  proceeds  of  a  policy  of  life  insurance  made  payable 
to  the  heirs  of  an  insured  husband  go  to  his  widow  and 
children,  in  the  proportion  provided  by  the  laws  of  the  state 
for  distribution  of  estates. 

Section  255t.— DEDUCTION  OF  UNPAID  PREM- 
IUMS.— The  insurance  company  is  entitled  to  have  the 
amount  of  premium  remaining  due  for  the  current  year,  after 
the  death  of  the  insured,  deducted  from  the  amount  of  the 
policy  before  paying  it. 

(a)  PAID-UP  LIFE  INSURANCE.— Every  contract 
or  policy  of  life  insurance  hereinafter  made  by  any  person 
or  corporation,  with  or  upon  the  life  of  a  resident  of  this 


322  BUSINESS   LAWS   FOR   BUSINESS    MEN. 

state,  and  delivered  within  this  state,  shall  provide,  in  event 
of  default  of  any  premium  payment  after  three  full  annual 
premiums  shall  have  been  paid  on  such  policy,  that  without 
any  action  on  the  part  of  the  insured,  the  net  value  of  such 
policy  based  upon  the  reserve  basis  used  in  computing  the 
premiums  and  values  thereunder  (the  policy  to  specify  the 
mortality  table  and  rate  of  interest  so  adopted),  which  net 
value  shall  be  at  least  equal  to  its  entire  net  reserve  at  the 
date  of  default,  including  that  of  dividend  additions,  if  any, 
based  upon  a  standard  not  lower  than  the  American  experi- 
ence tables  of  mortality  with  interest  at  three  and  one-half 
per  cent  yearly,  less  a  surrender  charge  of  not  more  than 
two  and  one-half  per  cent  of  the  face  amount  of  the  policy 
and  of  any  existing  dividend  additions  thereto  and  less  any 
indebtedness  to  the  company  on  or  secured  by  the  policy, 
shall  be  applied  as  a  single  premium  to  the  purchase  of  one 
of  the  following  stipulated  forms  of  insurance. 

First. — Paid-up  non-participating  term  insurance  in  the 
amount  of  the  face  of  the  policy,  plus  dividend  additions,  if 
any,  for  such  a  period  as  the  net  value  outlined  above  will 
purchase  at  the  net  single  premium,  at  the  attained  age  of 
the  insured  at  the  time  of  the  lapse,  based  upon  the  reserve 
basis  described  in  the  policy;  provided,  however,  that  under 
endowment  contracts  the  term  shall  not  extend  beyond  the 
endowment  period  named  in  the  original  contract,  and  the 
excess  value,  if  any,  shall  be  applied  as  a  net  single  premium 
to  purchase  in  the  same  manner  paid-up  pure  endowment 
insurance,  payable  at  the  end  of  the  endowment  period  named 
in  the  contract  if  the  insured  be  then  living;  or 

Second. — Paid-up  non-participating  term  insurance  in  the 
amount  of  the  face  of  the  policy,  plus  dividend  additions,  if 
any,  and  less  any  outstanding  indebtedness,  for  such  a  period 
as  the  net  value  outlined  above  will  purchase  at  the  net  single 
premium,  at  the  attained  age  of  the  insured,  based  upon  the 
reserve  basis  described  in  the  policy;  provided,  however,  that 
under  endowment  contracts  the  term  shall  not  extend  beyond 
the  endowment  period  named  in  the  original  contract,  and  the 
excess  value,  if  any,  shall  be  applied  as  a  net  single  premium 


BUSINESS    CONTRACTS    AND   LEGAL   OBLIGATIONS.  323 

to  purchase  in  the  same  manner  paid-up  pure  endowment 
insurance,  payable  at  the  end  of  the  endowment  period  named 
in  the  contract  if  the  insured  be  then  living;  or 

Third. — Paid-up  non-participating  insurance  payable  at  the 
time  and  on  the  conditions  named  in  the  policy  for  such  an 
amount  as  the  net  value  outlined  above  will  purchase  at  the 
net  single  premium,  at  the  attained  age  of  the  insured,  based 
upon  the  reserve  basis  described  in  the  policy. 

Provided,  however,  that  the  policy  may  be  surrendered  to 
the  company,  at  its  home  office,  upon  due  application  by  the 
legal  owner  thereof,  within  one  month  after  date  of  premium 
default,  for  a  specified  cash  value  which  shall  be  at  least 
equal  to  the  sum  which  would  be  otherwise  available  for  the 
purchase  of  the  automatic  form  of  insurance  provided 
therein;  and  provided  further  that  the  company  may  defer 
payment  of  such  cash  value  for  not  more  than  six  months 
after  application  therefor  is  made. 

No  agreement  between  the  company  and  the  policyholder 
or  applicant  for  insurance  contrary  to  the  foregoing  shall  be 
held  to  waive  any  of  the  provisions  provided  above. 

Any  life  insurance  policy  issued  upon  the  life  of  a  resident 
of  this  state,  and  delivered  within  this  state,  which  does  not 
contain  an  automatic  non-forfeiture  value  in  conformity  with 
the  foregoing  shall  be  construed  as  granting  non-participating 
term  insurance,  as  provided  in  paragraph  first  of  this  section, 
and  such  a  benefit  shall  be  read  into  the  contract. 

The  provisions  of  this  section  shall  not  apply  to  annuities, 
industrial  policies,  or  to  term  contracts  issued  for  periods  of 
twenty  years  or  less. 

Act  of  the  Legislature,  approved  May  1,  1911. 

Life   Insurance  Agents. 

Section    255u.  — PRINCIPLES     OF     AGENCY.— The 

principles  of  agency  stated  under  the  head  of  "Fire  Insurance 
Agents"  apply  equally  to  agents  of  life  insurance  companies. 
They  bind  their  principals  in  the  same  way;  their  represen- 
tations as  to  the  business  entrusted  to  them  have  the  same 


824  BUSINESS   LAWS   FOR   BUSINESS   MEN. 

effect;  they  may  waive  conditions  of  the  contract  to  the  same 
extent;  and,  as  there  is  no  special  rule  applying  particularly 
to  life  insurance  agents,  it  will  be  sufficient,  as  to  them,  to 
refer  to  the  subject  of  "Fire  Insurance  Agents." 

Accident  Insurance. 

Section  255v.— THE  POLICY.— A  policy  of  accidental 
insurance  is  issued  and  accepted  for  the  purpose  of  furnish- 
ing indemnity  against  accidents  and  death  caused  by  acci- 
dental means,  and  the  language  of  the  policy  must  be  con- 
strued with  reference  to  the  subject  to  which  it  is  applied. 
In  the  construction  of  an  accident  insurance  policy,  however, 
its  provisions  will  be  usually  interpreted  most  favorably  for 
the  insured,  in  case  of  doubt  or  uncertainty  in  their  terms. 
If  a  stipulation  or  exception  in  a  policy  of  accident  insurance 
is  capable  of  two  meanings,  that  will  be  adopted  which  is 
most  favorable  to  the  insured.  In  other  words,  if  there  is 
doubt  or  uncertainty  as  to  the  meaning  of  terms  employed 
in  a  policy  of  accident  insurance,  the  language  must  be 
liberally  construed  in  favor  of  the  insured,  so  as  not  to  defeat, 
without  a  plain  necessity,  his  claim  to  indemnity,  which,  in 
effecting  the  insurance,  it  was  his  object  to  secure. 

Section  255w.— DEFINITION  OF  ACCIDENT— Some 

difficulty  has  been  experienced  by  the  courts  in  arriving  at 
a  satisfactory  and  comprehensive  definition  of  the  word 
"accident"  as  used  in  insurance  policies.  Worcester  defines 
"accident"  to  be  "an  event  proceeding  from  an  unknown 
cause,  or  happening  without  the  design  of  the  agent."  Web- 
ster's definition  is,  "An  event  that  takes  place  without  one's 
foresight  or  expectation;  an  event  which  proceeds  from  an 
unknown  cause,  or  is  an  unusual  effect  of  a  known  cause, 
and  therefore  not  expected." 

The  definition  of  "accident"  generally  adopted  is,  an  event 
happening  without  any  human  agency,  or,  if  happening 
through  human  agency,  an  event  which,  under  the  circum- 
stances, is  unusual,  and  not  expected  by  the  person  to  whom 
it  happens. 


BUSINESS   CONTRACTS   AND  LEGAL  OBLIGATIONS.  325 

Disease,  produced  by  the  action  of  a  known  cause,  cannot 
be  considered  accidental.  In  the  term  "accident"  is  neces- 
sarily involved  some  violence,  some  unusual  and  unforeseen 
cause. 

Section  255x.— DEATH  BY  ACCIDENTAL  MEANS. 

— "Death  by  accident"  means  death  from  an  unexpected 
event  which  proceeds  from  an  unlcnown  and  unforeseen 
cause,  happening-  without  the  design  of  the  person  to  whom 
the  accident  occurs.  Unnatural  death,  the  result  of  accident 
of  any  kind,  imports  an  external  and  violent  agency  as  the 
cause. 

Section  255y.— HANGING  ONE'S  SELF  WHILE 
INSANE. — It  has  been  held  that  it  is  accidental  death, 
where  one  hangs  one's  self  while  insane,  unconscious  of 
the  act,  and  incapable  of  an  intelligent  intention  to  take  one's 
own  life. 

Section    255z.— BEING    KILLED    BY    ROBBERS.— 

Death  by  being  waylaid  and  assassinated  by  robbers  makes 
the  company  liable,  under  a  policy  insuring  the  person  so 
killed  against  death  through  "external,  violent,  or  accidental 
means." 

Section  255aa.— DEATH  BY  DROWNING.— Drown- 
ing is  a  death  from  external  violence,  in  the  meaning  of  an 
accident  insurance  policy. 

Section    255bb.— DEATH     FROM     FRIGHT.— Where 

the  insured  was  driving  upOn  a  public  street,  and  his  horse 
became  frightened  by  an  unsightly  object,  without  upset- 
ting the  carriage  or  coming  in  contact  with  anything,  and 
was  at  length  brought  under  control,  but  the  insured  was 
apparently  greatly  endangered  at  the  time,  and  suffered  so 
severely,  either  from  fright  or  strain  caused  by  physical 
exertion  in  restraining  the  horse,  that  he  died  within  an 
hour    afterward;    it    was    held    that    his    death    was    caused 


326  BUSINESS   LAWS   FOR   BUSINESS   MEN. 

by  "bodily  injuries  effected  through  external,  violent,  and 
accidental  means." 

Section  255cc.— DEATH  BY  FALLING.— Where  the 
insured  while  traveling  by  rail,  during  a  stoppage  of  a  train 
on  a  bridge,  went  to  the  front  platform  of  the  coach  in 
which  he  was  riding  and  stepped  off,  falling  through  a  hole 
in  the  floor  of  the  bridge  and  meeting  his  death,  this  was 
held  to  be  death  by  accident  in  the  meaning  of  the  policy. 

If  a  temporary  and  unexpected  physical  disorder  causes 
the  insured  to  fall  and  injure  himself,  the  injury  is  received 
through  violent,  external,  and  accidental  means,  and  the  in- 
surance company  is  liable  therefor. 

Section  255dd.— TAKING  POISON  BY  MISTAKE.— 

The  words  "taking  poison,"  as  employed  in  a  clause  of  an 
accident  insurance  policy,  exempting  the  company  from  liabil- 
ity for  death  from  "taking  poison,"  mean  the  voluntary, 
intentional  taking  of  poison,  and  do  not  include  cases  of 
accidental  poisoning.  Hence,  the  company  is  liable  for  the 
death  of  one  who,  by  mistake,  drinks  carbolic  acid  for  pepper- 
mint, which  he  wishes  to  take  for  some  ailment,  and  dies 
from  the  effects  of  the  poison. 

Section  255ee.— DEATH  BY  MURDER.— Whether  the 
company  will  be  liable  for  death  by  murder,  in  any  case, 
depends  upon  the  wording  of  the  policy.  If  the  policy  ex- 
empts the  company  from  liability  for  "intentional  injury 
inflicted  by  the  insured  or  any  other  person,"  then  the  com- 
pany will  not  be  liable  for  the  murder  of  the  insured.  If, 
however,  the  policy  covers  merely  "injuries  from  external 
violence  and  accidental  means,"  without  the  exception  above 
noted,  the  company  will  be  liable  when  the  insured  is 
murdered. 

Section  255ff.— DEATH  BY  INHALING  GAS.— The 
inhaling  of  gas,  within  the  exemption  of  insurance  policies, 
means  a  voluntary   and   intelligent   act  of  the  insured,   and 


BUSINESS    CONTRACTS    AND   LEGAL   OBLIGATIONS.  327 

not  an  involuntary  and  unconscious  act.  Therefore,  if  the 
insured  while  he  sleeps  is  accidentally  overcome  by  inhaling 
gas  without  intention  or  connivance  on  his  part,  the  company 
will  be  liable. 

Section  255gg.— LOSS  OF  HAND.— Under  a  policy 
making  the  company  liable  for  "loss  of  hand"  it  is  not 
necessary  to  show  that  the  entire  hand  is  gone.  If  the  hand 
is  so  injured  as  to  become  useless  as  a  hand,  the  company 
is   liable   as   for  an  entire  loss. 

Section  255hh.— LOSS  OF  FEET.— Under  a  policy 
agreeing  to  pay  an  indemnity  for  loss  of  "two  entire  feet," 
it  is  not  necessary  to  show,  in  order  to  make  the  company 
liable,  that  the  legs  or  feet  were  severed  from  the  body. 
It  is  only  necessary  to  show  that  the  insured  has  lost  the 
use  of  the  feet  as  members  of  his  body;  as,  where  through 
accident  the  lower  part  of  the  body  has  become  totally 
paralyzed,   and  thus  the  use   of  the   feet   destroyed. 

Section  255ii.— LOSS  OF  BUSINESS.— If  a  policy 
provides  that  the  insured  shall  be  paid  a  certain  sum  per 
week,  for  the  immediate,  continuous,  total  loss  of  such  busi- 
ness time  as  may  result  from  an  accidental  injury,  he  is 
entitled  to  recover  if  his  injury  is  such  that  he  loses  his 
time  in  the  business  in  which  he  was  engaged  when  insured, 
though  there  are  other  business  pursuits  from  which  the 
accident  would  not  incapacitate  him. 

Section  255jj.  — TOTAL  DISABILITY.— The  insured 
suffers  a  total  disability,  if  his  injuries  are  of  such  character 
that  common  care  and  prudence  require  him  to  desist  from 
the  transaction  of  any  business  pertaining  to  his  occupation, 
so  long  as  it  is  reasonably  necessary  to  effect  a  cure.  Ability 
to  occasionally  perform  some  single  and  trivial  act  of  busi- 
ness does  not  render  his  disability  partial  instead  of  total, 
provided  he  is  unable  substantially,  to  a  material  extent,  to 
transact  any  kind  of  business  pertaining  to  his  occupation. 


328  BUSINESS   LAWS   FOR   BUSINESS    MEN. 

Section  255kk.— "DISEASE"  AND  "BODILY  IN- 
FIRMITY."—The  words  "disease"  and  "bodily  infirmity," 
as  used  in  an  accident  insurance  policy,  exempting  the  com- 
pany from  liability  for  injury  from  such  cause,  mean,  prac- 
tically, the  same  thing.  They  refer  to  some  ailment  or 
disorder  of  a  somewhat  established  and  settled  character, 
some  physical  disturbance  to  which  the  insured  is  subject, 
and  of  which  an  attack  causing  him  an  injury  is,  in  some 
measure,  a  recurrence;  and  they  have  no  reference  to  some 
temporary  disorder,  new  and  unusual,  arising  from  some 
sudden  and  unexpected  derangement  of  the  system. 

Section  255  11.— DISEASE  PRODUCED  BY  KNOWN 
CAUSE. — Disease  produced  by  the  action  of  a  known  cause 
cannot  be  considered  as  accidental.  Thus,  disease,  or  death, 
engendered  by  exposure  to  heat,  cold,  damp,  the  vicissitudes 
of  climate,  or  atmospheric  influences,  cannot  properly  be  said 
to  be  accidental. 

Section  255mm.— CONDITION  AGAINST  CHANGE 
OF  OCCUPATION.— Where  there  is  a  condition  in  a 
policy  against  change  of  occupation  by  the  insured,  the  word 
"occupation"  has  reference  to  the  vocation,  trade,  or  calling 
which  he  is  engaged  in  for  hire  or  for  profit;  and  the  condi- 
tion does  not  preclude  him  from  the  performance  of  acts  and 
duties  which  are  incidentally  connected  with  the  life  of  men 
in  any  or  all  occupations,  or  from  engaging  in  mere  acts 
of  exercise,  diversion,  and  recreation. 

Section  255nn.  —  VOLUNTARY  EXPOSURE  TO 
DANGER. — The  insured  cannot  recover  upon  an  accident 
insurance  policy  if  he  has  voluntarily  and  intentionally  exposed 
himself  to  danger  from  which  the  injury  resulted.  Voluntary 
exposure  to  unnecessary  danger,  within  the  meaning  of  an 
accident  insurance  policy,  is  a  conscious  or  intentional  ex- 
posure involving  gross  or  wanton  negligence  on  the  part 
of  the  insured.  The  intention  of  the  insured  to  voluntarily 
expose  himself  to  unnecesary  danger  may  be  inferred  from 


BUSINESS   CONTRACTS   AND   LEGAL  OBLIGATIONS.  329 

his  acting  so  recklessly  and  carelessly  as  to  show  an  utter 
disregard  of  known  danger,  or  from  his  taking  the  risk  of 
a  danger  which  is  so  obvious  that  a  prudent  man,  exercising 
reasonable  forethought,  would  not  have  taken  it. 

Section  255  oc— PROOF  OF  INJURY   OR  DEATH. 

— Proof  of  injury  or  death  must  be  given  in  the  manner  and 
at  the  time  specified  in  the  policy.  The  company  may  waive 
the  proof,  either  expressly,  or  by  conduct  and  acts  which 
amount  to  a  waiver;  but,  if  there  is  no  waiver  on  the  part 
of  the  company,  proof  of  injury  or  death  must  be  made  as 
required  by  the  policy. 

Accident   Insurance   Agents. 

Section   255pp.— PRINCIPLES     OF     AGENCY.— The 

principles  of  agency  stated  under  the  head  of  "Fire  Insurance 
Agents"  apply  equally  to  agents  of  accident  insurance  com- 
panies. They  bind  their  principals  in  the  same  way;  their 
representations  as  to  the  business  entrusted  to  them  have 
the  same  effect ;  they  may  waive  conditions  of  the  contract 
to  the  same  extent;  and  as  there  is  no  special  rule  applying 
particularly  to  accident  insurance  agents,  it  will  be  sufficient, 
as  to  them,  to  refer  to  the  subject  of  "Fire  Insurance  Agents." 

Marine  Insurance. 

Section  255qq.  —  THE  POLICY.  —  Marine  insurance, 
though  upon  property  and  against  risks  unknown  on  land, 
is  to  be  construed  by  the  same  principles  which  apply  to 
other  insurance  policies.  In  the  construction  of  a  marine 
policy,  as  in  the  construction  of  other  policies,  the  intention 
of  the  contracting  parties  is  the  first  thing  to  be  determined. 
The  courts  will  enforce  the  contract  as  the  parties  intended 
it  to  be,  provided  this  can  be  done  without  violation  of  law 
and   in    accordance    with   a    reasonable    construction    of   the 


330  BUSINESS   LAWS   FOR   BUSINESS   MEN. 

policy.  Premiums  must  be  paid,  and  other  conditions  ob- 
served, as  faithfully  in  marine  as  in  other  forms  of  insur- 
ance. Conditions  may  be  waived  also,  in  like  manner  as  in 
other  insurance,  by  express  consent,  or  by  conduct  and  cir- 
cumstances from  which  a  waiver  is  inferred. 

Section  255rr.— DEFINITION  OF  MARINE  INSUR- 
ANCE.— Marine  insurance  is  an  insurance  against  risks 
connected  with  navigation,  to  which  a  ship,  cargo,  freight- 
age, profits,  or  other  insurable  interests  in  movable  property, 
may  be  exposed  during  a  certain  voyage  or  a  fixed  period 
of  time. 

Civil  Code,  Section  2655. 

Section  255ss.— INSURABLE  INTEREST.— The  owner 
of  a  ship  has  in  all  cases  an  insurable  interest  in  it,  even 
when  it  has  been  chartered  by  one  who  covenants  to  pay 
him  its  value  in  case  of  loss. 

The  insurable  interest  of  an  owner  who  has  hypothecated 
the  ship  as  security  for  a  loan,  to  be  repaid  only  in  case  the 
ship  survives  a  particular  risk,  voyage,  or  period,  is  only 
.the  excess  of  the  value  of  the  ship  over  the  amount  secured 
as  a  loan. 

Freightage,  in  the  sense  of  a  policy  of  marine  insurance, 
means  all  the  benefits  derived  by  the  owner  either  from  the 
chartering  of  the  ship  or  its  employment  for  the  carriage  of 
his  own  goods  or  those  of  others. 

The  owner  of  a  ship  has  an  insurable  interest  in  expected 
freightage,  which  he  would  have  certainly  earned  had  it  not 
been  for  the  happening  of  a  peril  insured  against.  This  in- 
terest in  expected  freightage  exists,  in  the  case  of  a  charter- 
party,  when  the  ship  has  broken  ground  on  the  charter  voy- 
age; or  if  a  price  is  to  be  paid  for  the  carriage  of  goods, 
when  they  are  actually  on  board,  or  there  is  some  contract 
for  putting  them  on  board  and  both  ship  and  goods  are  ready 
for  the  specified  voyage. 

One  who  has  an  interest  in  the  things  from  which  profits 
are  expected,  has  an  insurable  interest  in  the  profits. 


BUSINESS    CONTRACTS   AND   LEGAL   OBLIGATIONS.  331 

The  charterer  of  a  ship  has  an  insurable  interest  in  it  to 
the  extent  that  he  is  Hable  to  be  damaged  by  its  loss. 

Civil    Code,    Sections   2659,    2660,    2661,    2662,    2663, 
2664,  2665,  3017. 

Section  255tt.— PERILS  OF  THE  SEA.— The  defini- 
tion of  perils  of  the  sea,  covered  by  marine  insurance,  is  very 
extensive.  Perils  of  the  sea  are  all  perils,  losses,  and  mis- 
fortunes of  a  marine  character,  or  of  a  character  incident  to 
a  ship  as  such.  They  include  storms  and  waves;  rocks, 
shoals,  and  rapids;  and  other  obstacles,  though  of  human 
origin,  such  as  floating  logs,  abandoned  vessels,  or  other  dere- 
licts of  the  sea.  They  also  include  changes  in  climate;  the 
confinement  necessary  at  sea;  animals  peculiar  to  the  sea; 
and  all  other  dangers  met  with  only  upon  the  sea.  An  injury 
resulting  from  a  defective  condition  of  the  ship  itself,  or 
negligent  operation  of  the  machinery,  is  not  a  peril  of  the 
sea.  Thus,  it  has  been  held  that  the  bursting  of  a  steam 
boiler  is  not  a  peril  of  the  sea,  as  understood  in  the  law  of 
marine  insurance.  A  peril  of  the  sea  is  one  associated  with 
the  peculiar  character  and  nature  of  the  ocean,  suggesting  its 
winds  and  storms  and  tides,  its  tempestuous  waves,  its  obscur- 
ing fogs,  and  other  dangers  inevitably  incident  to  its 
navigation. 

Section  255uu.— DUTY  OF  PARTIES.— In  effecting  a 
contract  of  marine  insurance,  it  is  the  duty  of  the  parties, 
the  insurer  and  the  insured,  to  reveal  to  each  other  all  infor- 
mation materially  affecting  the  risk ;  unless  the  same  facts 
are  known  to  both,  or  which  in  the  exercise  of  ordinary  care 
either  party  has  the  means  of  ascertaining.  Neither  party  can 
withhold  from  the  other  any  information  peculiarly  within  his 
own  knowledge,  material  to  the  risk,  and  he  is  required  to 
state  the  exact  and  whole  truth  in  relation  to  all  matters 
about  which  he  makes  representations,  voluntarily,  or  in  an- 
swer to  inquiries  made  of  him. 


332  BUSINESS   LAWS   FOR   BUSINESS   MEN. 

(a) — Presumption  of  Knowledge  of  Loss. — A  person 
insured  by  a  contract  of  marine  insurance  is  presumed  to 
have  had  knowledge,  at  the  time  of  insuring,  of  a  prior  loss 
of  the  thing  insured;  provided,  it  must  appear  that  the  infor- 
mation might  possibly  have  reached  him  in  the  usual  mode  of 
transmission  and  in  the  usual  time. 

(b) — Concealments  Which  Only  Affect  the  Risk  in 
Question. — If  a  party  applying  for  a  policy  of  marine  insur- 
ance conceals  facts,  in  respect  to  any  of  the  following  matters, 
such  concealment  does  not  make  the  entire  contract  void,  but 
does  release  the  insurance  company  from  a  loss  resulting  from 
the  risk  concealed :  ( 1 )  The  national  character  of  the  insured ; 
(2)  The  liability  of  the  insured  property  to  capture  and  de- 
tention; (3)  The  liability  to  seizure  from  breach  of  foreign 
laws  of  trade;  (4)  The  want  of  necessary  documents;  and 
(5)  The  use  of  false  and  simulated  papers. 

(c) — Effect  of  Intentional  False  Representations. — If 
the  party  applying  for  a  policy  intentionally  makes  false 
representations  about  any  matter  respecting  the  risk,  whether 
material  or  immaterial,  the  insurance  company  may  rescind 
the  entire  contract. 

Civil   Code,    Sections   2563,   2564,   2669,   2671,   2672, 
2676. 

Section  255w.  — W  ARRANTY  OF  SEAWORTHI- 
NESS.— In  every  marine  insurance  upon  a  ship,  or  freight, 
or  freightage,  or  upon  anything  which  is  the  subject  of 
marine  insurance,  a  warranty  is  implied  that  the  ship  is 
seaworthy. 

(a) — Seaworthiness  Defined. — A  ship  is  seaworthy  when 
reasonably  fit  to  perform  the  services  and  to  encounter  the 
ordinary  perils  of  the  voyage  contemplated  by  the  parties 
to  the  policy.  A  warranty  of  seaworthiness  extends  not  only 
to  the  condition  of  the  structure  of  the  ship  itself,  but  requires 
that  it  be   properly   laden,  and  provided   with   a  competent 


BUSINESS    CONTRACTS    AND   LEGAL   OBLIGATIONS.  333 

master,  a  sufficient  number  of  competent  officers  and  sea- 
men, and  the  requisite  appurtenances  and  equipments,  such 
as  ballast,  cables,  anchors,  cordage,  sails,  food,  water,  fuel, 
lights,  and  other  necessary  or  proper  stores  and  implements 
for  the  voyage. 

(b) — Different  Degrees  of  Seaworthiness  at  Different 
Stages  of  the  Voyage. — Where  different  portions  of  the 
voyage  contemplated  by  a  policy  differ,  in  respect  to  the 
things  requisite  to  make  the  ship  seaworthy  therefor,  a 
warranty  of  seaworthiness  is  complied  with  if,  at  the  com- 
mencement of  each  part  of  the  voyage,  the  ship  is  seaworthy 
with  reference  to  that  portion. 

(c) — Delay  in  Making  Repairs. — When  a  ship  becomes 
unseaworthy  during  the  voyage,  an  unreasonable  delay  in 
making  repairs  will  exonerate  the  insurance  company  from 
liability. 

(d) — Seaworthiness  for  Cargo. — A  ship  which  is  sea- 
worthy for  the  purpose  of  an  insurance  upon  the  ship  may 
nevertheless,  by  reason  of  being  unfitted  to  receive  cargo, 
be  unseaworthy  for  the  purpose  of  insurance  upon  the 
cargo.  To  be  seaworthy  for  cargo,  the  vessel  must  be 
properly  equipped,  with  competent  master  and  officers  and 
men,  and  all  necessary  and  proper  stores  and  implements 
for  the  voyage. 

(e) — Neutral  Papers. — Where  the  nationality  or  neutral- 
ity of  a  ship  or  cargo  is  expressly  warranted,  it  is  implied 
that  the  ship  will  carry  the  requisite  documents  to  show 
such  nationality  or  neutrality,  and  that  it  will  not  carry 
any  documents  which  cast  reasonable  suspicion  thereon. 

(f) — At   What   Time   Seaworthiness   Must   Exist. — An 

implied  warranty  of  seaworthiness  is  complied  with  if  the 
ship  be  seaworthy  at  the  time  of  the  commencement  of  the 
risk,  except  in  the  following  cases :  When  the  insurance  is 
made  for  a  specified  length  of  time,  the  implied  warranty 
is  not  complied  with  unless   the   ship  be   seaworthy   at   the 


334  BUSINESS   LAWS   FOR  BUSINESS   MEN. 

commencement  of  every  voyage  she  may  undertake  during 
that  time;  and,  when  the  insurance  is  upon  the  cargo,  which, 
by  the  terms  of  the  policy,  or  the  description  of  the  voyage, 
or  the  estabhshed  custom  of  the  trade,  is  to  be  transshipped 
at  an  intermediate  point,  the  implied  warranty  is  not  com- 
plied with,  unless  each  vessel  upon  which  the  cargo  is 
shipped  or  transshipped  be  seaworthy  at  the  commencement 
of  its  particular  voyage. 

Civil   Code,    Sections   2681,   2682,   2683,   2684,    2685, 
2686,  2687,  2688. 

Section    255ww.— DEVIATION    FROM    VOYAGE.— 

In  order  to  hold  the  insurance  company  liable  in  the  event 
of  a  loss,  it  must  appear  that  no  .material  deviation  from 
the  voyage  named  in  the  policy  was  made.  Where,  for 
instance,  a  cargo  of  wheat  was  insured  from  San  Francisco 
to  Hong  Kong,  the  transshipment  of  the  wheat  at  Yoko- 
hama was  a  deviation,  even  though  the  bill  of  lading  autho- 
rized it,  because  the  insurance  had  not  been  effected  with 
reference  to  that  port. 

(a) — What  Constitutes  Deviation. — Deviation  is  defined 
by  the  law  to  be  a  departure  from  the  course  of  the  voyage 
insured,  or  an  unreasonable  delay  in  pursuing  the  voyage, 
or  the  commencement  of  an  entirely  different  voyage. 
When  the  voyage  contemplated  by  a  policy  is  described 
by  the  places  of  beginning  and  ending,  the  voyage  insured 
is  one  which  conforms  to  the  course  of  sailing  fixed  by 
mercantile  usage  between  those  places.  If  the  course  of 
sailing  is  not  fixed  by  mercantile  usage,  the  voyage  insured 
by  a  policy  is  the  way  between  the  places  specified  which, 
to  a  master  of  ordinary  skill  and  discretion,  would  seem 
the  most  natural,  direct,  and  advantageous. 

(b) — Deviation  Exonerates  the  Insured. — An  insurer  is 
not  liable  for  any  loss  happening  subsequently  to  an  im- 
proper deviation.  But  a  deviation  from  the  voyage  con- 
templated by  the  policy  is  sometimes  proper,  and  when 
properly  made  will  not  exonerate  the  insurer.     A  deviation 


BUSINESS    CONTRACTS   AND   LEGAL   OBLIGATIONS.  335 

may  be  properly  made,  when  caused  by  circumstances  over 
which  neither  the  master  nor  the  owner  of  the  ship  had  any 
control ;  or,  when  necessary  to  comply  with  a  warranty,  or 
to  avoid  a  peril  of  the  sea,  whether  insured  against  or  not; 
or,  when  made  in  good  faith  and  upon  reasonable  grounds 
of  belief  in  its  necessity  to  avoid  a  peril  to  ship  or  cargo; 
or,  when  made  in  good  faith  for  the  purpose  of  saving 
human  life  or  relieving  another  vessel  in  distress.  Every 
deviation  not  specified  above  as  being  proper  is  pronounced 
by  the  law  to  be  improper,  and  when  improperly  made  will 
release  the  insurer  from  liability. 

Civil    Code,   Sections   2692,   2693,   2694,   2695,   2696, 
2697. 

Section  255xx.— TOTAL  AND  PARTIAL  LOSS.— A 

loss  may  be  either  total  or  partial.  Every  loss  which  is  not 
total  is  partial.  A  total  loss  may  be  either  actual  or 
constructive. 

(a) — Actual  Total  Loss. — An  actual  total  loss  is  caused 
by  a  total  destruction  of  the  thing  insured;  or  a  loss  by 
sinking,  or  by  being  broken  up ;  or  any  damage  to  the 
insured  property  which  renders  it  valueless  to  the  owner  for 
the  purposes  for  which  he  held  it;  or  any  other  event  which 
entirely  deprives  the  owner  of  the  possession,  at  the  port 
of  destination,  of  the  property  insured.  An  actual  loss 
may  be  presumed  from  the  continued  absence  of  the  ship 
without  being  heard  of;  and  the  length  of  time  which  is 
sufficient  to  raise  the  presumption  depends  on  the  circum- 
stances of  each  case. 

Upon  an  actual  total  loss,  a  person  insured  is  entitled  to 
payment  without  notice  of  abandonment. 

(b) — Constructive  Total  Loss. — A  constructive  total  loss 
is  one  which  gives  to  a  person  insured  a  right  to  abandon 
the  property  by  declaring  to  the  insurer  that  he  relinquishes 
to  him  his  interest  in  the  thing  insured. 


336  BUSINESS   LAWS   FOR   BUSINESS    MEN. 

(c)  —  Insurance  Against  Total  Loss.  —  An  insurance 
confined  in  terms  to  an  actual  total  loss  does  not  cover  a 
constructive  total  loss,  but  covers  any  loss  which  necessarily 
results  in  depriving  the  insured  of  the  possession  at  the 
port  of  destination  of  the  entire  thing  insured. 

(d) — Liability  of  Insurer  When  Voyage  is  Broken 
Up. — When  a  ship  is  prevented,  at  an  intermediate  port, 
from  completing  the  voyage  by  the  perils  insured  against, 
the  master  must  make  every  exertion  to  procure,  in  the  same 
or  a  contiguous  port,  another  ship,  for  the  purpose  of  con- 
veying the  cargo  to  its  destination;  and  when  he  has  done 
so,  the  liability  of  a  marine  insurer  of  the  cargo  continues 
after  it  is  thus  reshipped.  And  in  addition,  a  marine  in- 
surer is  bound  for  damages,  expenses  of  discharging,  stor- 
age, reshipment,  extra  freightage,  and  all  other  expenses 
incurred  in  saving  the  cargo  reshipped,  up  to  the  amount 
insured. 

Civil   Code,    Sections   2701,   2702,   2703,   2704,   2705, 
2706,  2707,  2708,  2709,  2712. 

Section  255yy.— ABANDONMENT.— A  person  insured 
by  a  contract  of  marine  insurance  may  abandon  the  thing 
insured,  or  any  particular  portion  separately  valued  by 
the  policy  or  otherwise  separately  insured,  and  recover  for 
a  total  loss  thereof,  when  the  cause  of  the  loss  is  a  peril 
insured  against,  in  any  of  the  following  cases:  (1)  If  more 
than  half  in  value  is  actually  lost,  or  would  have  to  be  ex- 
pended to  recover  it  from  the  peril;  (2)  If  the  property  is 
injured  to  such  an  extent  as  to  reduce  its  value  more  than 
one-half;  (3)  If  a  ship  is  insured,  and  the  contemplated 
voyage  cannot  be  performed  without  incurring  an  expense 
to  the  insured  of  more  than  half  the  value  of  the  ship,  or 
without  incurring  a  risk  which  a  prudent  man  would  not 
take  under  the  circumstances;  (4)  If  the  cargo  or  freightage 
is  insured,  and  the  voyage  cannot  be  performed  nor  another 
ship  procured  by  the  master,  within  a  reasonable  time  and 
with    reasonable    diligence,    to    forward    the    cargo,    without 


BUSINESS    CONTRACTS   AND   LEGAL   OBLIGATIONS.  337 

incurring  an  expense  of  more  than  half  the  value,  or  with- 
out incurring  a  risk  which  a  prudent  man  would  not  take 
under  the  circumstances. 

Freightage  cannot  in  any  case  be  abandoned  unless  the 
ship  is  also  abandoned. 

An  abandonment  must  be  neither  partial  nor  conditional. 
An  abandonment,  to  give  the  insured  the  right  to  claim 
the  full  amount  of  insurance,  must  include  not  only  an 
intention  to  abandon,  but  also  a  relinquishment  to  all  right 
to  the  property.  The  insured  must  in  fact  and  in  good  faith 
abandon  the  ship ;  and  he  cannot  still  claim  ownership,  or 
continue  in  the  use  of  the  vessel,  after  he  has  given  notice 
of  abandonment  as  for  a  total  loss. 

An  abandonment  must  be  made  within  a  reasonable  time 
after  information  of  the  loss,  after  the  commencement  of 
the  voyage.  Where  the  information  upon  which  an  aban- 
donment has  been  made  proved  incorrect,  or  the  property 
insured  was  so  far  restored  when  the  abandonment  was 
made  that  there  was  then  in  fact  no  total  loss,  the  abandon- 
ment becomes  ineffectual. 

An  abandonment  is  equivalent  to  a  transfer  by  the  insured 
of  his  interest  to  the  insurer,  with  all  the  chances  of  recov- 
ery and  indemnity.  An  acceptance  of  an  abandonment  is 
not  necessary  to  the  rights  of  the  insured.  But  the  accept- 
ance of  an  abandonment,  whether  express  or  implied,  is 
conclusive  upon  the  parties,  and  admits  the  loss  and  the 
sufficiency  of  the  abandonment. 

An  abandonment  once  made  and  accepted  is  irrevocable, 
unless  the  ground  upon  which  it  was  made  proves  to  be 
unfounded;  as,  where  information  of  the  loss  of  a  ship  turns 
out  to  be  incorrect. 

On  an  accepted  abandonment  of  a  ship,  freightage  earned 
previous  to  the  loss  belongs  to  the  insurer  of  the  freightage; 
but  freightage  subsequently  earned  belongs  to  the  insurer 
of  the  ship. 

(a) — Refusal  to  Accept. — If  an  insurance  company  re- 
fuses to  accept  a  valid  abandonment,  it  is  liable  as  upon  an 
actual  total  loss,  deducting  from  the  amount  any  proceeds 


338  BUSINESS  LAWS   FOR  BUSINESS  MEN. 

of  the  thing  insured  which  may  have  come  to  the  hands 
of  the  insured  person. 

(b) — Waiver  of  Formal  Abandonment. — If  a  marine 
insurance  company  pays  for  a  loss  as  if  it  were  an  actual 
total  loss,  it  is  entitled  to  whatever  may  remain  of  the  prop- 
erty insured,  or  its  proceeds  or  salvage,  as  if  there  had  been 
a  formal  abandonment. 

(c) — Omission  to  Abandon. — If  a  person  insured  omits 
to  abandon,  he  may  nevertheless  recover  his  actual  loss.  . 

(d) — Notice  of  Abandonment. — Abandonment  is  made 
by  giving  notice  thereof  to  the  insurer,  which  may  be  made 
orally  or  in  writing.  A  notice  of  abandonment  must  be 
explicit,  and  must  specify  the  particular  cause  of  the  aban- 
donment; but  it  is  only  necessary  to  state  enough  to  show 
that  there  is  probable  cause  to  abandon,  and  the  notice 
need  not  be  accompanied  with  proof  of  interest  or  of  loss. 
Civil   Code,    Sections   2716,   2717,   2718,   2719,   2720, 

2721,   2722,   2724,   2725,   2727,   2728,   2729,   2730, 

2731,  2732. 

Section  255zz.— MEASURE  OF  INDEMNITY.— A 
valuation  in  a  policy  of  marine  insurance  is  conclusive  between 
the  parties  thereto,  in  the  adjustment  of  either  a  partial  or 
total  loss,  if  the  insured  has  some  interest  at  risk,  and  there 
is  no  fraud  on  his  part;  except  that  when  a  thing  has  been 
hypothecated,  before  its  insurance,  and  without  the  knowl- 
edge of  the  person  actually  procuring  the  insurance,  he  may 
show  the  real  value.  But  a  valuation  fraudulent  in  fact 
entitles  the  insurer  to  rescind  the  contract. 

(a) — Partial  Loss. — ^A  marine  insurer  is  liable  upon  a 
partial  loss,  only  for  such  proportion  of  the  amount  insured 
by  him  as  the  property  lost  bears  to  the  value  of  the  whole 
interest  of  the  insured. 

(b) — Profits. — Where  profits  are  separately  insured  the 
insured  is  entitled  to  recover,  in  case  of  loss,  a  proportion 


BUSINESS    CONTRACTS   AND   LEGAL   OBLIGATIONS.  339 

of  such  profits,  equivalent  to  the  proportion  which  the  vakte 
of  the  property  lost  bears  to  the  value  of  the  whole. 

(c) — Valuation  Apportioned. — In  case  of  a  valued  policy 
on  freightage  or  cargo,  if  a  part  only  of  the  subject  is 
exposed  to  risk,  the  valuation  applies  only  in  proportion  to 
such  part. 

(d) — Valuation  Applied  to  Profits. — When  profits  are 
valued  and  insured  in  the  policy,  a  loss  of  them  is  con- 
clusively presumed  from  a  loss  of  the  property  out  of  which 
they  were  expected  to  arise,  and  the  valuation  in  the  policy 
fixes  their  amount. 

(e) — Estimating  Loss  Under  an  Open  Policy. — In  esti- 
mating a  loss  under  an  open  policy,  where  the  values  are 
not  fixed  by  the  contract,  the  following  rules  are  to  be 
observed :  ( 1 )  The  value  of  a  ship  is  its  value  at  the  begin- 
ning of  the  risk,  including  all  articles  or  charges  which  add 
to  its  permanent  value,  or  which  are  necessary  to  prepare 
it  for  the  voyage  insured;  (2)  The  value  of  cargo  is  its 
actual  cost  to  the  insured,  when  laden  on  board,  or  when 
that  cost  cannot  be  ascertained,  its  market  value  at  the 
time  and  place  of  lading,  adding  the  charges  incurred  in 
purchasing  and  placing  it  on  board;  but  this  must  be  with- 
out referrence  to  any  losses  incurred  in  raising  money  for 
its  purchase,  or  any  drawback  on  its  exportation,  or  any 
fluctuations  of  the  market  at  the  port  of  destination,  or  any 
expenses  incurred  on  the  way  or  on  arrival;  (3)  The  value 
of  freightage  is  the  gross  freightage,  exclusive  of  primage, 
without  reference  to  the  cost  of  earning  it;  and  (4)  The 
cost  of  insurance  is  in  each  case  to  be  added  to  the  value 
thus  estimated. 

(f) — Arrival  of  Cargo  Damaged. — If  cargo  insured 
against  partial  loss  arrives  at  the  port  of  destination  in  a 
damaged  condition,  the  loss  of  the  insured  is  deemed  to  be 
the  same  proportion  of  the  value  which  the  market  price  at 
that  port,  of  the  goods  damaged,  bears  to  the  market  price 
they  would  have  brought  if  sound. 


340  BUSINESS   LAWS   FOR   BUSINESS   MEN. 

(g) — Labor  and  Expenses. — A  marine  insurer  is  liable 
for  all  the  expense  attendant  upon  a  loss  which  forces  the 
ship  into  port  to  be  repaired;  and  where  it  is  agreed  that 
the  insured  may  perform  labor  for  the  recovery  of  the  prop- 
erty, the  insurer  is  liable  for  the  expense  incurred  thereby; 
such  expense  in  either  case  being  in  addition  to  a  total  loss, 
if  that  afterwards  occurs. 

(h) — One-third  New  for  Old. — In  case  of  a  partial  loss 
of  a  ship  or  its  equipments,  the  old  materials  are  to  be 
applied  towards  payment  for  the  new,  when  repairs  are 
made;  and  whether  the  ship  is  new  or  old,  a  marine  insurer 
is  liable  for  only  two-thirds  of  the  remaining  costs  of  the 
repairs,  except  that  he  must  pay  for  anchors  and  cannon  in 
full,  and  for  sheathing  metal  at  a  depreciation  of  only  two 
and  one-half  per  cent  for  each  month  that  it  has  been 
fastened  to  the  ship. 

Civil   Code,    Sections   2736,   2737,   2738,   2739,   2740, 
2741,  2742,  2743,  2746. 

Section  255aaa.— GENERAL  AVERAGE.— A  carrier 
by  water  may,  when  in  case  of  extreme  peril  it  is  necessary 
for  the  safety  of  the  ship  or  cargo,  throw  overboard  or 
otherwise  sacrifice,  any  or  all  the  cargo  or  appurtenances 
of  the  ship.  Throwing  property  overboard  for  such  per- 
pose  is  called  jettison,  and  the  loss  incurred  thereby  is  called 
a  general  average  loss. 

A  jettison  must  begin  with  the  most  bulky  and  least  val- 
uable articles,  so  far  as  possible. 

A  jettison  can  be  made  only  by  authority  of  the  master 
of  the  ship,  except  in  case  of  his  disability  or  an  overruling 
necessity,  when  it  may  be  made  by  any  other  person. 

The  loss  incurred  by  a  jettison,  when  lawfully  made,  must 
be  borne  in  due  proportions  by  all  that  part  of  the  ship, 
appurtenances,  freightage,  and  cargo,  for  the  benefit  of 
which  the  sacrifice  is  made,  as  well  as  by  the  owner  of  the 
property  sacrificed.  The  proportions  in  which  a  general 
average   loss    is    to   be   borne   must   be    ascertained   by    an 


BUSINESS   CONTRACTS   AND   LEGAL  OBLIGATIONS.  341 

adjustment,  in  which  the  owner  of  each  separate  interest  is 
to  be  charged  with  such  proportion  of  the  value  of  the 
thing  lost  as  the  value  of  his  part  of  the  property  affected 
bears  to  the  value  of  the  whole.  An  adjustment  made  at 
the  end  of  the  voyage,  if  valid  there,  is  valid  everywhere. 

In  estimating  values  for  the  purpose  of  a  general  average, 
the  ship  and  appurtenances  must  be  valued  as  at  the  end 
of  the  voyage,  the  freightage  at  one-half  the  amount  due 
on  delivery,  and  the  cargo  as  at  the  time  and  place  of  its 
discharge;  adding,  in  each  case,  the  amount  made  good 
by  contribution. 

The  owner  of  things  stowed  on  deck,  in  case  of  their 
jettison,  is  entitled  to  the  benefit  of  a  general  average  con- 
tribution only  in  case  it  is  usual  to  stow  such  things  on 
deck  upon  such  voyage. 

Where  a  person .  insured  by  a  contract  of  marine  insur- 
ance has  a  demand  against  others  for  a  contribution,  by 
reason  of  a  general  average,  he  may  claim  the  whole  loss 
from  the  insurance  company,  subrogating  it  to  his  own 
right  to  contribution.  But  no  such  claim  can  be  made  upon 
the  insurer  after  the  separation  of  the  interests  liable  to 
contribution,  nor  when  the  insured,  having  the  right  and 
opportunity  to  enforce  contribution  from  others,  has  neg- 
lected or  waived  the  exercise  of  that  right. 

Civil    Code,    Sections   2148,   2149,   2150,    2151,    2152, 
2153,  2154,  2155,  2745. 

Section    255bbb.— PERISHABLE     GOODS.— What    is 

known  as  the  memorandum  clause  in  policies  of  marine 
insurance,  whereby  the  insurance  company  is  exempted 
from  liability  for  any  partial  loss  of  goods  of  a  perishable 
nature,  is  intended  to  apply  only  where  goods  are  perish- 
able and  there  is  difficulty  in  proving  whether  the  loss 
occurred  from  the  inherent  quality  of  the  goods  or  from  a 
peril  of  the  sea. 

Section  255ccc.--ACTS  OF  MASTER  AND   CREW. 

— The   insurance  company   will   be   liable   notwithstanding  a 


342  BUSINESS   LAWS   FOR   BUSINESS   MEN. 

lack  of  skill,  or  even  negligence,  on  the  part  of  the  master 
or  crew.  To  relieve  the  company  from  liability  because  of 
acts  of  the  master  or  crew,  there  must  be  want  of  good 
faith  and  honesty  of  purpose  on  their  part.  If  a  ship  should 
be  run  on  shore  by  the  crew  and  wrecked,  through  being 
placed  in  a  dangerous  position  by  reason  of  negligence 
or  unskilfulness  of  the  crew,  this  does  not  exempt  the  com- 
pany from  liability,  where  it  appears  that  the  crew  were 
not  acting  in  bad  faith  and  with  dishonest  purpose  to  cause 
loss. 

Marine  Insurance  Agents. 

Section  255ddd.~PRINCIPLES  OF  AGENCY.— The 
principles  of  agency  stated  under  the  head  of  "Fire  Insur- 
ance Agents"  apply  equally  to  agents  of  marine  insurance 
companies.  They  bind  their  principals  in  the  same  way; 
their  representations  as  to  the  business  entrusted  to  them 
have  the  same  effect;  they  may  waive  conditions  of  the 
contract  to  the  same  extent;  and  as  there  is  no  special  rule 
applying  particularly  to  marine  insurance  agents,  it  will 
be  sufficient,  as  to  them,  to  refer  to  the  subject  of  "Fire 
Insurance  Agents." 

Building  Contracts. 

Section   256.—  THE     CONTRACT.— The     law     was 

amended  in  1911,  so  that  now  a  building  contract  may  be 
either  oral  or  in  writing,  if  the  work  is  to  be  performed 
within  a  year.  But  as  the  lien  taw  requires  the  recording 
of  the  original  contract,  in  order  to  give  actual  notice  of  its 
terms  to  all  persons  who  perform  work  upon  or  furnish 
materials  for  the  structure,  it  may  be  said  that  a  contract 
in  writing  is  still  essential. 

Code  of  Civil  Procedure,   Section   1183;  as  amended 
by  Act  of  the  Legislature,  approved  May  1,  1911. 


BUSINESS   CONTRACTS   AND   LEGAL   OBLIGATIONS.  343 

Section    257.— RECORDING    OF    CONTRACT.— The 

contract  must  be  recorded,  if  recorded  at  all,  in  the  office 
of  the  County  Recorder  of  the  county  where  the  property 
is  situated,  before  the  commencement  of  the  work. 

Code  of  Civil  Procedure,  Section  1183;  as  amended  by 
Act  of  the  Legislature,  approved  May  1,  1911. 

Section  258.  —  MATERIALS  FURNISHED  CON- 
TRACTOR EXEMPT  FROM  EXECUTION.— Mater- 
ials furnished  for  use  and  about  to  be  used  in  the  construc- 
tion, alteration,  or  repair  of  any  building  cannot  be  taken 
under  attachment  or  execution,  to  enforce  any  debt  due  by 
the  purchaser  of  such  materials,  except  a  debt  due  for  the 
purchase  price  of  the  materials. 

Code  of  Civil  Procedure,  Section  1196. 

Section  259.— FORM   OF  BUILDER'S   CONTRACT. 

— The  following  Ms  a  form  of  builder's  contract,  which  is  in 
common  use  in  this  state,  and  which  meets  the  requirements 
of  the  law  in  its  terms: — 

ARTICLES  OF  AGREEMENT,  Made  this day  of 

,   191 . . .   Between 


of  the ,  County  of ,  State  of  Cali- 
fornia, the  party  of  the  first  part,  and 

of  the ,  County  of .,   State 

of  California,  the  party  of  the  second  part. 

Witnesseth: — The  the  party  of  the  first  part  will  be  herein- 
after designated  as  the  Owner,  and  the  party  of  the  second 
part  as  the  Contractor,  singular  number  only  being  used; 
and  the  word  Architect  used  herein  in  the  singular  shall 
include  the  plural,  and  the  masculine  the  feminine. 

FIRST. — The    Contractor    agrees,    within    the    space    of 

working  days  from  and  after  the  date 

hereof,  to  furnish  the  necessary  labor  and  materials,  includ- 
ing tools,  implements,  and  appliances  required,  and  perform 
and  complete  in  a  workmanlike  manner  all  the 


344  BUSINESS   LAWS   FOR  BUSINESS   MEN. 

(Here  insert  description  of  work  to  be  done,  under  the 
contract,  whether  woodwork,  plastering,  plumbing,  iron- 
work, etc.) 

and  other  works  shown  and  described  in  and  by,  and  in 
conformity  with,  the  plans,  drawings,  and  specifications  for 
the  same  made  by the  author- 
ized Architect  employed  by  the  Owner,  and  which  are  signed 
by  the  parties  hereto. 

SECOND. — Said  Architect  shall  provide  and  furnish  to 
the  Contractor  all  details  and  working  drawings  necessary 
to  properly  delineate  said  plans  and  specifications ;  and  the 
work  is  to  be  done  and  the  materials  furnished  in  accord- 
ance therewith  under  the  direction  and  supervision  and  sub- 
ject to  the  approval  of  said  Architect,  or  a  Superintendent 
selected  and  agreed  upon  by  the  parties  hereto,  within  a  fair 
and  equitable  construction  of  the  true  intent  and  meaning  of 
said  plans  and  specifications. 

THIRD. — The  time  during  which  the  Contractor  is  de- 
layed in  said  work  by  acts  or  neglects  of  the  Owner  or 
his  employees,  or  those  under  him  by  contract  or  otherwise, 
or  by  the  acts  of  God  which  the  Contractor  could  not  have 
reasonably  foreseen  and  provided  for,  or  by  stormy  and 
inclement  weather  which  delays  the  work,  or  by  any  strikes, 
boycotts,  or  like  obstructive  action  by  employee  or  labor 
organizations,  or  by  lock-outs  or  other  defensive  action  by 
employers,  whether  general,  or  individual,  or  by  organiza- 
tions of  employers,  shall  be  added  to  the  aforesaid  time  for 
completion. 

FOURTH.— Said   building 


to  be  erected  upon  a  lot  of  land  situated  in . . . 

,  County  of 

State  of  CaUfornia,  and  described  as  follows: 


(Here  insert  description  of  the  lot  of  land.) 


FIFTH. — The  Owner  agrees,  in  consideration  of  the  per- 
formance of  this  agreement  by  the  Contractor,  to  pay,  or 
cause  to  be  paid  to  the  Contractor,  his  legal  representative 
or  assigns,  the  sum  of 


BUSINESS    CONTRACTS   AND   LEGAL   OBLIGATIONS.  345 

(Here  insert  contract  price.) 

Dollars,  in 

United  States   Gold  Coin,  at  the  times  and   in  the  manner 

following,  to-wit :  Dollars  when  the 

foundation  is  completed   and  the   framing  materials   on   the 

ground  and  the  frame  up ;  Dollars 

when  the  roof  and  rustic  are  on ;  Dollars 

when  the  plastering  is  completed ;  and 

Dollars  thirty-five  days  after  the  completion  of  the  build- 
ing and  acceptance  by  the  Owner ; 

(Here  insert  any  other  condition  as  to  payment  desired.) 

Provided,  that  when  each  payment  or  installment  shall  be- 
come due,  and  in  the  final  completion  of  the  work,  certifi- 
cates in  writing  shall  be  obtained  from  the  said  Architect, 
stating  that  the  payment  or  installment  is  due  or  work  com- 
pleted, as  the  case  may  be,  and  the  amount  then  due ;  and 
the  said  Architect  shall  at  said  times  deliver  said  certificates 
under  his  hand  to  the  Contractor,  or,  in  lieu  of  such  cer- 
tificates shall  deliver  to  the  contractor  in  writing  under 
his  hand,  a  just  and  true  reason  for  not  issuing  the  certifi- 
cates, including  a  statement  of  the  defects,  if  any,  to  be 
remedied,  to  entitle  the  Contractor  to  the  certificate  or 
certificates.  And  in  the  event  of  the  failure  of  the  Archi- 
tect to  furnish  and  deliver  said  certificates,  or  any  of  them, 
or  in  lieu  thereof  the  writing  aforesaid,  within  three  days 
after  the  times  aforesaid,  and  after  demand  therefor  made 
in  writing  by  the  Contractor,  the  amount  which  may  be 
claimed  to  be  due  by  the  Contractor,  and  stated  in  the  said 
demand  made  by  him  for  the  certificate,  shall,  at  the  ex- 
piration of  said  three  days,  become  due  and  payable,  and 
the  Owner  shall  be  liable  and  bound  to  pay  the  same  on 
demand. 

In  case  the  Architect  delivers  the  writing  aforesaid  in 
lieu  of  the  certificate,  then  a  compliance  by  the  Contractor 
with  the  requirements  of  said  writing  shall  entitle  the  Con- 
tractor to  the  certificate. 

SIXTH. — For  any  delay  on  the  part  of  the  Owner  in  mak- 
ing any  of  the  payments  or  installments  provided  for  in 
this  contract  after  they  shall  become  dtie  and  payable,  he 
shall  be  liable  to  the  Contractor  for  any  and  all  damages 
which  the  latter  may  sufiFer ;  and  such  delay  shall,  in  addi- 
tion, operate  as  an  additional  extension  of  the  time  for  com- 
pletion aforesaid  for  the  length  of  time  of  such  delay.     And 


346  BUSINESS   LAWS  FOR  BUSINESS   MEN. 

such  delay,  if  for  more  than  five  days  after  the  date  when 
said  payments  or  installments  shall  have  respectively  be- 
come due  and  payable,  as  in  this  agreement  provided,  shall, 
at  the  option  of  the  Contractor,  be  held  to  be  prevention 
by  the  Owner  of  performance  of  this  contract  by  the 
Contractor. 

SEVENTH. — The  specifications  and  drawings  are  intended 
to  co-operate,  so  that  any  work  exhibited  in  the  drawings  and 
not  mentioned  in  the  specifications,  or  vice  versa,  are  to  be 
executed  the  same  as  if  both  mentioned  in  the  specifications 
and  set  forth  in  the  drawings,  to  the  true  intent  and  meaning 
of  the  said  drawings  and  specifications  when  taken  together. 
But  no  part  of  said  specifications  that  is  in  conflict  with 
any  portion  of  this  agreement,  or  that  is  not  actually  descrip- 
tive of  the  work  to  be  done  thereunder,  or  of  the  manner 
in  which  the  said  work  is  to  be  executed,  shall  be  considered 
as  any  part  of  this  agreement,  but  shall  be  utterly  null 
and  void. 

EIGHTH. — Should  the  Owner  or  the  Architect  at  any 
time  during  the  progress  of  the  work,  request  any  alterations 
or  deviations  in,  additions  to,  or  omissions  from,  this  con- 
tract, or  the  plans  or  specifications,  either  of  them  shall  be  at 
liberty  to  do  so,  and  the  same  shall  in  no  way  aflfect  or  make 
void  this  contract;  but  the  amount  thereof  shall  be  added  to, 
or  deducted  from,  the  amount  of  the  contract  price  afore- 
said, as  the  case  may  be,  by  a  fair  and  reasonable  valuation. 
And  this  contract  shall  be  held  to  be  completed  when  the 
work  is  finished  in  accordance  with  the  original  plans,  as 
amended  by  such  changes,  whatever  may  be  the  nature  or 
extent  thereof. 

NINTH. — The  rule  of  practice  to  be  observed  in  the  ful- 
filment of  the  last  foregoing  paragraph  (eighth)  shall  be 
that,  upon  the  demand  of  either  the  Contractor,  Owner,  or 
Architect,  the  character  and  valuation  of  any  or  all  changes, 
omissions,  or  extra  work,  shall  be  agreed  upon  and  fixed  in 
writing,  signed  by  the  Owner,  Architect,  and  the  Contractor, 
prior  to  execution. 

TENTH. — Should  any  dispute  arise  between  the  Owner 
and  Contractor,  or  between  the  Contractor  and  Architect, 
respecting  the  true  construction  of  the  drawings  and  speci- 
fications, the  same  shall,  in  the  first  instance,  be  decided  by 
the  Architect;  but  should  either  of  the  parties  hereto  be  dis- 
satisfied  with   the  justice   of   such   decision,   or   should   any 


BUSINESS   CONTRACTS   AND  LEGAL  OBLIGATIONS.  347 

dispute  arise  between  the  parties  hereto  respecting  the  valu- 
ation of  the  extra  work,  work  done,  or  work  omitted,  the 
disputed  matter  shall  be  referred  to,  and  decided  by,  two 
competent  persons  who  are  experts  in  the  business  of  building 
— one  to  be  selected  by  the  Owner  or  Architect,  and  the  other 
by  the  Contractor;  and,  in  case  they  cannot  agree,  these  two 
shall  select  an  umpire,  and  the  decision  of  any  two  of  them 
shall  be  binding  on  all  parties. 

ELEVENTH.— Should  the  Contractor  fail  to  complete 
this  contract,  and  the  works  provided  for  therein,  within  the 
time  fixed  for  such  completion,  due  allowance  being  made  for 
the  contingencies  provided  for  herein,  he  shall  become  liable  to 
the  owner  for  all  loss  and  damages  which  the  latter  may 
sufifer   on   account   thereof,   but   not   to   exceed   the    sum   of 

$ per  day  for  each  day  said  work  shall  remain 

uncompleted  beyond  such  time  for  completion. 

TWELFTH. — In  case  said  work  herein  provided  for 
should,  before  completion,  be  wholly  destroyed  by  fire,  defec- 
tive soil,  earthquake,  or  other  act  of  God  which  the  Con- 
tractor could  not  have  reasonably  foreseen  and  provided  for, 
then  the  loss  occasioned  thereby  shall  be  sustained  by  the 
Owner  to  the  extent  that  he  has  paid  installments  thereon, 
or  that  may  be  due  under  the  fifth  clause  of  this  contract; 
and  the  loss  occasioned  thereby,  and  to  be  sustained  by  the 
Contractor,  shall  be  for  the  uncompleted  portion  of  said  work 
upon  which  he  may  be  engaged  at  the  time  of  the  loss,  and 
for  which  no  payment  is  yet  due  under  said  fifth  clause  of 
this  contract. 

In  the  event  of  a  partial  destruction  of  said  work  by  any 
of  the  causes  above  named,  then  the  loss  to  be  sustained  by 
the  Owner  shall  be  in  the  proportion  that  the  amounts  of 
installments  paid  or  due  bears  to  the  total  amount  of  work 
done  and  materials  furnished,  estimated  according  to  said 
contract  price,  and  the  balance  of  said  loss  to  be  sustained  by 
the  Contractor. 

THIRTEENTH. — The  payment  of  the  progress  payments 
by  the  Owner  shall  not  be  construed  as  an  absolute  accept- 
ance of  the  work  done  up  to  the  time  of  such  payments ; 
but  the  entire  work  is  to  be  subjected  to  inspection  and 
approval  of  the  Architect  or  Superintendent  at  the  time  when 
it  shall  be  claimed  by  the  Contractor  that  the  contract  and 
works  are  completed ;  but  the  Architect  or  Superintendent  shall 
exercise  all  reasonable  diligence  in  the  discovery,  and  report 
to  the  Contractor,  as  the  work  progresses,  of  materials  and 


348  BUSINESS   LAWS   FOR  BUSINESS   MEN. 

labor  which  are  not  satisfactory  to  the  Architect  or  Superin- 
tendent, so  as  to  avoid  unnecessary  trouble  and  cost  to  the 
Contractor  in  making  good  defective  parts. 

FOURTEENTH.— Should  the  Contractor,  at  any  time 
during  the  progress  of  the  work,  refuse  or  neglect,  without 
the  fault  of  the  Owner,  Architect,  or  Superintendent,  to 
supply  a  sufficiency  of  materials  or  workmen  to  complete  the 
contract  within  the  time  limited  herein,  or  any  lawful  exten- 
sion thereof,  for  a  period  of  more  than  three  days  after 
having  been  notified  by  the  Owner  in  writing  to  furnish  the 
same,  the  Owner  shall  have  power  to  furnish  and  provide 
said  materials  or  workmen  to  finish  the  said  work;  and  the 
reasonable  expenses  thereof  shall  be  deducted  from  the 
amount  of  the  contract  price. 

IN  WITNESS  WHEREOF,  the  said  parties  to  these 
presents  have  hereunto  set  their  hands  and  seals,  the  day 
and  year  first  above  written. 

..(Seal.) 

(Seal.) 

Section  260.— REFERENCE  TO  PLANS  AND  SPECI- 
FICATIONS IN  CONTRACT.— Where  a  building  con- 
tract provides  that  the  contractor  shall  do  the  work  according 
to  certain  drawings  and  specifications,  which  are  referred  to 
in  the  contract  as  "hereto  annexed,"  the  drawings  and  speci- 
fications are  an  essential  part  of  the  contract,  and  until  they 
are  annexed  the  contract  is  not  complete;  and  it  is  essential 
that  the  drawings  and  specifications  referred  to  in  the  con- 
tract should  be  filed  in  the  Recorder's  office,  together  with 
the  contract,  and  a  failure  to  file  them  destroys  the  validity 
of  the  contract. 

Section  261.— FAILURE    TO    FILE    CONTRACT.— 

The  failure  to  file  the  contract  for  record  will  not  make  the 
contract  void.  The  filing  of  the  contract  for  record  gives 
actual  notice  of  its  terms  to  all,  and  limits  lien  claims  to  the 
labor  or  materials  embraced  within  the  terms  of  the  original 
contract;  but  the  contract  will  be  valid,  though  not  recorded 
at  all. 

Code  of  Civil  Procedure,  Section  1183;  as  amended  by 
Act  of  the  Legislature,  approved  May  1,  1911. 


BUSINESS   CONTRACTS   AND  LEGAL   OBLIGATIONS.  349 

Section  262.— CONTRACT  OF  MINOR.— A  minor  is 
not  bound  by  his  contract  for  the  erection  or  repair  of  a 
building.  A  minor  is  only  bound  by  his  contracts  in  certain 
cases,  which  form  exceptions  to  the  general  rule  that  minors 
cannot  make  contracts,  in  which  the  erection  of  a  building 
is  not  included. 

Section  263.—  PRICE  WHERE  CONTRACTOR 
ABANDONS  THE  WORK.— If  the  contract  for  the 
erection  and  completion  of  a  building  is  entire,  and  the  con- 
tractor abandons  the  work  before  it  is  completed,  he  loses 
the  right  which  he  would  have  had  to  the  full  compensation 
agreed  on. 

Section    264.  — OWNER    PREVENTING    WORK.— 

Where  a  contractor  has  proceeded  to  construct  a  building 
of  the  material  and  in  the  manner  substantially  as  provided 
for  in  the  contract,  and  the  owner  before  completion  of  the 
contract,  and  without  cause,  and  in  violation  of  the  contract, 
refuses  to  allow  the  contractor  to  go  on,  and  takes  possession 
of  the  building,  and  appropriates  to  his  own  use  the  materials 
on  hand  for  the  construction  of  the  building,  the  contractor 
is  entitled  to  treat  the  contract  as  rescinded.  And  in  other 
circumstances,  where  acts  of  similar  character  by  the  owner 
prevent  the  contractor  from  completing  the  work  as  agreed 
upon,  the  contractor  may  look  upon  the  contract  as  rescinded. 
In  all  such  cases,  the  contractor  may  recover  from  the  owner 
the  reasonable  value  of  the  work  performed  and  material 
furnished  by  him. 

Section  265.— ACCEPTANCE  BY  AGENT.— Where 
the  parties  to  a  building  contract  agree  upon  an  agent,  who 
is  authorized  to  accept  or  reject  the  work  when  completed, 
his  acceptance  is  binding  upon  both  parties ;  and  where  the 
agent  acts  in  good  faith,  and  without  practicing  any  fraud 
upon  either  party  to  the  contract,  his  acceptance  of  the  work 
is  final  and  conclusive. 


350  BUSINESS   LAWS   FOR   BUSINESS   MEN. 

Section  266.—  BREACH  OF  CONTRACT  BY 
OWNER. — Where  a  contractor  agrees  to  perform  certain 
work  and  furnish  certain  materials  for  the  construction  of  a 
building,  and  after  furnishing  a  portion  of  the  materials  the 
owner  of  the  building  stops  the  work,  and  fails  to  receive  any- 
further  material  from  the  contractor,  the  owner  is  liable 
to  the  contractor  in  damages.  The  contractor  may  recover 
from  the  owner  as  damages  all  the  profits  he  would  have 
made  if  the  work  had  gone  on  and  the  materials  had  been 
received  from  him. 

Section  267.— AGREEMENT  AS  TO  EXTRA 
WORK. — Where  a  building  contract  provides  that  "no  extra 
work  is  to  be  paid  for  except  by  contract  in  writing,"  the 
parties  may  verbally  rescind  this  provision,  at  any  time,  and 
agree  to  alterations.  Where  alterations  are  made  by  agree- 
ment, written  or  verbal,  the  original  contract  is  not  set  aside, 
but  is  only  modified  to  the  extent  of  the  change  in  the  plans. 

Section  268.— LOSS  BY  FIRE  BEFORE  COMPLE- 
TION.— Where,  by  the  terms  of  a  building  contract,  the 
third  and  last  installments  of  payment  for  the  work  are  con- 
ditioned upon  its  oompletion  according  to  agreement  and 
specifications,  such  installments  cannot  be  recovered  where 
the  whole  work  is  consumed  by  fire,  without  apparent  fault 
of  either  party,  before  its  completion.  A  question  will  arise 
under  such  circumstances  as  to  whether  the  building  was 
substantially  completed  at  the  time  of  the  fire.  In  a  suit 
between  a  contractor  and  owner,  at  San  Francisco,  the 
Supreme  Court  of  California  decided  that  where  it  was 
proved  that  no  part  of  the  second  coat  of  paint  required  by 
the  contract  had  been  put  on;  that  the  work  bench  of  the 
carpenters  and  the  paint  for  the  second  coat  were  in  the 
building  at  the  time  of  the  fire;  that  two  of  the  doors  were 
unhung,  and  no  fastenings  put  on  the  front  door  or  windows ; 
and  that  the  house  had  not  been  delivered  or  accepted;  the 
building  was  not  substantially  completed  before  the  fire. 
(Decided  by  the  Supreme  Court  of  California  in  the  case 


BUSINESS    CONTRACTS   AND   LEGAL   OBLIGATIONS.  351 

of  Clark  vs.  Collier,  which  decision  is  printed  in  Volume  100 
of  the  California  Reports,  page  256.)  So  many  things  were 
lacking  in  the  case  quoted,  that  it  would  have  been  surprising 
indeed  if  the  Supreme  Court  had  decided  that  the  work  was 
substantially  performed ;  and  in  all  cases  the  question,  whether 
a  contract  has  been  substantially  performed  before  a  fire,  will 
depend  upon  the  terms  of  the  contract  and  a  reasonable  con- 
sideration of  the  work  done  and  remaining  to  be  done. 

Section  269.— CONTRACT  PROVIDING  FOR  ARBI- 
TRATION.— Where  a  building  contract  provides  for  the 
arbitration  of  any  matter,  the  contractor  must  first  demand 
an  arbitration  before  he  can  sue  for  his  pay  for  the  work 
included  in  the  provision  for  arbitration.  For  instance,  the 
contractor  is  not  entitled  to  recover  for  extra  work,  or  for 
materials  furnished,  when  the  contract  provides  that  claims 
for  such  extras  must  be  submitted  to  arbitration,  and  the 
contractor  has  made  no  offer  or  request  to  arbitrate.  The 
contractor  must  offer  in  good  faith  to  arbitrate,  and  if  the 
owner  refuses,  he  may  then  sue  for  and  recover  the  value 
of  the  extra  work,  regardless  of  the  arbitration  clause. 

Section    270.— SUBSTANTIAL     PERFORMANCE.— 

In  certain  cases,  the  contractor,  although  he  has  not  com- 
pleted the  work  literally  as  called  for  by  the  contract,  yet 
may  recover  from  the  owner  the  contract  price,  less  damages 
suffered  by  the  owner  from  the  contractor's  failure  to  do 
the  work  as  contracted  for.  But  the  contractor  must  show 
in  such  cases  that  the  failure  was  not  by  his  own  fault;  that 
he  endeavored  and  intended  in  good  faith  to  do  the  work 
exactly  as  contracted  for;  and  he  must  also  be  able  to  show 
that  the  work  has  been  in  every  material  particular  per- 
formed substantially  in  the  manner  called  for  by  the  con- 
tract. The  contractor  must  have  intended  in  good  faith  to 
comply  with  the  terms  of  the  contract.  The  spirit  of  the 
contract  must  be  faithfully  observed,  though  the  very  letter  of  it 
fail.  Good  faith  alone,  however,  is  not  enough.  The  owner  has 
a  right  to  a  structure  in  all  essential  particulars  such  as  he  has 


352  BUSINESS   LAWS   FOR   BUSINESS   MEN. 

contracted  for,  and  to  authorize  a  court  or  jury  to  find  that 
there  has  been  a  substantial  performance,  it  must  be  found  that 
he  has  such  a  structure.  The  court  cannot  say  that  anything  is 
immaterial,  which  the  parties  have  made  material  by  their 
own  agreement.     The  owner  has  a  right  to  have  the  struc- 
ture he  contracted  for,  and  not  another ;  and  even  his  caprices, 
if  expressed  in  the  contract,  must  be   complied   with,  even 
though  they   do  not  add   to  the  value   of  the  building,   or 
may  have  lessened  its  value.     It  is  only  where  the  plan  has 
been  substantially  embodied  in  the  work  that  the  contractor 
will  have  a  remedy  for  substantial  performance.     The  omis- 
sions or  deviations  from  the  plans  must  be  the  result  of  a 
mistake  or  inadvertance,  and  not  intentional,  much  less  fraud- 
ulent; and  they  must  be  slight  or  susceptible  of  remedy,  so 
that  an  allowance   out  of  the  contract  price   will   give  the 
owner  substantially  what  he  contracted   for.     Some  of  the 
things  which  will  not  be  considered  as  substantial  performance 
of  a  building  contract  are  mentioned  in  the  suit  brought  at 
San   Francisco   by   Edward   H.    Perry   against   Thomas    M. 
Quackenbush,  and  decided  by  the  Supreme  Court  of  Cali- 
fornia.    The  contractor  agreed   in   the   construction   of  the 
foundation  to  use  good,  hard  brick  and  lay  seven  courses, 
and  to  construct  twelve  piers  of  brick  laid  in  six  courses.     In 
violation  of  the  agreement,  he  used  old,  second-hand  brick 
of  poor  quality,  that  had  been  used  in  other  buildings,  and 
laid  the  same  in  courses  of  five  and  six  instead  of  seven, 
and  constructed  only  six  piers  of  brick  of  the   same  kind 
laid  in  three  courses.     He  agreed  to  use  in  the  construction 
of  the  frame  of  said  building  the  best  kind  of  lumber;  con- 
trary to  his  agreement,  he  used  only  second-class  lumber  and 
second-hand  and  refuse  lumber  that  had  been  used  in  other 
buildings.    He  agreed  to  use  in  the  construction  of  the  roof  the 
best  quality  of  shingles;  contrary  to  his  agreement,  he  used 
second-hand  lumber  and  second-class   shingles.     He   agreed 
to  paint  the  building  with  two  coats  of  metallic  paint,  but 
used  no  metallic  paint  at  all,  but  cheap  and  inferior  paint. 
The  Supreme  Court  held  that  these   facts  showed  that  the 
contractor    had    in    no    sense    substantially    performed    his 


BUSINESS   CONTRACTS   AND   LEGAL  OBLIGATIONS.  353 

agreement,  but  that  he  had  intentionally  and  wilfully  departed 
from  it.  (Decided  by  the  Supreme  Court  of  California  in 
the  case  of  Edward  H.  Perry  vs.  Thomas  M.  Quackenbush, 
which  decision  is  printed  in  Volume  105  of  the  California 
Reports,  page  299.) 

Section  271.  — RIGHT  OF  CONTRACTOR  TO 
ABANDON  WORK. — If  the  owner  prevents  the  progress 
of  the  work,  or  fails  to  furnish  materials  with  which  the 
work  can  be  done,  where  the  owner  is  to  furnish  the  ma- 
terials, or  fails  to  pay  an  installment  of  the  price  when  it 
becomes  due,  the  contractor  has  the  right  to  abandon  the 
work  and  sue  the  owner  for  the  reasonable  value  of  his 
work  and  materials.  The  contractor  has  no  right  to  leave 
the  work  without  cause ;  and  if,  when  he  makes  a  demand 
for  an  installment  of  the  price,  he  has  not  performed  the 
contract  according  to  its  terms,  the  installment  is  not  legally 
due,  and  he  will  not  be  justified  in  leaving  the  work  on  the 
ground  of  non-payment. 

Section  272.  —  MATERIAL  DEPARTURE  FROM 
SPECIFICATIONS.— A  building  contractor  must  stick 
close  to  the  plans  and  specifications,  and  must  make  no 
changes  or  deviations  without  the  consent  of  the  owner.  Any 
material  departure  from  the  plans  and  specifications  by  the 
contractor  will  render  him  liable  to  the  owner  in  damages, 
and  may  give  the  owner  the  right  to  rescind  the  contract 
altogether.  Where  a  building  contract  called  for  laths  one 
and  one-quarter  inches  wide,  and  laths  one  and  one-half 
inches  wide  were  used,  and  the  contract  called  for  No.  1 
rustic  and  the  best  quality  of  joists  and  studding,  and  the 
contractor  used  second  quality  of  joists  and  studding  and 
No.  2  rustic,  it  has  been  decided  by  our  Supreme  Court 
that  there  was  a  substantial  and  material  departure  from  the 
specifications  of  the  contract. 

Section  273.— EXCAVATIONS.— The  question  whether 
the  owner  of  land  will  be  liable  in  damages,  for  injury  to 


354  BUSINESS   LAWS   FOR   BUSINESS   MEN. 

adjoining  property,  caused  by  excavating,  will  depend  in  every 
case  upon  the  manner  of  making  the  excavation.  The  owner 
of  a  lot  in  making  excavations  must  use  due  care.  If  one 
by  carelessness  in  making  excavations  on  his  own  land  causes 
injury  to  an  adjoining  building,  even  where  the  owner  of 
the  house  has  no  easement  of  support,  he  will  be  liable  for 
damages.  The  law  exacts  from  a  person  who  undertakes 
even  a  lawful  act  on  his  own  premises  from  which  injury 
might  be  apprehended  to  the  property  of  his  neighbor,  the 
exercise  of  a  degree  of  care  measured  by  the  danger,  to 
prevent  or  lessen  the  injury.  The  general  rule  is,  that  no 
one  has  absolute  freedom  in  the  use  of  his  property,  but  is 
restrained  by  the  co-existence  of  equal  rights  of  his  neighbor 
to  the  use  of  his  property,  so  that  each  in  exercising  his 
right  must  do  no  act  which  causes  injury  to  his  neighbor. 
But  if  the  owner  of  the  land,  in  making  excavations,  per- 
forms the  work  in  a  proper  and  careful  manner,  he  will  not 
be  liable  for  injury  to  the  premises  of  an  adjoining  owner. 
He  is  required  only  to  take  reasonable  precaution  to  sustain 
the  land  of  the  adjoining  owner.  The  adjoining  owner  must 
also  take  precaution  to  sustain  his  own  walls,  after  notice 
of  the  intended  excavations.  The  party  intending  to  make 
excavations  must  give  notice  to  the  adjoining  owner.  This 
notice  may  be  verbal  or  written.  The  notice  is  not  required 
to  be  in  any  particular  form.  In  one  case  decided  by  the 
Supreme  Court  of  California,  it  was  held  that  the  following 
notice  was  entirely  sufficient:  "Dear  Madam:  As  we  are 
about  to  excavate  the  premises  on  the  southeast  corner  of 
Haight  and  Devisadero  Streets,  directly  adjoining  your  lot, 
to  a  depth  somewhat  below  your  foundation,  you  are  hereby 
notified  to  take  the  necessary  measures  to  protect  your  prop- 
erty. Very  respectfully,  Cunningham  Bros.,  Architects.  For 
Christian  Warneke."  (Decided  by  the  Supreme  Court  of 
California,  in  the  case  of  Nippert  vs.  Warneke,  which  decision 
is  reported  in  Volume  128  of  the  California  Reports,  page 
501.) 

Civil  Code,  Section  832. 


BUSINESS   CONTRACTS   AND  LEGAL  OBLIGATIONS.  355 

Section  274.— UNSAFE  SCAFFOLDING,  LADDERS, 
ETC. — Any  person  or  corporation  employing  or  directing 
another  to  do  or  perform  any  labor  in  the  construction,  alter- 
ation, repairing,  painting  or  cleaning  of  any  house,  building 
or  structure  within  this  state,  who  knowingly  or  negligently 
furnishes  or  erects  or  causes  to  be  furnished  or  erected  for 
performance  of  labor,  unsafe  or  improper  scaffolding,  slings, 
hangers,  blocks,  pulleys,  stays,  braces,  ladders,  irons,  ropes 
or  other  mechanical  contrivances ;  or  who  hinders  or  obstructs 
any  officer  attempting  to  inspect  the  same;  or  who  destroys, 
defaces,  or  removes  any  notice  posted  thereon  by  such  officer; 
or  who  permits  the  use  thereof,  after  the  same  has  been  de- 
clared unsafe  by  such  officer,  is  guilty  of  a  misdemeanor. 
Act  of  the  Legislature,  approved  March  13,  1909. 

Section  275.— TEMPORARY  FLOORING  FOR  PRO- 
TECTION OF  WORKMEN.— Any  building  more  than 
two  stories  high  in  the  course  of  construction  shall  have  the 
joists,  beams  or  girders  of  each  and  every  floor  below  the 
floor  or  level  where  any  work  is  being  done,  or  about  to  be 
done,  covered  with  flooring  laid  close  together,  or  with  such 
other  suitable  material  to  protect  workmen  engaged  in  such 
building  from  falling  through  joists  or  girders,  and  from 
falling  planks,  bricks,  rivets,  tools,  or  any  other  substance 
whereby  life  and  limb  are  endangered. 

Such  flooring  shall  not  be  removed  until  the  same  is  re- 
placed by  the  permanent  flooring  in  such  building. 

It  shall  be  the  duty  of  the  general  contractor  having  charge 
of  the  erection  of  such  building  to  provide  for  the  flooring  as 
herein  required,  or  to  make  such  arrangements  as  may  be 
necessary  with  sub-contractors  in  order  that  the  provisions 
of  this  act  may  be  carried  out. 

It  shall  be  the  duty  of  the  owner  or  the  agent  of  the 
owner  of  such  building  to  see  that  the  general  contractor  or 
sub-contractors  carry  out  the  provisions  of  this  act. 

Should  the  general  contractor  or  sub-contractors  of  such 
building  fail  to  provide  for  the  flooring  of  such  building,  as 
herein  provided,  then  it  shaU  be  the  duty  of  the  owner  or  the 


356  BUSINESS   LAWS   FOR   BUSINESS   MEN. 

agent  of  the  owner  of  such  building  to  see  that  the  provisions 
of  this  act  are  carried  out. 

Failure  upon  the  part  of  the  owner,  agent  of  the  owner, 
general  contractor,  or  sub-contractors  to  comply  with  the 
provisions  of  this  act  shall  be  deemed  a  misdemeanor  and 
shall  be  punishable  as  such. 

Act  of  the  Legislature,  approved  April  26,  1911. 

Section  276.— TENEMENT  HOUSE  LAW.— This  act 
shall  be  known  as  the  tenement  house  act,  and  its  provisions 
shall  apply  to  all  incorporated  towns,  incorporated  cities,  cities 
and  counties  in  the  State  of  California. 

1.  Tenement  House. — ^A  tenement  house  is  any  house  or 
building,  or  portion  thereof,  of  more  than  one  story,  which  is 
designed,  built,  rented,  leased,  let  or  hired  out,  to  be  occupied 
or  is  occupied  as  the  home  or  residence  of  four  families  or 
more  living  independently  of  each  other,  and  doing  their 
cooking  upon  the  premises,  or  by  three  families  so  living 
and  cooking,  and  having  a  common  right  in  the  halls,  stair- 
ways, yards,  water-closets,  or  some  or  any  of  them. 

Provided,  that  a  building  of  not  more  than  two  stories  in 
height,  which  is  designed,  built,  rented,  leased,  let  or  hired 
out,  to  be  occupied  or  is  occupied  as  the  home  or  residence 
of  not  more  than  four  families  living  independently  of  each 
other,  and  so  constructed  that  each  section  is  arranged  to  be 
occupied  as  the  home  or  residence  of  a  separate  family  and 
each  section  having  an  entirely  independent  and  separate 
entrance  and  stairway  from  the  street  or  from  an  outside 
vestibule  on  the  level  of  the  first  floor  of  said  building,  and 
with  no  room,  hall,  bathroom,  water-closet,  kitchen  or  other 
convenience  used  in  common  by  two  or  more  families  occupy- 
ing said  building,  shall  not  come  within  the  definition  of  a 
tenement  house  contained  in  this  act. 

2.  Apartments. — ^An  "apartment"  in  a  tenement  house  is 
a  room  or  suite  of  rooms  which  is  occupied,  or  is  intended 
or  designed  to  be  occupied,  as  a  family  domicile. 


BUSINESS    CONTRACTS   AND   LEGAL   OBLIGATIONS.  357 

3.  Yards. — A  "yard"  is  an  open,  unoccupied  space  on  the 
same  lot  with  a  tenement  house,  between  the  extreme  rear 
line  of  the  house  and  the  rear  line  of  the  lot. 

4.  Courts. — A  "court"  is  an  open,  unoccupied  space,  other 
than  a  yard,  on  the  same  lot  with  a  tenement  house.  A  court 
not  extending  to  the  street  or  yard  is  an  inner  court.  A 
court  extending  to  the  street  or  yard  and  bounded  on  three 
sides  by  a  tenement  house  on  the  same  lot  is  an  outer 
court.  If  it  extends  to  the  street  it  is  a  street  court.  If  it 
extends  to  the  yard  it  is  a  yard  court.  If  it  extends  from 
the  street  to  the  yard  it  is  a  street-to-yard  court.  A  court 
bounded  on  one  side  and  both  ends  by  a  tenement  house 
and  on  the  remaining  side  by  a  lot-line  is  a  "lot-line"  court. 

A  court  bounded  on  one  side  and  one  end  by  a  tenement 
house  and  on  the  remaining  side  by  lot  line  and  the  remain- 
ing end  open  to  the  street  or  yard  is  a  lot  line  outer  court. 

5.  Shafts. — A  "shaft"  includes  exterior  and  interior  shafts, 
whether  for  air,  light,  elevator,  dumbwaiter,  or  any  other 
purpose.  A  vent  shaft  is  one  used  solely  to  ventilate  or  light 
a  water-closet  compartment  or  bathroom. 

6.  Public  Halls. — A  "public  hall"  is  a  hall,  corridor  or 
passageway  not  within  an  apartment. 

7.  Stair  Halls. — A  "stair  hall"  includes  the  stairs,  stair 
landings  and  those  portions  of  the  public  hall  through  which 
it  is  necessary  to  pass  in  going  between  the  entrance  hall 
and  the  roof. 

8.  Basements. — A  "basement"  is  a  story  partly  below  the 
level  of  the  curb,  the  ceiling  of  which  is  not  less  than  four 
feet  six  inches  above  the  curb  level. 

9.  Cellars. — A  "cellar"  is  any  story  partly  or  wholly  below 
the  level  of  the  curb,  the  ceiling  of  which  is  less  than  four 
feet  six  inches  above  the  curb  level. 

10.  Fireproof  Tenement  House. — A  "fireproof  tenement 
house"  is  one  the  walls  of  which  are  constructed  of  brick, 


358  BUSINESS   LAWS   FOR   BUSINESS   MEN. 

Stone,  iron  or  other  incombustible  material,  and  in  which  there 
are  no  wooden  beams  or  lintels,  and  in  which  the  floors, 
roofs,  stair  halls  and  public  halls  arc  built  entirely  of  brick. 
Stone,  iron,  or  other  hard  incombustible  material,  and  in  which 
no  woodwork  or  other  inflammable  material  is  used  in  any 
of  the  partitions,  furrings  or  ceilings.  But  this  definition  shall 
not  be  construed  as  prohibiting  elsewhere  than  in  the  stair 
halls  or  entrance  halls,  the  use  of  wooden  flooring  on  top 
of  the  fireproof  floors  or  the  use  of  wooden  sleepers,  nor 
as  prohibiting  wooden  handrails,  and  hardwood  treads. 

11.  Wooden  Tenement. — A  "wooden  tenement"  is  a 
tenement  of  which  the  exterior  walls  or  a  portion  thereof 
are  of  wood.  Wooden  buildings  covered  with  metal,  plaster, 
terra  cotta,  or  veneered  with  masonry  are  wooden  structures. 

12.  Length,  Width  and  Height. — For  the  purpose  of  this 
act  the  greatest  horizontal  linear  dimension  of  any  building 
shall  be  its  length,  and  the  next  greatest  horizontal  linear 
dimension  its  width. 

The  height  of  buildings  shall  be  measured  from  the  curb 
level  at  the  center  of  the  main  front  of  the  building  to  the 
top  of  the  highest  point  of  the  roof  beams  in  case  of  flat 
roofs,  and  for  high-pitched  roofs  the  average  height  of  the 
gable  shall  be  taken  as  the  highest  point  of  the  building. 

For  a  building  erected  upon  a  street  corner,  the  measure- 
ments shall  be  taken  from  the  curb  level  opposite  the  center 
of  either  front. 

When  the  ground  upon  which  the  walls  of  a  structure  are 
built  is  above  the  street  level,  the  average  level  for  the 
ground  adjoining  the  walls  may  be  taken  instead  of  the  curb 
level  for  the  height  of  such  structure. 

13.  Building  Not  Erected  for  Tenement. — A  building 
not  erected  for  use  as  a  tenement  house,  if  hereafter  altered 
or  converted  to  such  use,  shall  thereupon  become  subject  to 
all  of  the  provisions  of  this  act  affecting  tenement  houses 
hereafter  erected. 

14.  Tenement  Not  to  Be  Altered. — No  tenement  house 
shall  at  any  time  be  altered  so  as  to  be  in  violation  of  any 


BUSINESS    CONTRACTS   AND   LEGAL   OBLIGATIONS.  359 

provision  of  this  act.  If  any  tenement  house  or  any  part 
thereof  be  erected,  altered  or  occupied  contrary  to  law,  such 
tenement  house  shall  be  deemed  an  unlawful  structure,  and 
the  board  of  health,  or  if  there  be  no  board  of  health,  the 
department  charged  with  the  enforcement  of  this  act,  may 
cause  such  building  to  be  vacated,  and  such  building  shall 
not  again  be  occupied  until  it  or  its  occupation,  as  the  case 
may  be,  has  been  made  to  conform  with  the  law. 

15.  Per  Cent  of  Lot  House  May  Occupy. — No  tenement 
house  hereafter  erected  shall  occupy  more  than  ninety  per 
cent  of  a  corner  lot  or  more  than  seventy-five  per  cent  of 
any  other  lot,  except  as  otherwise  provided  in  this  act,  pro- 
vided that  the  space  occupied  by  open  iron  fire  escapes  erected 
and  constructed  according  to  law  shall  not  be  deemed  a  part 
of  the  lot  occupied,  but  that  the  space  occupied  by  fireproof 
stairs,  and  by  vent  shafts  thirty-two  square  feet  or  less  in 
area,  shall  be  considered  as  part  of  the  lot  occupied.  For 
the  purposes  of  this  section  the  measurements  may  be  taken 
at  the  level  of  the  second  tier  of  beams  (the  second  floor 
level),  except  where  rooms  on  the  ground  floor  are  to  be 
used  for  sleeping  apartments. 

16.  Corner  Lot. — By  corner  lot  is  meant  a  lot  situated  at 
the  junction  of  two  streets,  or  of  a  street  and  public  alley 
or  other  public  thoroughfare  or  public  park,  not  less  than 
sixteen  feet  in  width.  Any  portion  of  the  width  of  such  lot 
distant  more  than  fifty  feet  from  such  junction  shall  not  be 
regarded  as  part  of  a  corner  lot,  but  shall  be  subject  to  the 
provisions  of  this  act  respecting  other  than  corner  lots. 
Where,  in  any  corner  lot,  the  two  frontages  are  of  unequal 
length,  either  street  frontage  may  be  taken  as  the  width  of 
the  lot.  Street  frontage  alone  and  not  alley  frontage  shall 
be  considered  in  determining  such  lesser  frontage. 

17.  Limit  of  Height. — The  height  of  no  tenement  house 
hereafter  erected  shall  by  more  than  one-half  exceed  the 
width  of  the  widest  street  upon  which  it  stands. 


360  BUSINESS   LAWS   FOR  BUSINESS   MEN. 

18.  Rear  Yard. — Behind  every  tenement  house  hereafter 
erected,  there  shall  be  a  yard  extending  across  the  entire 
width  of  the  lot  and  at  every  point  open  from  the  ground 
to  the  sky,  unobstructed,  except  that  open  iron  fire  escapes 
may  project  not  over  four  feet  from  the  rear  line  of  the  house. 
The  depth  of  said  yard,  measured  from  the  extreme  rear  wall 
of  the  house  to  the  rear  line  of  the  lot,  shall  be  as  provided  in 
the  following  sections. 

19.  Houses  Sixty  Feet  High  — Yard  Not  Less  Than 
Twelve  Feet  Wide. — Except  upon  a  corner  lot,  as 
provided  herein,  or  upon  a  lot  running  through  from 
street  to  street  or  street  to  public  alley,  or  public  park 
as  provided  herein,  the  depth  of  the  yard  behind  every 
tenement  house  hereafter  erected  sixty  feet  in  height  shall 
not  be  less  than  12  feet  in  every  part.  Said  yard  shall  be 
increased  in  depth  two  feet  for  every  additional  twelve  feet 
in  height  of  the  building  or  fraction  thereof,  and  may  be 
decreased  in  depth  one  foot  for  every  twelve  feet  in  height 
of  the  building  less  than  sixty  feet;  but  it  shall  never  be  less 
than  ten  feet  in  depth  in  every  part. 

20.  Yard  of  Corner  Lot  Not  Less  Than  Ten  Feet 
Wide. — The  depth  of  the  yard  behind  every  tenement  house 
hereafter  erected  upon  a  corner  lot  shall  be  not  less  than 
ten  feet  in  every  part  and  at  every  point  open  and  un- 
obstructed from  the  level  of  the  second  tier  of  beams  (the 
second  floor  level),  provided  that  where  any  such  lot  is 
less  than  one  hundred  feet  in  depth  the  depth  of  the  yard 
be  not  less  than  ten  per  centum  of  the  greatest  depth  of  such 
lot,  but  shall  never  be  less  than  five  feet  in  every  part,  nor 
less  than  the  minimum  width  of  an  outer  court  on  the  lot 
line  as  prescribed  by  this  act.  If  rooms  on  the  ground  floor 
are  used  as  sleeping  apartments  the  yard  shall  be  taken 
from  the  ground  up.  When  a  corner  lot  is  more  than  fifty 
feet  in  width,  the  yard  for  that  portion  in  excess  of  fifty 
feet  shall  conform  to  the  provisions  of  subdivision  16. 


BUSINESS   CONTRACTS   AND   LEGAL   OBLIGATIONS.  361 

21.  When  One-half  Width  of  Alley  May  Be  Included 
in  Yard. — Whenever  a  tenement  house  is  hereafter  erected 
upon  a  lot  which  runs  through  from  one  street  to  another 
street  or  public  alley  or  public  park  and  said  lot  is  not 
more  than  one  hundred  and  fifty  feet  in  depth,  one-half  of 
the  width  of  the  narrowest  street  or  alley  may  be  included 
in  the  depth  of  the  yard  required  by  this  act,  provided  that 
on  such  lot  no  tenement  house,  hereafter  erected  shall  occupy 
more  than  90  per  centum  of  a  comer  lot,  or  more  than  75 
per  centum  of  any  other  lot. 

One-half  of  the  rear  street  or  public  alley  or  public  park 
may  be  included  in  the  portion  of  lot  that  is  left  uncovered 
in  computing  the  percentage,  provided  said  one-half  does  not 
exceed  the  depth  of  yard  required  herein,  in  which  case  only 
twelve  feet  may  be  included  in  computing  the  percentage  to 
be  left  uncovered. 

22.  When  Lot  Is   Surrounded  by   Streets. — If  a  lot  is 

surrounded  upon  its  four  sides  by  streets  or  streets  and  public 
alleys  20  feet  or  more  wide  or  public  parks  over  24  feet 
wide,  the  provisions  relating  to  yards  need  not  be  com- 
plied with,  provided  that  the  tenement  house  to  be  con- 
structed on  such  lot  does  not  occupy  more  than  75  per 
centum  of  the  lot  and  contains  an  outer  court  at  least  80 
feet  deep  and  of  a  width  twice  as  great  as  the  depth  pre- 
scribed for  yards  and  open  to  one  of  the  surrounding, 
streets,  alleys,  or  parks.  Provided,  that  said  outer  court 
shall  not  be  required  to  be  of  a  depth  which  shall  leave  less 
than  50  feet  between  the  rear  line  of  said  court  and  the  line 
of  said  lot  immediately  behind  said  court. 

No  court  of  a  tenement  house  hereafter  erected  shall  be 
covered  by  a  roof  or  skylight,  but  every  such  court  shall  be 
at  every  point  open  from  the  bottom  of  the  lowest  room 
used  for  human  habitation  and  lighted  by  such  court  to  the 
sky,  unobstructed,  except  that  open  iron  fire  escapes,  as 
required  by  law,  or  by  ordinances  or  regulations  of  incor- 
porated towns,  incorporated  cities  or  cities  and  counties,  may 
project  into  the  court,  but  not  more  than  four  feet  from  the 


362  BUSINESS   LAWS   FOR   BUSINESS   MEN. 

wall  of  the  house.  All  courts  in  tenement  houses  hereafter 
erected  shall  conform  to  the  requirements  of  the  following 
sections. 

Except  that  recesses  may  be  built  on  the  street  or  yard 
or  a  court,  provided  the  depth  of  same  is  no  greater  than 
the  width  and  that  their  area  be  not  counted  in  computing 
the  area  of  the  court. 

23.  Minimum  Widths  and  Maximum  Lengths  of  Outer 
Courts. — The  outer  courts  of  all  tenement  houses  hereafter 
erected  shall  have  not  less  than  the  following  minimum 
widths  nor  more  than  the  following  maximum  lengths: 

Building.  Least  width  Maximum  length. 

2  stories 4  feet    16  feet. 

3  stories 4  feet  6  inches ....  25  feet. 

4  stories 5  feet  6  inches ....  30  feet. 

5  stories 6  feet    35  feet. 

6  stories 8  feet    35  feet. 

7  stories 10  feet    40  feet. 

8  stories 12  feet    40  feet. 

The  length  of  outer  courts  shall  not  be  more  than  the 
maximum  lengths  given  in  the  above  table  unless  six  inches 
be  added  to  the  minimum  widths  for  each  additional  five 
feet  or  fraction  thereof  in  length.  The  lot  line  outer  courts 
shall  have  the  same  minimum  width  as  outer  courts,  but  are 
not  governed  by  the  provision  in  this  section  regarding 
maximum  lengths. 

24.  Areas  and  Widths  of  Inner  Courts. — The  inner 
courts  of  all  tenement  houses  hereafter  erected  shall  have 
areas  and  minimum  widths  in  all  parts,  not  less  than  the 
widths   and  areas   as   follows: 


BUSINESS    CONTRACTS   AND   LEGAL   OBLIGATIONS.  363 

Building.  Square  feet.  Least  width. 

2  stories 75 6  feet. 

3  stories 120 7  feet. 

4  stories 160 8  feet. 

5  stories 250 12  feet. 

6  stories 400 16  feet. 

7  stories 625 20  feet. 

8  stories  or  more  ....  840 24  feet. 

25.  Areas  and  Widths  of  Lot  Line  Courts. — Lot  line 
courts  in  tenement  houses  hereafter  erected  shall  have  areas 
and  minimum  widths  in  all  parts  not  less  than  those  specified 
in  the  following  table: 

Building.  Square  feet.  Least  width. 

2  stories 50 4  feet. 

3  stories 60 5  feet. 

4  stories 105 7  feet. 

5  stories 180 9  feet. 

6  stories 300 12  feet. 

7  stories 490 14  feet. 

8  stories 595 17  feet. 

26.  Air  Intakes  of  Inner  Courts. — Every  inner  court, 
including  lot  line  courts,  shall  be  provided  with  one  or  more 
horizontal  air  intakes  at  the  bottom.  Such  intakes  shall 
always  communicate  directly  with  the  street  or  yard,  and 
shall  consist  of  an  unobstructed  passageway,  not  less  than 
three  feet  wide  and  six  feet  six  inches  high,  which  shall  be  left 
open,  or  if  not  open,  there  shall  always  be  provided  in  said 
passageway  open  grilles  or  transoms,  one  at  each  end,  of  a 
size  not  less  than  10  square  feet  each,  and  such  open  grilles 
or  transoms  shall  never  be  covered  with  glass  or  in  any 
other  way.  In  case  the  court  does  not  go  down  to  the 
ground  level,  the  intake  shall  consist  of  unobstructed 
open  ducts  having  an  open  interior  area  of  not  less  than 
sixteen  square  feet  at  any  point,  and  covered  at  each  end 


364  BUSINESS   LAWS   FOR  BUSINESS   MEN. 

with  a  wire  screen  of  not  less  than  one  inch  mesh.  Such 
ducts  shall  be  so  arranged  as  to  be  easily  cleaned  out.  These 
ducts  or  intakes  must  in  any  case  be  either  of  fireproof 
construction  or  lined  with  No.  26  galvanized  iron  on  inside. 

27.  Enlarging  Existing  Tenements. — No  existing  tene- 
ment house  shall  (unless  the  rear  of  the  lot  upon  which  it 
stands  abuts  upon  a  public  alley  at  least  ten  feet  wide) 
hereafter  be  enlarged  or  its  lot  be  diminished  so  that  any 
building  on  such  lot  shall  at  any  point  approach  nearer 
than  ten  feet  to  the  rear  of  the  lot.  Where  a  tenement  house, 
now  or  hereafter  erected,  stands  upon  a  lot,  other  than  a 
corner  lot,  no  other  building  shall  hereafter  be  placed  upon 
the  front  or  rear  of  that  lot,  unless  the  minimum  distance 
between  such  buildings  shall  be  at  least  ten  feet,  if  neither 
building  exceeds  the  height  of  one  story;  or  twelve  feet  if 
either  building  exceeds  the  height  of  one  story,  but  not  the 
height  of  two  stories,  and  so  on,  two  additional  feet  to  be 
added  to  such  minimum  distance  of  ten  feet  for  every  story 
more  than  one  in  the  height  of  the  highest  building  on  such 
lot.  Every  rear  tenement  hereafter  erected,  or  every  tene- 
ment that  hereafter  becomes  a  rear  tenement  by  the  erection 
of  a  building  or  buildings  on  the  front  of  the  same  lot, 
shall  have  direct  access  to  a  street,  or  to  a  public  alley  or  other 
public  thoroughfare  or  public  park  at  least  sixteen  feet  wide, 
by  a  passageway  not  less  than  five  feet  wide  by  seven 
feet    high. 

28.  Windows. — In  every  tenement  house  hereafter  erected, 
every  room,  except  water-closet  compartments  and  bath 
rooms,  shall  have  at  least  one  window  opening  directly  upon 
the  street,  or  upon  a  yard  or  court  of  the  dimensions  speci- 
fied in  this  act,  and  such  windows  shall  be  located  as  to 
properly  light  all  portions  of  such  rooms. 

29.  Window  Area  of  Each  Room. — In  every  tenement 
house  hereafter  erected,  the  total  window  area  of  each  room, 
except  water-closet  compartments  and  bath  rooms,  shall  be 
at  least  one  eighth  of  the  superficial  area  of  the  room,  except 


BUSINESS    CONTRACTS   AND   LEGAL   OBLIGATIONS.  365 

in  the  cellar  or  basement,  where  it  shall  be  one  sixth,  and 
the  upper  half  of  all  windows  shall  be  made  so  as  to  open 
the  full  width.  The  total  window  area  of  any  such  room 
shall  never  be  less  than  twelve  square  feet,  measured  to  out- 
side of  sash. 

30.  Area  of  Each  Room. — In  every  tenement  house  here- 
after erected,  all  rooms,  except  water-closet  compartments 
and  bath  rooms,  shall  be  of  the  following  dimensions:  In 
each  apartment  there  shall  be  at  least  one  room  containing 
not  less  than  one  hundred  and  twenty  square  feet  of  floor 
area,  and  each  other  room  shall  contain  at  least  ninety  square 
feet  of  floor  area.  Each  room  shall  be  in  every  part  not  less 
than  nine  feet  from  the  finish  floor  to  the  finished  ceiling; 
provided,  that  an  attic  room  need  be  but  nine  feet  high  in 
but  half  its  area.  Except  that  small  closets,  and  water- 
closet  compartments,  and  bath  rooms  may  be  not  less  than 
seven  feet  six  inches  in  height,  and  except  that  buffet  kitchens 
or  pantries  may  be  less  than  ninety  square  feet  of  area,  pro- 
vided the  same  are  not  occupied  or  intended  or  designed  to 
be  occupied  as  bed  rooms. 

31.  Alcoves  to  be  Separately  Lighted. — In  every  tene- 
ment house  hereafter  erected  an  alcove  in  any  room  shall  be 
separately  lighted  and  ventilated  and  must  conform  to  all 
the  requirements  of  other  rooms,  and  shall  not  be  less  than 
ninety  square  feet  in  area.  No  part  of  any  room  in  a  tene- 
ment house  hereafter  erected  shall  be  enclosed  or  subdivided 
at  any  time,  wholly,  or  in  part,  by  a  curtain  portiere,  fixed 
or  movable  partition,  or  other  contrivance  or  device,  unless 
such  part  of  the  room  so  enclosed  or  subdivided  shall  con- 
tain a  separate  window  as  herein  required,  and  shall  have  a 
floor  area  of  not  less  than  ninety  square  feet;  provided, 
however,  that  closets  or  alcoves  of  not  more  than  twenty- 
five  square  feet  floor  area  do  not  come  within  the  provisions 
of  this  section. 

32.  Windows  in  Stair  Halls. — In  every  tenement  house 
which  is  hereafter  erected,  which  is  occupied  or  arranged  to 


366  BUSINESS   LAWS   FOR   BUSINESS   MEN. 

be  occupied  by  more  than  two  families  on  any  floor,  or  which 
exceeds  four  stories  and  cellar  in  height,  every  public  hall  or 
stair  hall  shall  have  at  least  one  window  at  each  floor  opening 
directly  upon  the  street  or  upon  a  yard  or  court,  except  as 
otherwise  provided  in  this  section. 

Any  part  of  a  hall  which  is  shut  oflf  from  any  other  part 
of  said  hall  by  a  door  or  doors,  shall  be  deemed  a  separate 
hall  within  the  meaning  of  this  section.  In  every  tenement 
house  hereafter  erected  where  the  public  hall  is  not  provided 
with  a  window  opening  directly  to  the  outer  air  as  above 
provided,  there  shall  be  a  stair  well  not  less  than  twelve 
inches  wide  extending  from  the  entrance  floor  to  the  roof, 
and  all  doors  leading  from  such  public  halls  shall  be  pro- 
vided with  translucent  glass  panels  of  an  area  not  less  than 
five  square  feet  for  each  door,  and  also  with  fixed  transoms 
of  translucent  glass  over  each  door. 

33.  Minimum  Area  of  Hall  Windows  and  Skylights. — 
In  every  tenement  house  hereafter  erected,  one  at  least  of 
the  windows  provided  to  light  each  public  hall  or  part 
thereof  shall  have  an  area  of  at  least  twelve  square  feet 
measured  to  outside  of  sash.  In  every  such  house  there 
shall  be  in  the  roof,  directly  over  each  stair  well,  a  ventilat- 
ing skylight  provided  with  ridge  ventilators  having  a  mini- 
mum opening  of  forty  square  inches  or  such  skylight  shall 
be  provided  with  fixed  or  movable  louvres ;  the  glazed  roof 
of  such  skylight  shall  be  not  less  than  twnty  square  feet  in 
area.  In  tenement  houses  hereafter  erected  where  the  stairs 
and  public  halls  are  not  provided  with  windows  on  each  floor 
opening  directly  into  the  outer  air,  the  skylights  shall  be 
provided  with  both  such  rigid  ventilators,  and  also  with  fixed 
or  movable  louvres,  or  movable  sashes. 

34.  Minimum  Area  of  Stair  Hall  Windows. — In  every 
tenement  house  hereafter  erected,  the  windows  required  by 
law  on  each  floor  to  light  or  ventilate  stair  halls,  shall  be  at 
least  fifteen  square  feet  of  area  measured  to  outside  of  sash. 
Sash  doors  in  entrance  halls  and  public  halls  shall  be  deemed 
the  equivalent  of  a  window  for  lighting  purposes,  provided 


BUSINESS   CONTRACTS   AND  LEGAL  OBLIGATIONS.  367 

that  such  doors  contain  the  amount  of  glazed  surface  pre- 
scribed for  windows. 

35.  Area  of  Vent  Shafts — Air  Intakes. — Every  vent 
shaft  hereafter  constructed  in  a  tenement  house  shall  be  at 
least  twenty  square  feet  in  area,  and  the  least  dimension  of 
such  vent  shaft  shall  be  at  least  four  feet;  and  if  the  build- 
ing be  above  sixty  feet  in  height  such  vent  shaft  shall 
throughout  its  entire  height,  be  increased  in  area  three  square 
feet  for  each  additional  twelve  feet  or  fraction  thereof;  and 
for  each  twelve  feet  of  height  less  than  sixty  feet,  such  vent 
shaft  may  be  decreased  in  area  three  feet.  Every  such  vent 
shaft  shall  be  constructed  of  fireproof  materials  or  shall  be 
covered  on  the  outside  with  metal  and  on  the  inside  with 
metal  lath  and  plaster.  Every  such  vent  shaft  shall  be  pro- 
vided with  a  horizontal  air  intake  or  duct  at  the  bottom 
communicating  with  the  street  or  yard  or  a  court;  such 
duct  or  air  intake  to  be  not  less  than  four  square  feet  in 
total  area.  Such  duct  shall  be  constructed  of  fireproof  ma- 
terial or  shall  be  lined  on  the  inside  with  metal,  and  shall 
enter  the  shaft  at  a  point  not  less  than  six  inches  above  the 
bottom  thereof,  and  shall  be  provided  with  a  wire  screen  of 
not  less  than  one  inch  mesh  at  each  end.  Such  duct  shall 
be  so  arranged  as  to  be  easily  cleaned  out. 

36.  Access  to  Rooms. — In  every  apartment  of  four  or 
more  rooms  in  a  tenement  house  hereafter  erected,  access  to 
every  living  room  and  bed  room  and  to  at  least  one  water- 
closet  compartment  shall  be  had  without  passing  through 
any  bed  room. 

37.  Basement  Rooms. — In  no  tenement  house  hereafter 
erected,  shall  any  room  in  the  cellar  be  constructed,  altered, 
converted  or  occupied  for  living  purposes;  and  no  room  in 
the  basement  of  a  tenement  house  shall  be  constructed,  al- 
tered, converted,  or  occupied  for  living  purposes,  unless  all 
of  the  following  conditions  of  this  act  be  complied  with,  and 
at  least  one-third  of  the  basement  shall  be  above  grade  for 


368  BUSINESS   LAWS   FOR   BUSINESS   MEN. 

building;  provided  in  each  case  of  each  such  room  the  ceil- 
ing shall  be  at  least  four  feet  six  inches  above  the  adjoining 
street  grades  and  actual  ground  levels. 

Such  room  shall  be  at  least  nine  feet  in  every  part  from 
the  floor  to  the  ceiling. 

There  shall  be  appurtenant  to  such  room  or  apartment  a 
water-closet  conforming  to  the  regulations  and  ordinances 
relating  to  water-closets,  of  the  incorporated  town,  incorpor- 
ated city  or  city  and  county  in  which  the  tenement  house  is 
or  is  to  be  built. 

38.  Basement  Walls  Dampproofed. — If  the  basement  of 
any  tenement  house  hereafter  erected  is  used  or  designed  to 
be  used  for  living  purposes  it  shall  have  all  walls  below 
the  ground  level  and  all  cellar  or  lower  floors  dampproofed 
and  waterproofed.  When  necessary  to  make  such  floors  and 
walls  dampproof  and  waterproof,  the  dampproofing  and 
waterproofing  shall  run  through  the  walls  as  high  as  the 
ground  level  and  continue  throughout  the  floor.  All  cellars 
and  basements  in  such  tenement  houses  shall  be  properly 
lighted  and  ventilated  to  the  satisfaction  of  the  department 
charged  with  the  enforcement  of  this  act. 

39.  Bottom  of  Shaft  to  Be  Six  Inches  Below  Floor 
Level. — In  every  tenement  house  hereafter  erected  the  bottom 
of  all  shafts,  courts,  areas,  and  yards  which  extend  to  the 
basement  for  light  or  ventilation  of  living  rooms,  must  be 
six  inches  below  the  floor  level  of  the  part  occupied  or  in- 
tended to  be  occupied.  In  every  tenement  house  all  shafts, 
courts,  areas  and  yards  shall  be  properly  graded  and  drained, 
and  connected  with  the  street  sewer  so  that  all  water  may 
pass  freely  through  into  it,  and  when  required  by  the  depart- 
ment charged  with  the  enforcement  of  this  act,  shall  be  prop- 
erly concreted. 

40.  Sinks  and  Running  Water. — In  every  tenement  house 
hereafter  erected,  there  shall  be  in  each  apartment  a  proper 
sink  with  running  water,  provided  there  is  a  water  system 
accessible  to  said  tenement  house. 


BUSINESS    CONTRACTS   AND   LEGAL   OBLIGATIONS.  369 

41.  Water-closets  and  Baths. — In  every  tenement  house 
hereafter  erected  there  shall  be  a  separate  water-closet  in  a 
separate  compartment  within  each  apartment,  and  one  shower 
bath  or  bath  tub  in  a  separate  compartment,  shall  be  pro- 
vided on  each  floor  for  every  ten  rooms  or  fraction  thereof, 
and  arranged  so  that  one  bath  tub  or  shower  is  accessible  to 
each  apartment,  provided  that  where  there  are  apartments 
consisting  of  but  one  or  two  rooms  there  may  be  one  water- 
closet  compartment  for  every  two  such  apartments  accessible 
from  each  apartment  through  the  public  hall,  and  not  more 
than  twenty  feet  distance  from  an  entrance  of  each  such 
apartment,  provided  there  is  a  water  system  accessible  to 
such  tenement  house. 

Each  compartment  shall  not  be  less  than  two  feet  four 
inches  wide  and  shall  be  enclosed  with  plastered  partitions 
which  shall  extend  to  the  ceiling. 

Every  such  water-closet  compartment  shall  have  a  window 
or  windows  of  at  least  six  square  feet  total  area  opening 
directly  upon  a  vent  shaft,  court,  street  or  yard. 

However,  a  bath  tub  or  shower  may  be  placed  in  the  sepa- 
rate water-closet  compartment  where  neither  bath  tub  or 
shower,  or  water-closet  are  to  be  used  by  more  than  one 
apartment. 

Every  water-closet  compartment  shall  be  provided  with 
proper  means  for  lighting  same  by  night. 

The  floor  of  every  such  water-closet  compartment  shall  be 
made  waterproof  with  asphalt,  tile,  cement  or  some  other 
non-absorbent  waterproof  material. 

42.  Rooms  in  Wooden  Tenements. — No  wooden  tene- 
ment house  shall  hereafter  be  erected  which  shall  contain 
more  than  one  hundred  and  fifty  rooms  exclusive  of  bath 
rooms. 

43.  Height  of  Tenements. — No  wooden  tenement  house 
exceeding  three  stories  in  height,  exclusive  of  cellar,  shall 
hereafter  be  erected.  However,  the  building  may  step  up 
to  follow  the  grade,  provided  no  part  of  the  said  building 
is  over  three  stories  in  height. 


870  BUSINESS   LAWS    FOR   BUSINESS   MEN. 

A  non-fireproof  tenement  house  may  be  built  four  stories 
in  height,  provided  the  exterior  walls  are  all  of  brick  or 
stone  or  concrete  and  all  other  municipal  requirements  for 
this  class  of  building  are  complied  with.  If  in  addition  to 
above  requirements  all  joists,  girders,  studding,  furring  and 
the  soffits  of  stairs  be  lathed  with  metal  lath  and  plastered, 
such  tenement  house  may  be  built  not  to  exceed  six  stories, 
provided  the  height  limits  imposed  by  municipal  ordinance 
for  all  buildings  of  this  particular  class  be  not  exceeded.  A 
cellar  is  not  a  story  within  the  meaning  of  this  section,  pro- 
vided that  no  part  of  such  cellar  is  occupied  or  arranged  to 
be  occupied  for  living  purposes.  However,  the  building  may 
step  up  to  follow  the  grade,  provided  that  no  part  of  said 
building  exceeds  the  number  of  stories  provided  for  in  this 
section. 

Every  tenement  house  hereafter  erected  exceeding  six 
stories  or  parts  of  stories  in  height  (above  the  curb)  shall 
be  a  fireproof  tenement  house.  A  cellar  is  not  a  story  within 
the  meaning  of  this  section,  provided  no  part  of  such  cellar 
is  occupied  or  arranged  to  be  occupied  for  living  purposes. 

44.  Stand  Pipes,  Fire  Escapes,  Etc.  —  Every  tenement 
house  shall  be  provided  and  equipped  with  stand  pipes  and 
with  metallic  fire  escapes,  combined  with  suitable  metallic 
balconies,  platforms  and  railings,  as  provided  for,  or  which 
shall  be  provided  for  by  the  ordinances  of  the  incorporated 
town,  city  or  city  and  county  in  which  the  tenement  house 
is  situated.  No  incumbrance  of  any  kind  shall  at  any  time 
be  placed  before,  upon  or  against  any  stairway,  steps  or 
landings  or  fire  escapes  in  or  upon  any  tenement  house.  All 
fire  escapes  upon  tenement  houses  shall  be  kept  in  good  order 
and  repair,  and  every  exposed  part  thereof  shall  at  all  times 
be  protected  against  rust  by  durable  paint. 

45.  Stairs  to  Roof.  —  Every  tenement  house  hereafter 
erected  shall  have  stairs  with  a  guide  or  hand  rail,  leading 
to  the  roof  and  enclosed  between  ceiling  and  roof  by 
fireproof    partitions    with    fireproof    door    to    same    opening 


BUSINESS    CONTRACTS    AND   LEGAL   OBLIGATIONS.  371 

onto  roof,  except  that  in  non-fireproof  tenement  houses  here- 
after erected  such  partitions  may  be  of  wood  covered  with 
metal  on  both  sides.  These  stairs  shall  be  at  least  two  feet 
six  inches  wide  and  constructed  as  specified  in  this  act.  All 
doors  in  the  above  partitions  shall  be  fire  doors,  metal  lined 
on  both  sides. 

46.  Stairs  from  Entrance  to  Roof.  —  Every  tenement 
house  hereafter  erected  shall  have  at  least  one  flight  of 
stairs,  extending  from  the  entrance  floor  to  the  roof,  and  the 
stairs  and  public  halls  therein  shall  be  at  least  three  feet 
wide  in  the  clear,  and  every  non-fireproof  tenement  house 
containing  not  more  than  fifty  rooms  shall  have  a  secondary 
flight  of  stairs  running  from  the  top  floor  down  to  the  second 
floor  and  not  less  than  two  feet  six  inches  wide.  A  fire 
escape  may  take  the  place  of  this  second  stairway,  provided 
said  fire  escape  connects  directly  with  a  public  hallway  or 
is  accessible  to  each  apartment. 

47.  Additional  Flight  of  Stairs  for  Tenement  Having 
More  than  Fifty  Rooms. — Every  non-fireproof  tenement 
house  hereafter  erected  containing  over  fifty  rooms,  exclusive 
of  bath  rooms,  above  the  entrance  story,  shall  also  have  an 
additional  flight  of  stairs  for  every  additional  eighty  rooms 
or  fraction  thereof;  if  said  house  contains  not  more  than  one 
hundred  rooms  above  the  entrance  story,  in  lieu  of  an  addi- 
tional stairway,  the  stairs,  stair  halls  and  entrance  halls 
throughout  the  entire  building  shall  be  at  least  one-half  wider 
than  is  specified  in  this  act.  However,  where  an  additional 
flight  of  stairs  is  added  in  accordance  with  the  provisions 
of  this  section,  the  secondary  stairway  may  be  omitted. 

48.  Additional  Flight  of  Stairs  for  Fireproof  Tene- 
ments Having  More  than  One  Hundred  and  Twenty 
Rooms. — Every  fireproof  tenement  house  hereafter  erected 
containing  over  one  hundred  and  twenty  rooms  above  the 
entrance  story,  exclusive  of  bath  rooms,  shall  have  an  addi- 
tional flight  of  stairs  for  every  additional  one  hundred  and 


372  BUSINESS   LAWS   FOR  BUSINESS   MEN. 

twenty  rooms  or  fraction  thereof;  but  if  said  house  contains 
not  more  than  one  hundred  and  eighty  rooms  above  the 
entrance  story,  exclusive  of  bath  rooms,  in  lieu  of  an  addi- 
tional stairway  the  stairs,  stair  halls  and  entrance  halls 
throughout  the  entire  building  may  each  be  at  least  one-half 
wider  than  is  specified  in  this  act,  and  if  such  house  contains 
not  more  than  three  hundred  rooms,  above  entrance  story, 
exclusive  of  bathrooms,  in  lieu  of  four  stairways  there  may 
be  but  three  stairways,  provided  that  one  of  such  stairways 
and  the  stair  halls  and  entrance  halls  connected  therewith 
are  at  least  one-half  wider  than  is  otherwise  specified  in 
this  act. 

49.  Stairs  to  Have  Entrance  from  Street. — Each  flight 
of  stairs  mentioned  in  the  last  two  sections  shall  have  an 
entrance  on  the  entrance  floor  from  the  street  or  street  court, 
or  from  an  inner  court  which  connects  directly  with  the 
street.  All  stairs  shall  be  constructed  with  a  rise  of  not 
more  than  eight  inches,  and  with  treads  not  less  than  nine 
inches  wide,  exclusive  of  nosings.  Where  winders  are  used 
all  treads  at  a  point  eighteen  inches  from  the  strings  on  the 
wall  side  shall  be  at  least  ten  inches  wide. 

50.  Width  of  Entrance. — Every  entrance  hall  in  a  tene- 
ment house  hereafter  erected  shall  be  at  least  three  feet  six 
inches  in  the  clear  from  the  entrance  up  to  and  including 
the  stair  enclosure,  and  beyond  this  point  three  feet  wide 
in  the  clear.  In  every  tenement  house  hereafter  erected, 
access  shall  be  had  from  the  street  to  the  yard,  either  in  a 
direct  line  or  through  a  court. 

51.  No  Closet  Under  Stairs  in  Non-fireproof  Tene- 
ments.— In  non-fireproof  tenement  houses  hereafter  erected 
no  closet  of  any  kind  shall  be  constructed  under  any  stairway 
leading  from  the  first  story  exclusive  of  the  cellar,  to  the 
upper  stories,  but  such  space  shall  be  left  entirely  open  and 
kept  clear  and  free  from  incumbrance. 


BUSINESS   CONTRACTS   AND  LEGAL  OBLIGATIONS.  373 

52.  Entrance  to  Cellar. — In  every  tenement  house  here- 
after erected  there  shall  be  an  entrance  to  the  cellar  or  other 
lowest  story  from  the  outside  of  said  building. 

53.  Increase  of  Height — Decrease  of  Lot. — No  tenement 
house  shall  be  increased  in  height,  its  lot  decreased  so  that 
its  yard  shall  be  diminished  to  less  than  is  required  by  this 
act,  or  so  that  a  greater  percentage  of  the  lot  shall  be 
occupied  by  buildings  or  structures  than  provided  for  in  this 
act.  For  the  purpose  of  this  section,  the  measurements  for 
computing  the  percentage  of  lot  to  be  occupied  may  be  taken 
at  the  level  of  the  second  tier  of  beams  (the  second  floor 
level),  except  in  tenement  houses  where  rooms  on  the  ground 
floor  are  to  be  occupied  as  sleeping  apartments ;  provided,  that 
the  space  occupied  by  open  iron  fire  escapes  and  by  chimneys 
or  flues  located  in  yards  and  attached  to  the  house,  which  do 
not  exceed  five  square  feet  in  area  and  do  not  obstruct  the 
light  or  ventilation,  shall  not  be  deemed  part  of  the  lot 
occupied. 

No  tenement  house  shall  be  increased  in  height  so  that 
said  building  shall  exceed  in  height  by  more  than  one  half 
the  width  of  the  widest  street  on  which  it  stands. 

54.  Courts  for  Ventilation  and  Light. — Any  shaft  or  court 
used  or  intended  to  be  used  to  light  or  ventilate  rooms  intended 
to  be  used  for  living  purposes,  and  which  may  hereafter  be 
placed  in  tenement  houses  erected  prior  to  the  passage  of  this 
act,  shall  not  be  less  in  area  than  twenty-five  square  feet,  or 
less  than  four  feet  in  width  in  any  part,  and  such  shaft  shall 
under  no  circumstances  be  roofed  or  covered  over  at  the 
top  with  a  roof  or  skylight ;  every  such  shaft  shall  be  provided 
at  the  bottom  with  a  horizontal  intake  or  duct  of  a  size  not 
less  than  four  feet  square  and  communicating  directly  with 
the  street  or  yard,  and  such  duct  shall  be  so  arranged  as  to 
be  readily  cleaned  out.  Such  vent  shaft  shall  be  constructed 
of  fireproof  materials  or  shall  be  covered  with  metal  on  the 
outside  and  with  metal  lath  and  plaster  on  the  inside,  and 


374  BUSINESS  LAWS  FOR  BUSINESS  MEN. 

such  duct  shall  be  constructed  of  fireproof  materials,  or  shall 
be  lined  on  the  inside  with  metal. 

Any  additional  room  or  hall  that  is  hereafter  constructed 
or  created  in  a  tenement  house  shall  comply  in  all  respects 
with  the  provisions  of  this  act  applicable  to  tenement  houses 
to  be  erected  hereafter,  except  that  such  rooms  may  be  the 
same  height  as  the  other  rooms  of  the  same  story  of  the 
house. 

55.  Alteration  Diminishing  Light. — No  tenement  house 
shall  be  so  altered  that  any  room  or  public  hall  or  stairs  shall 
have  its  light  or  ventilation  diminished  in  any  way  not  ap- 
proved by  the  health  department  or  other  department  desig- 
nated by  municipal  ordinance  for  that  purpose. 

56.  Subdividing  Rooms  by  Curtains. — No  part  of  any 
room  in  any  tenement  house  shall  hereafter  be  enclosed  or 
subdivided  wholly  or  in  part,  by  a  curtain,  portiere,  fixed  or 
movable  partition,  or  other  contrivance  or  device,  unless  such 
part  of  the  room  so  enclosed  or  subdivided,  shall  contain  a 
window  as  required  by  this  act,  and  have  a  floor  area  of 
not  less  than  ninety  square  feet;  provided,  however,  that 
closets  or  alcoves  of  not  more  than  twenty-five  square  feet 
in  area  do  not  come  within  the  provisions  of  this  section. 

57.  New  Water-closets. — Every  new  water-closet  here- 
after placed  in  a  tenement  house,  except  one  provided  to  re- 
place a  defective  or  antiquated  fixture  in  the  same  location, 
shall  comply  with  the  provisions  of  this  act  relative  to  water- 
closets  in  tenement  houses  hereafter  erected. 

58.  Increasing  Size  and  Height  of  Wooden  Tenements. 
— No  existing  wooden  tenement  house  shall  hereafter  be  in- 
creased in  size  so  as  to  contain  more  than  one  hundred  and 
fifty  rooms  exclusive  of  bath  rooms. 

No  wooden  tenement  house  shall  be  increased  in  height 
so  as  to  exceed  three  stories,  exclusive  of  the  cellar.  How- 
ever, the  building  may  step  up  to  follow  the  grade,  provided 
no  part  of  said  building  is  over  three  stories  in  height. 


BUSINESS   CONTRACTS   AND   LEGAL   OBLIGATIONS.  375 

59.  Altering  Non-fireproof  Tenements  to  Four  Stories 

— A  non-fireproof  tenement  house  may  hereafter  be  altered 
to  be  four  stories  in  height,  provided  the  exterior  walls  are 
all  of  brick  or  stone  or  concrete  and  all  other  municipal  re- 
quirements for  this  class  of  building  are  complied  with.  If 
in  addition  to  the  above  requirements  all  joists,  girders, 
studding,  furring  and  the  sofiits  of  stairs  be  lathed  with  metal 
lath  and  plastered,  such  tenement  houses  may  be  built  not 
to  exceed  six  stories,  provided  the  height  limits  imposed  by 
municipal  ordinances  for  all  buildings  of  this  particular  class 
be  not  exceeded.  A  cellar  is  not  a  story  within  the  mean- 
ing of  this  section,  provided  that  no  part  of  such  cellar 
is  occupied  or  arranged  to  be  occupied  for  living  purposes. 
However,  the  building  may  step  up  to  follow  the  grade,  pro- 
vided no  part  of  the  said  building  exceeds  the  number  of 
stories   provided   for   in  this   section. 

60.  Altering  Tenements  to  Six  Stories. — No  tenement 
house  shall  hereafter  be  altered  to  exceed  six  stories  or  parts  of 
stories  in  height  unless  it  is  a  fireproof  tenement  house.  A 
cellar  is  not  a  story  within  the  meaning  of  this  section,  provided 
no  part  of  such  cellar  is  occupied  or  arranged  to  be  occupied 
for  living  purposes. 

61.  Stairs  to  Roof  Not  to  Be  Removed. — No  stairs  lead- 
ing to  the  roof  in  any  tenement  house  shall  be  removed  or 
replaced  with  a  ladder,  unless  a  new  stairway  is  built  in 
conformity  with  requirements  of  this  act. 

62.  Public  Hall  Not  to  Be  Reduced.— No  public  hall  or 
stairs  in  a  tenement  house  shall  be  reduced  in  width  so  as 
to  be  less  than  the  minimum  width  prescribed  in  this  -act. 

63.  Health   Department   May   Require   Lights   in  Hall. 

— In  every  tenement  house  containing  fifteen  rooms  or  more, 
where  the  public  halls  and  stairs  are  not  in  the  opinion  of 
the  health  department,  or  other  department  designated  by 
municipal  ordinance  for  that  purpose,  sufficiently  lighted, 
the  owner  of  such  house  shall  keep  a  proper  light  burning 


376  BUSINESS   LAWS   FOR   BUSINESS   MEN. 

in  the  hallway  near  the  stairs  upon  each  floor  from  sunrise 
to  sunset. 

64.  Lights  to  Be  Kept  Burning  by  Owner. — In  every 
tenement  house  containing  fifteen  rooms  or  more,  a  proper 
light  shall  be  kept  burning  by  the  owner  in  the  public  hall- 
ways, near  the  stairs,  upon  the  entrance  floor,  and  upon  the 
second  floor  above  the  entrance  floor  of  said  house,  every 
night  from  sunset  to  sunrise  throughout  the  year,  and  upon 
all  other  floors  of  the  said  house  from  sunset  until  ten 
o'clock  in   the  evening. 

65.  No  Water-closets  in  Cellars. — No  water-closets  shall 
be  maintained  in  the  cellar  of  any  tenement  house  without 
a  special  permit  in  writing  from  the  health  department,  or 
other  department  designated  by  municipal  ordinance  for 
that  purpose,  which  shall  have  power  to  make  rules  and 
regulations  governing  the  maintenance  of  such  closets. 

(^.  Water-closets  in  Existing  Tenements. — In  every 
tenement  house  existing  prior  to  the  passage  of  this  act,  at 
least  one  water-closet  shall  be  provided  for  every  two 
families.  Provided,  however,  that  the  health  department 
or  other  department  designated  by  municipal  ordinance  for 
that  purpose  may  exempt  any  tenement  house  existing  prior 
to  the  passage  of  this  act  from  the  provision  in  this  section 
above  contained,  whenever,  in  the  judgment  of  said  depart- 
ment, it  would  not  be  detrimental  to  the  health  of  the  occu- 
pants of  said  tenement  house,  and  the  written  permit  be 
signed  by  an  officer  of  said  department  authorized  to  do  so 
and  filed  in  said  department  as  a  part  of  its  records ;  provided, 
further,  that  the  above  exemption  shall  not  apply  to  extensions 
of  or  additions  to  tenement  houses  existing  prior  to  the  passage 
of  this  act. 

67.  Basement  Rooms  for  Living  Purposes. — In  no  now 

existing  tenement  house  shall  any  room  in  the  cellar  be 
constructed,  altered,  converted  or  occupied  for  living  pur- 
poses; and  no  room  in  the  basement  of  a  tenement  house 
shall  be  constructed,  altered,  or  converted  to  be  occupied  for 


BUSINESS    CONTRACTS   AND   LEGAL   OBLIGATIONS.  377 

living  purposes,  unless  all  of  the  following  conditions  of 
this  act  be  complied  with,  and  at  least  one-third  of  the 
basement  shall  be  above  grade  for  building;  provided,  in 
each  case  it  shall  be  at  least  four  feet  six  inches  above  the 
street  grade  and  actual  ground  level.  Such  rooms  shall  be 
at  least  eight  feet  six  inches  high  in  all  now  existing  tene- 
ment houses  in  every  part,  from  the  floor  to  the  ceiling. 

There  shall  be  appurtenant  to  such  room  or  apartment  a 
water-closet  conforming  to  the  regulations  and  ordinances 
relating  to  water-closets,  of  the  incorporated  town,  incor- 
porated city,  or  city  and  county  in  which  the  tenement  house 
is  or  is  to  be  built. 

All  walls  shall  be  dampproofed,  and  there  shall  be  an 
open  area  way  extending  to  bottom  of  basement  floor  and 
running  clear  across  outside  of  at  least  one  room  in  each 
apartment. 

68.  Floors  and  Walls  Around  Water-closets. — In  all 
tenement  houses  the  floor  and  wall  surfaces  beneath  and 
around  all  water-closets  and  sinks  shall  be  maintained  in 
good  order  and  repair,  and  if  of  wood  shall  be  kept  well 
painted  with  light  colored  paint. 

69.  Keeping  Tenements  in  Order. — The  owner  of  every 
tenement  house  shall  see  that  such  house  and  all  parts  thereof 
shall  be  kept  in  good  order  and  the  roof  shall  be  kept  so  as  not 
to  leak,  and  all  rain  water  shall  be  so  drained  and  conveyed 
therefrom  as  to  prevent  its  dripping  'on  the  ground  or  caus- 
ing dampness  in  the  walls,  ceilings,  yards,  or  areas. 

The  owner  of  every  tenement  house  shall  see  that  such 
house  and  every  part  thereof  shall  be  kept  clean  and  free 
from  any  accumulation  of  dirt,  filth  or  garbage  or  other  matter 
in  or  on  the  same,  or  in  the  yards,  courts,  passages,  areas  or 
alleys  connected  or  belonging  to  the  same. 

70.  Walls  of  Courts  to  Be  Whitewashed.— The  walls 
of  all  yard  courts,  inner  courts  and  shafts,  unless  built  of 
light  colored  brick  or  stone,  shall  be  thoroughly  whitewashed 


378  BUSINESS   LAWS    FOR   BUSINESS   MEN. 

by  the  owner,  or  shall  be  painted  a  light  color  by  him  and 
so  maintained. 

71.  Kalsomining  and  Painting. — In  all  tenement  houses, 
the  health  department  or  other  department  designated  by 
municipal  ordinance  for  that  purpose  may  require  the  walls 
and  ceilings  of  every  room  that  does  not  open  directly  on 
the  street  to  be  kalsomined  white  or  painted  with  white  paint, 
when  necessary  to  improve  the  lighting  of  such  rooms, 
and  may  require  this  to  be  renewed  as  often  as  may  be 
necessary. 

72.  Using  Wall  Paper. — No  wall  paper  shall  be  placed 
upon  a  wall  or  ceiling  of  any  tenement  house  unless  all  wall 
paper  shall  be  first  removed  therefrom  and  said  wall  and 
ceiling  thoroughly  cleaned. 

73.  Garbage  Receptacles. — The  owner  of  every  tenement 
house  shall  provide  for  said*  building  proper  and  suitable 
conveniences  or  receptacles  for  ashes,  rubbish,  garbage,  refuse 
and  other  matter. 

74.  Keeping  Stock  Prohibited. — No  horse,  cow,  calf, 
swine,  goat  or  sheep,  chickens  or  poultry  shall  be  kept  in  a 
tenement  house,  or  within  twenty  feet  thereof  on  the  same 
lot,  and  no  tenement  house  or  the  lot  or  premises  thereof, 
shall  be  used  for  a  lodging  house  or  stable,  or  for  the  stor- 
age or  handling  of  rags. 

75.  Janitor  for  Tenements  cf  More  than  Eight  Fam- 
ilies.— Whenever  there  shall  be  more  than  eight  families 
living  in  any  tenement  house,  in  which  the  owner  does  not 
reside,  there  shall  be  a  janitor,  housekeeper,  or  some  respon- 
sible person  who  shall  reside  in  said  house  and  have  charge 
of  same,  as  the  department  charged  with  the  enforcement  of 
this  act  shall  so  require. 

76.  Four  Hundred  Feet  of  Air  for  Each  Person. — No 
room  in  any  tenement  house  shall  be  so  overcrowded  that 
there  shall  be  afforded  less  than  four  hundred  cubic  feet  of  air 
to  each  person  occupying  such  room. 


BUSINESS   CONTRACTS   AND   LEGAL  OBLIGATIONS.  379 

77.  Cannot  Store  Combustibles.  —  No  tenement  house 
or  any  part  thereof,  nor  of  the  lot  upon  which  it  is  situated, 
shall  be  used  as  a  place  of  storage,  keeping  or  handling  of 
any  combustible  article,  except  under  such  conditions  as  may 
be  prescribed  by  the  department  of  any  incorporated  town, 
incorporated  city,  or  city  and  county  to  which  this  act  applies, 
which  are  now  charged  with  the  enforcement  of  laws,  ordi- 
nances, or  regulations,  relating  to  the  erection  of  buildings, 
the  protection  of  public  health,  and  police  and  fire  protection. 
No  tenement  house  nor  any  part  thereof,  nor  of  the  lot  upon 
which  it  is  situated,  shall  be  used  as  a  place  of  storage, 
keeping  or  handling  of  any  article  dangerous  or  detrimental 
to  life  or  health,  nor  for  the  storage,  keeping  or  handling 
of  feed,  hay,  straw,  excelsior,  cotton,  paper  stock,  feathers 
or  rags. 

78.  No  Bakery  in  Any  Except  Fireproof  Tenement. — 

No  bakery,  and  no  place  of  business  in  which  fat  is  boiled, 
shall  be  maintained  in  any  tenement  house  which  is  not 
fireproof  throughout,  unless  the  ceilings  and  side  walls  of 
said  bakery  or  place  where  fat  boiling  is  done  are  made 
safe  by  fireproof  materials  around  the  same,  and  there  shall 
be  no  openings  either  by  door  or  window,  dumb  waiter 
shafts  or  otherwise,  between  said  bakery  or  said  place  where 
fat  is  boiled  in  any  tenement  house  and  the  other  parts  of 
said  building. 

79.  Windows  Where  Paint  Is  Stored. — All  transoms  and 
windows  opening  into  halls  from  any  portion  of  a  tenement 
house  where  paint,  oil,  spirituous  liquors  or  drugs  are  stored 
for  the  purpose  of  sale  or  otherwise,  shall  be  glazed  with 
wire  glass  or  they  shall  be  removed  and  closed  up  as  solidly 
as  the  rest  of  the  wall.  And  all  doors  leading  into  such 
hall  from  such  portion  shall  be  made  fireproof. 

80.  Scuttles. — All  scuttles  and  pent  houses  and  all  stairs 
or  ladders  leading  thereto  shall  be  easily  accessible  to  all 
tenants  of  the  building,  and  kept  free  from  incumbrance, 
and  ready  for  use  at  all  times.    No  scuttle  and  no  pent  house 


380  BUSINESS  LAWS  FOR  BUSINESS   MEN. 

door  shall  at  any  time  be  locked  with  a  key,  but  either  may 
be  fastened  on  the  inside  by  movable  bolts  or  hooks. 

81.  Outside  Windows. — No  room  in  a  tenement  house 
erected  prior  to  the  passage  of  this  act  shall  hereafter  be 
occupied  for  living  purposes,  unless  it  shall  have  a  window 
opening  directly  upon  the  street,  or  upon  a  yard  not  less 
than  ten  feet  deep,  or  above  the  roof  of  an  adjoining  build- 
ing, or  upon  a  court  of  not  less  than  twenty  square  feet  in 
area,  open  to  the  sky  without  roof  or  skylight,  unless  such 
room  is  located  on  the  top  floor  and  is  adequately  lighted 
and  ventilated  by  a  skylight  opening  directly  to  the  outer  air, 
or  is  on  the  top  floor  and  has  a  window  opening  upon  a 
court  not  less  than  ten  square  feet  in  area  and  not  more 
than  three  feet  below  the  top  of  the  walls  of  said  court. 
Every  room  which  does  not  comply  with  the  above  pro- 
visions shall  be  provided  with  a  sash  window,  opening  into 
an  adjoining  room  in  the  same  apartment  which  latter  room 
either  opens  directly  on  the  street  or  on  a  yard  of  the  above 
dimensions,  or  itself  connected  by  a  similar  sash  window 
or  series  of  windows  with  such  an  outer  room.  Said  sash 
window  shall  be  a  vertically  sliding  pulley-hung  sash  not 
less  than  three  feet  by  five  feet  between  stop  beads,  both 
halves  being  made  so  as  to  readily  open,  and  shall  be 
glazed  with  translucent  glass,  and  so  far  as  possible  it  shall 
be  in  line  with  windows  in  outer  rooms  opening  on  the  street 
or  yard  as  to  afford  a  maximum  of  light  and  ventilation.  In 
the  case  of  rooms  located  in  apartments  that  extend  through 
from  the  street  to  the  yard,  thus  ensuring  thorough  ventila- 
tion, where  such  rooms  are  already  provided  either  with 
windows,  window  openings,  glass  sliding  doors,  or  large 
alcove  openings  to  adjoining  rooms,  but  do  not  comply  with 
all  the  provisions  of  this  section,  the  health  department  or 
other  department  designated  by  municipal  ordinance  for  that 
purpose  when  satisfied  that  no  material  improvement  in  the 
light  and  ventilation  of  such  rooms  can  be  had  that  would 
warrant  the  providing  of  new  windows  of  the  size  and  kind 
specified,  may  permit  the  occupancy  of  such  rooms  for  living 


BUSINESS   CONTRACTS   AND  LEGAL  OBLIGATIONS.  381 

purposes  in  the  following  cases,  provided  such  improvements 
or  alterations  as  may  be  practicable  and  as  are  required  by 
said  department  are  made  by  the  owner: 

Where  there  is  an  existing  window  or  window  opening 
from  such  interior  room  to  an  adjoining  room,  and  such 
window  or  opening  is  not  less  than  ten  square  feet  in  area. 

Where  there  is  an  existing  glass  sliding  door  or  an  alcove 
opening  of  sufficient  size  from  such  interior  room  to  an 
adjoining  room. 

Where  rooms  located  on  the  top  floor  open  upon  a  court 
of  less  size  than  twenty  square  feet  but  such  rooms  have 
sufficient  light   and  ventilation. 

Where  owing  to  the  size  of  partitions,  arrangement  of 
rooms,  location  of  fixed  closets  or  stairs,  or  the  interposition 
of  air  shafts,  it  is  impracticable  to  provide  a  window  of 
the  required  size,  and  a  window  as  large  as  practicable  is 
provided. 

82.  Glass  Doors. — In  all  now  existing  tenement  houses 
whenever  a  public  hall  on  any  floor  is  not  light  enough  in 
the  day  time  to  permit  a  person  to  read  in  every  part 
thereof  without  the  aid  of  artificial  light,  the  wooden  panels 
in  the  doors  located  at  the  ends  of  the  public  halls  and 
opening  into  rooms  shall  be  removed,  and  ground  glass  or 
other  translucent  glass  or  wire  glass  panels  of  an  aggre- 
gate area  of  not  less  than  four  square  feet  for  each  door 
shall  be  substituted;  or  said  public  hall  may  be  lighted  by 
a  window  at  the  end  thereof,  with  the  plane  of  the  window 
at  right  angles  to  the  axis  of  the  said  hall,  said  window  opening 
upon  the  street  or  upon  a  yard  or  court. 

83.  Woodwork   Enclosing   Water-closets   and   Sinks. — 

In  all  now  existing  tenement  houses,  the  woodwork  enclos- 
ing all  water-closets  shall  be  removed  from  the  front  of 
said  closets  and  the  space  underneath  the  seat  shall  be  left 
open.  The  floor  and  other  surface  beneath  and  around  the 
closet  shall  be  maintained  in  good  order  and  repair,  and  if 
of  wood  shall  be  kept  well  painted  with  light  colored  paint. 


•382  BUSINESS  LAWS   FOR  BUSINESS   MEN. 

In  all  now  existing  tenement  houses  the  woodwork  enclos- 
ing sinks  located  in  public  halls  or  stairs  shall  be  removed, 
and  the  space  underneath  sink  shall  be  left  open.  The  floors 
and  wall  surfaces  beneath  and  around  the  sink  shall  be  main- 
tained in  good  order  and  repair,  and  if  of  wood  shall  be  well 
painted. 

84.  Window  at  Bottom  of  Shaft. — In  all  now  existing 
tenement  houses  there  shall  be  at  the  bottom  of  every  shaft 
or  inner  court,  a  door  or  window  giving  sufficient  access  to 
each  shaft  or  court  to  enable  it  to  be  properly  cleaned  out. 

85.  Sinks  and  Vaults  to  Be  Replaced  by  Individual 
Water-closets. — In  all  tenement  houses  erected  prior  to 
the  passage  of  this  act,  where  a  connection  with  a  sewer  is 
possible,  all  school  sinks,  privy  vaults  or  other  similar  recep- 
tacles used  to  receive  fecal  matter,  urine  or  sewage,  shall 
be  completely  removed  and  the  place  where  they  are  located 
properly  disinfected  under  the  direction  of  the  health  depart- 
ment or  other  department  designated  by  municipal  ordinance 
for  that  purpose.  Such  appliances  shall  be  replaced  by  in- 
dividual water-closets  of  durable  non-absorbent  material, 
properly  sewer-connected,  and  with  individual  traps,  and 
properly  connected  flush  tanks  providing  an  ample  flush  of 
water  to  thoroughly  cleanse  the  bowl.  Each  water-closet  shall 
be  located  in  a  compartment  completely  separated  from  every 
other  water-closet,  and  such  compartment  shall  contain  a  win- 
dow of  not  less  than  three  square  feet  in  area  opening  directly 
to  the  street,  or  yard,  or  on  a  court  of  the  minimum  size 
prescribed  in  this  act.  The  floors  of  the  water-closet  com- 
partment shall  be  waterproof  as  provided  in  this  act.  Where 
water-closets  are  placed  in  the  yard  to  replace  school  sinks  or 
privy  vaults,  the  structure  containing  the  water-closets  shall 
not  exceed  ten  feet  in  height ;  such  structure  shall  be  provided 
with  a  ventilating  skylight  in  the  roof,  of  adequate  size,  and 
each  water-closet  shall  be  located  in  a  compartment  sepa- 
rated completely  from  every  other  water-closet.  Proper  and 
adequate  means  for  lighting  the  structure  at  night  shall  be 
provided.     There  shall  be  provided  at  least  one  water-closet 


BUSINESS    CONTRACTS   AND   LEGAL   OBLIGATIONS.  383 

for  every  two  families  in  every  tenement  house  existing  on 
the  day  this  act  takes  effect,  subject  to  the  provisions  of 
this  act.  Except  as  in  this  section  otherwise  provided  such 
water-closets  and  all  plumbing  in  connection  therewith  shall 
be  in  accordance  with  the  ordinances  and  regulations  in  rela- 
tion to  plumbing  and  drainage. 

86.  Penthouse  or  Scuttle  in  Roof.  —  Every  tenement 
house  erected  prior  to  the  passage  of  this  act,  shall  have  in 
the  roof  a  pent  house  or  a  scuttle  which  shall  not  be  less 
than  twenty-one  by  twenty-eight  inches,  and  located  in  the 
ceiling  of  a  public  hall.  All  scuttles  shall  be  covered  on 
the  outside  with  metal  and  shall  be  provided  with  stairs  or 
stationary  ladders  leading  thereto  and  easily  accessible  to 
all  tenants  of  the  building.  No  scuttle  and  no  bulkhead  door 
shall  at  any  time  be  locked  with  a  key,  but  either  may  be 
fastened  on  the  inside  by  movable  bolts  or  locks.  All  key 
locks  on  scuttles  and  on  pent  house  doors  shall  be  removed. 

87.  Plans  to  Be  Submitted  to  Building  Department. — 

Before  the  construction  or  alteration  of  a  tenement  house, 
or  the  alteration  or  conversion  of  a  building  for  use  as  a 
tenement  house  is  commenced,  and  before  the  constructioin 
or  alteration  of  any  building  or  structure  on  the  same  lot 
with  a  tenement  house,  the  owner  or  his  agent  or  architect, 
shall  submit  to  the  building  department  subject  to  the  inspec- 
tion and  approval  of  the  health  department,  or  if  there  be 
no  health  department  or  no  building  department  then  to  such 
departments  as  shall  be  designated  for  that  purpose  by  munic- 
ipal ordinance,  of  the  municipality  in  which  said  work  is 
contemplated,  a  detailed  statement  in  writing,  verified  by  the 
affidavit  of  a  person  making  the  same,  of  the  specifications 
for  the  construction  and  for  the  light  and  ventilation  of 
such  tenement  house  or  building,  upon  blanks  or  forms  to  be 
furnished  by  such  departments,  and  also  a  full  and  complete 
copy  of  the  plans  of  such  work.  Such  statement  shall  give 
in  full  the  name  and  residence,  by  street  and  number,  of 
the  owner  or  owners  of  such  tenement  house  or  building.  If 
such  construction,  alteration  or  conversion  is  proposed  to  be 


384  BUSINESS   LAWS   FOR  BUSINESS    MEN. 

made  by  any  other  person  than  the  owner  of  the  land  in 
fee,  such  statement  shall  contain  the  full  name  and  residence, 
by  street  and  number,  not  only  of  the  owner  of  the  land, 
but  of  every  person  interested  in  such  tenement  house,  either 
as  owner,  lessee,  or  in  any  representative  capacity.  Said 
affidavit  shall  allege  that  said  specifications  and  plans  are 
true  and  contain  a  correct  description  of  such  tenement 
house,  building,  structure,  lot  and  proposed  work.  The 
statements  and  affidavits  herein  provided  for  may  be  made 
by  the  owner,  or  the  person  who  proposes  to  make  the 
construction,  alteration  or  conversion,  or  by  his  agent  or 
architect. 

No  person,  however,  shall  be  recognized  as  the  agent  of 
the  owner  unless  he  shall  file  with  the  department  of  health 
or  other  department  by  municipal  ordinance  designated  for 
that  purpose,  a  written  instrument  signed  by  such  owner 
designating  him  as  agent.  Any  false  swearing  in  a  material 
point  in  such  affidavit  shall  be  deemed  perjury.  Such  speci- 
fications, plans  and  statements  shall  be  filed  in  said  depart- 
ments and  shall  be  deemed  public  records,  and  no  such 
specifications,  plans  or  statements  shall  be  removed  from  said 
departments. 

88.  Issue  of  Certificates. — The  said  departments  shall  cause 
all  such  plans  and  specifications  to  be  examined.  If  such 
plans  and  specifications  conform  to  the  provisions  of  this  act 
relative  to  the  light  and  ventilation  and  sanitation  of  tene- 
ment houses  hereafter  erected  or  altered,  as  the  case  may  be, 
the  health  department  or  other  department  designated  by 
municipal  ordinance  for  this  purpose  shall  issue  a  written 
certificate  to  that  effect  to  the  person  submitting  the  same, 
and  if  they  conform  to  the  provisions  of  this  act  relative 
to  the  fire  protection  of  tenement  houses  hereafter  erected 
or  altered,  as  the  case  may  be,  the  building  department  or 
other  department  designated  by  municipal  ordinance  for  that 
purpose  shall  issue  a  written  certificate  to  that  effect  to  the 
person  submitting  the  same.    Such  certificates  shall  state  that 


BUSINESS    CONTRACTS    AND   LEGAL   OBLIGATIONS.  385 

the  tenement  house  act  has  been  complied  with.  Each  depart- 
ment may,  from  time  to  time,  approve  changes  in  any  plans 
and  specifications  previously  approved  by  it,  provided  the 
plans  and  specifications  when  so  changed,  shall  be  in  conform- 
ity with  the  law.  The  construction,  alteration  or  conversion 
of  such  tenement  house,  building  or  structure  or  any  part 
thereof,  shall  not  be  commenced  until  the  filing  of  such  speci- 
fications, plans  and  statements,  and  the  approval  thereof,  as 
above  provided.  The  construction,  alteration  or  conversion 
of  such  house,  building  or  structure,  shall  be  in  accordance 
with  such  approved  specifications  and  plans.  Any  permit  or 
approval  which  may  be  issued  by  the  health  department  and 
the  building  department  or  other  departments  by  municipal 
ordinance  designated  for  that  purpose,  but  under  which  no 
work  has  been  done  above  the  foundation  walls  within  one 
year  from  the  time  of  the  issuance  of  such  permit  or  approval, 
shall  expire  by  limitation.  Said  departments  shall  have  power 
to  revoke  or  cancel  any  permit  or  approval  in  case  of  any 
failure  or  neglect  to  comply  with  any  of  the  provisions  of 
this  act,  or  in  case  any  false  statement  or  representation  is 
made  in  any  specification,  plans  or  statements  submitted  or 
filed  for  such  permit  or  approval. 

89,  Occupation  Certificates. — No  building  hereafter  con- 
structed as  or  altered  into  a  tenement  house,  shall  be  occupied 
in  whole  or  in  part  for  human  habitation  until  the  issuance 
of  a  certificate  by  the  health  department  or  other  department 
by  municipal  ordinance  designated  for  that  purpose  that  said 
building  conforms  in  all  respects  to  the  requirements  of  this 
act  relative  to  the  light  and  ventilation  and  sanitation  of 
tenement  houses  hereafter  erected,  nor  until  the  issuance  by 
the  building  department  or  other  department  by  municipal 
ordinance  designated  for  that  purpose  of  a  certificate  that 
said  building  conforms  in  all  respects  to  the  requirements 
of  this  act  relative  to  fire  protection  of  tenement  houses  here- 
after erected.  Such  certificates  shall  be  issued  within  ten 
days  after  written  application  therefor,  if  said  building  at 
the  date  of  such  application  shall  be  entitled  thereto. 


386  BUSINESS   LAWS   FOR   BUSINESS   MEN. 

If  any  building  hereafter  constructed  as  or  altered  into  a 
tenement  house,  be  occupied  in  whole  or  in  part  for  human 
habitation  in  violation  of  this  law,  during  such  unlawful 
occupancy  said  premises  shall  be  deemed  unfit  for  human 
habitation  and  the  department  of  health  or  other  department 
charged  with  the  enforcement  of  this  act  may  cause  them 
to  be  vacated  accordingly. 

90.  Enforcing  the  Law — Except  as  herein  otherwise  pro- 
vided, the  provisions  of  this  act  shall  be  enforced  by  the  de- 
partments of  any  incorporated  town,  incorporated  city,  or  city 
and  county  to  which  this  act  applies,  which  are  now  charged 
with  the  enforcement  of  laws,  ordinances,  and  regulations 
relating  to  the  erection  of  buildings,  the  protection  of  public 
health  or  police  or  fire  protection. 

The  department  of  health  or  other  department  charged  with 
the  enforcement  of  this  act  in  any  incorporated  town,  incor- 
porated city  or  city  and  county  to  which  this  act  applies  and 
the  officers  and  agents  of  such  departments  shall  have  the 
right  and  it  shall  be  its  and  their  duty  to  enter  into 
tenement  houses  and  buildings  within  the  said  municipal 
corporation  for  the  purpose  of  inspecting  such  houses  and 
buildings  to  secure  compliance  with  the  provisions  of  this 
act,  and  to  prevent  violations  thereof. 

Nothing  in  this  act  shall  be  construed  to  abrogate  or 
impair  the  powers  of  the  department  of  health,  the  department 
of  public  works  or  of  the  courts,  to  enforce  any  provisions  of 
the  charter  or  building  ordinances  and  regulations  of  any 
incorporated  town,  incorporated  city,  or  city  and  county,  not 
inconsistent  with  this  act,  or  to  prevent  or  punish  violations 
thereof. 

The  provisions  of  this  act  shall  be  held  to  be  the  minimum 
requirements  adopted  for  the  protection,  health  and  safety  of 
the  community.  Nothing  in  this  act  contained  shall  be  con- 
strued as  prohibiting  the  local  legislative  body  of  any  incor- 
porated town,  incorporated  city  or  city  and  county,  from 
enacting  from  time  to  time  supplementary  ordinances  impos- 
ing   further   restrictions.     But   no   ordinance,    regulation   or 


BUSINESS    CONTRACTS   AND   LEGAL   OBLIGATIONS.  387 

ruling  of  any  municipal  authority  shall  repeal,  amend,  modify 
or  dispense  with  any  provision  of  this  act. 

91.  Penalty  for  Violation  of  Law. — Every  person  who 
shall  violate  or  assist  in  violation  of  any  provision  of  this  act 
shall  be  guilty  of  a  misdemeanor  punishable  by  imprisonment 
in  a  county  jail  not  exceeding  six  months  or  by  a  fine  not 
exceeding  five  hundred  dollars,  or  by  both,  and  in  addition 
to  the  penalty  therefor,  shall  be  liable  for  all  costs,  expense, 
and  disbursements  paid  or  incurred  by  the  department,  by  any 
of  the  officers  thereof,  or  by  any  agent,  employee  or  contractor 
of  the  same,  in  the  prosectuion  of  such  violation. 

92.  Court  Proceedings. — Except  as  herein  otherwise  speci- 
fied the  procedure  for  the  prevention  of  violations  of  this  act, 
or  for  the  vacation  of  premises  unlawfully  occupied,  or 
for  other  abatement  of  nuisance  in  connection  with  a  tene- 
ment house,  shall  be  as  set  forth  in  charter  and  ordinances 
of  the  municipality  in  which  the  procedure  is  taken.  In  case 
any  tenement  house,  building  or  structure  or  any  part  thereof 
is  constructed,  altered,  converted  or  maintained  in  violation 
of  any  provision  of  this  act  or  of  any  order  or  notice  of 
the  departments  charged  with  its  enforcement,  or  in  case  a 
nuisance  exists  in  any  such  tenement  house,  building  or  struc- 
ture or  upon  the  lot  on  which  it  is  situated,  said  departments 
may  institute  any  appropriate  action  or  proceeding  to  prevent 
such  unlawful  construction,  alteration,  conversion  or  mainte- 
nance, to  restrain,  correct  or  abate  such  violation  or  nuisance, 
to  prevent  the  occupation  of  said  tenement  house,  building  or 
structure,  or  to  prevent  any  illegal  act,  conduct  or  business 
in  or  about  such  tenement  house  or  lot.  In  any  such  action 
or  proceeding  said  departments  may,  by  affidavit  setting  forth 
the  facts,  apply  to  the  superior  court,  or  to  any  judge  thereof, 
for  an  order  granting  the  relief  for  which  said  action  or 
proceeding  is  brought,  or  for  an  order  enjoining  all  persons 
from  doing  or  permitting  to  be  done  any  work  in  or  about 
such  tenement  house,  building,  structure  or  lot,  or  from 
occupying  or  using  the  same  for  any  purpose,  until  the  entry 
of  final  judgment  or  order.     In  case  any  notice  or   order 


BUSINESS   LAWS   FOR   BUSINESS   MEN. 

issued  by  said  departments  is  not  complied  with,  said  depart 
ments  may  apply  to  the  superior  court,  or  to  any  judge 
thereof,  for  an  order  authorizing  said  departments  to  execute 
and  carry  out  the  provisions  of  said  notice  or  order,  to  remove 
any  violation  specified  in  said  order  or  notice,  or  to  abate 
any  nuisance  in  or  about  such  tenement  house,  building  or 
structure,  or  the  lot  upon  which  it  is  situated.  The  court, 
or  any  judge  thereof,  is  hereby  authorized  to  make  any  order 
specified  in  this  section.  In  no  case  shall  the  said  depart- 
ments or  any  officer  thereof  or  the  municipal  corporation  be 
liable  for  costs  in  any  action  or  proceeding  that  may  be  com- 
menced in  pursuance  of  this  act. 

93.  Fine  Becomes  Lien  on  Tenement. — Every  fine  im- 
posed by  judgment  upon  a  tenement  house  owner  shall  be  a 
lien  upon  the  house  in  relation  to  which  the  fine  is  imposed 
from  the  time  of  the  filing  of  a  certified  copy  of  said  judg- 
ment in  the  office  of  the  recorder  of  the  county  in  which  said 
tenement  house  is  situated,  subject  only  to  taxes  and  assess- 
ments and  water  rates,  and  to  such  mortgage  and  mechanics' 
liens  as  may  exist  thereon  prior  to  such  filing;  and  it  shall  be 
the  duty  of  the  department  of  health  or  other  department  by 
municipal  ordinance  designated  for  that  purpose,  upon  the 
entry  of  such  judgment,  to  forthwith  file  the  copy  as  afore- 
said, and  such  copy  upon  filing  shall  be  forthwith  indexed 
by  the  recorder  in  the  index  of  mechanics'  liens. 

94.  Notice  of  Action. — In  any  action  or  proceeding  insti- 
tuted by  the  departments  charged  with  the  enforcement  of 
this  act,  the  plaintiff  or  petitioner  may  file  in  the  county 
recorder's  office  of  the  county  where  the  property  affected 
by  such  action  or  proceeding  is  situated,  a  notice  of  the  pen- 
dency of  such  action  or  proceeding.  Said  notice  may  be 
filed  at  the  time  of  the  commencement  of  the  action  or  pro- 
ceeding, or  at  any  time  afterwards  before  final  judgment  or 
order,  or  at  any  time  after  the  service  of  any  notice  or  order 
issued  by  said  department.  Each  county  recorder  with  whom 
such  notice  is  filed  shall  record  it,  and  shall  index  it  in  the 
name  of  each  person  specified  in  a  direction  subscribed  by  an 


BUSINESS    CONTRACTS   AND   LEGAL   OBLIGATIONS.  389 

officer  of  the  department  instituting  such  action  or  proceeding. 
Any  such  notice  may  be  vacated  upon  the  order  of  a  judge 
of  the  court  in  which  such  action  or  proceeding  was  instituted 
or  is  pending.  The  recorder  of  the  county  where  such  notice 
is  filed  is  hereby  directed  to  mark  such  notice  and  any  record 
or  docket  thereof  as  canceled  of  record,  upon  the  presentation 
and  filing  a  certified  copy  of  such  order. 

95.  Tenement  Owner  to  File  Statement  in  Depart- 
ment of  Health. — Every  owner  of  a  tenement  house  and 
every  lessee  of  the  whole  house,  or  other  person  having 
control  of  a  tenement  house,  shall  file  in  the  department  of 
health  or  other  department  designated  by  municipal  ordinance 
for  that  purpose  a  notice  containing  his  name  and  address, 
and  also  a  description  of  the  property,  by  street  and  number, 
and  otherwise,  as  the  case  may  be,  in  such  manner  as  will 
enable  the  departments  charged  with  the  enforcement  of  this 
act  to  easily  find  the  same ;  and  also  the  number  of  apartments 
in  each  house,  the  number  of  rooms  in  each  apartment,  and 
the  number  of  families  occupying  the  apartments.  In  case 
of  a  transfer  of  any  tenement  house,  it  shall  be  the  duty  of 
the  grantee  of  said  tenement  house  to  file  in  the  department 
of  health  or  other  department  designated  by  municipal  ordi- 
nance for  that  purpose  a  notice  of  such  transfer,  stating  the 
name  of  the  new  owner,  within  thirty  days  after  such  transfer. 
In  case  of  the  devolution  of  the  said  property  by  will,  it  shall 
be  the  duty  of  the  executor  and  the  devisee,  if  more  than 
twenty-one  years  of  age,  and  in  the  case  of  devolution  of  such 
property  by  inheritance  without  a  will,  it  shall  be  the  duty 
of  the  heirs,  or  in  case  all  the  heirs  are  under  age,  it  shall  be 
the  duty  of  the  administrator  of  the  deceased  owner  of  said 
property  to  file  in  said  department  a  notice,  stating  the  death 
of  said  owner  and  the  names  of  those  who  have  succeeded  to 
his  interests,  within  thirty  days  after  the  death  of  the  dece- 
dent, in  case  he  died  intestate,  and  within  thirty  days  after  the 
probate  of  his  will,  if  he  died  testate. 

96.  Owner  to  File  Notice  of  Agent  to  Receive  Service 
of   Process. — Every  owner,   agent  or  lessee  of  a  tenement 


390  BUSINESS   LAWS   FOR  BUSINESS   MEN. 

house  shall  file  in  the  department  of  health  or  other  depart- 
ment designated  by  municipal  ordinance  for  that  purpose,  a 
notice  containing  the  name  and  address  of  such  agent  of  such 
houses,  for  the  purpose  of  receiving  service  of  process,  and 
also  a  description  of  the  property,  by  street  and  number  or 
otherwise,  as  the  case  may  be,  in  such  manner  as  will  enable 
the  department  charged  with  the  enforcement  of  this  act  to 
easily  find  the  same.  The  name  of  the  owner  or  lessee  may 
be  filed  as  agent  for  this  purpose. 

97.  Public  Records. — The  names  and  addresses  filed  in 
accordance  with  this  act  shall  be  indexed  by  the  department 
of  health  or  other  department  designated  by  municipal  ordi- 
nance for  that  purpose,  in  such  a  manner  that  all  of  those  filed 
in  relation  to  each  tenement  house  shall  be  together  and  readily 
ascertainable.  The  board  of  health  or  other  department  desig- 
nated by  municipal  ordinance  for  that  purpose  shall  provide 
the  necessary  books  and  clerical  assistance  for  that  purpose, 
and  the  expense  thereof  shall  be  paid  by  the  municipality. 
Said  indexes  shall  be  public  records,  open  to  public  inspection 
during  business  hours. 

98.  Serving  Notices. — Every  notice  or  order  in  relation 
to  a  tenement  house  shall  be  served  five  days  before  the  time 
for  doing  the  thing  in  relation  to  which  it  shall  have  been 
issued. 

99.  Penalty  for  Using  Tenement  as  House  of  Pros- 
titution. —  A  tenement  house  shall  be  subject  to  a  penalty 
of  one  thousand  dollars,  if  it  or  any  part  of  it  shall  be  used 
for  the  purposes  of  a  house  of  prostitution  or  assignation  of 
any  description,  with  the  permission  of  the  owner  thereof,  or 
his  agent,  and  said  penalty  shall  be  a  lien  upon  the  house 
and  the  lot  upon  which  the  house  is  situated. 

A  tenement  house  shall  be  deemed  to  have  been  used  for 
the  purposes  specified  with  the  permission  of  the  owner  or 
lessee  thereof,  if  summary  proceedings  for  the  removal  of  the 
tenants  of  said  tenement  house,  or  so  much  thereof  as  is 
unlawfully  used,  shall  not  have  been  commenced  within  five 


BUSINESS   CONTRACTS   AND  LEGAL  OBLIGATIONS.  391 

days  after  notice  of  such  unlawful  use,  served  by  the  depart- 
ment charged  with  the  enforcement  of  this  act. 

100.  Competent  Evidence. — In  a  prosecution  against  an 
owner  or  agent  of  a  tenement  house  under  the  Penal  Code, 
or  in  an  action  to  establish  a  lien  under  this  act,  the  general 
reputation  of  the  premises  in  the  neighborhood  shall  be  com- 
petent evidence,  but  shall  not  be  sufficient  to  support  a  judg- 
ment without  corroborative  evidence,  and  it  shall  be  presumed 
that  their  use  was  with  the  permission  of  the  owner  or  lessee ; 
provided,  that  such  presumption  may  be  rebutted  by  evidence. 

101.  Suit  Against  Tenement  House. — Said  action  shall  be 
brought  against  the  tenement  house  as  defendant.  Said  house 
may  be  designated  in  the  title  of  the  action  by  its  street  and 
number  or  in  any  other  method  sufficiently  precise  to  secure 
identification.  The  property  shall  be  described  in  the  com- 
plaint. The  plaintiff,  except  as  hereinafter  provided,  shall 
be  any  department  charged  with  the  enforcement  of  this  act. 

Said  action  shall  be  brought  in  the  superior  court  in  the 
county  or  city  and  county  in  which  the  property  is  situated. 
At,  or  before  the  commencement  of  the  action,  the  complaint 
shall  be  filed  in  the  office  of  the  clerk  of  the  county  or  city 
and  county,  together  with  a  notice  of  the  pendency  of  the 
action,  containing  the  names  of  the  parties,  the  object  of  the 
action,  and  a  brief  description  of  the  property  affected  thereby. 

The  judgment  in  such  action,  if  in  favor  of  the  plaintiff, 
shall  establish  the  penalty  sued  for  as  a  lien  upon  said 
premises,  subject  only  to  taxes,  assessments,  and  to  such 
mortgages  and  mechanics'  liens  as  may  exist  thereon  prior 
to  the  filing  of  the  notice  of  pendency  of  the  action. 

102.  Inconsistent  Laws  Repealed. — All  statutes  of  the 
state  and  ordinances  of  incorporated  town,  incorporated  cities 
and  cities  and  counties,  as  far  as  inconsistent  with  the  pro- 
visions of  this  act,  are  hereby  repealed ;  provided,  that  nothing 
in  this  act  contained  shall  be  construed  as  repealing  or  abro- 
gating any  present  law  or  ordinance  in  any  incorporated 
town,  incorporated  city  or  city  and  county  of  the  state, 
further  restricting  the  percentage  of  the  lot  to  be  covered 


392  BUSINESS   LAWS   FOR  BUSINESS   MEN. 

by  a  tenement  house,  the  number  of  stories  or  the  height 
of  such  house,  the  number  of  apartments  therein,  the  occupa- 
tion thereof,  the  materials  to  be  used  in  its  construction,  or 
increasing  the  size  of  yards  or  courts,  the  air  space  to  each 
individual  occupying  a  room,  the  requirements  as  to  sani- 
tation,  ventilation,   light,   protection   against   fire. 

Nothing  in  this  act  contained  shall  be  construed  as  abro- 
gating, diminishing,  minimizing  or  denying  the  power  of  any 
incorporated  town,  incorporated  city  or  city  and  county  by 
ordinance  to  further  restrict  the  percentage  of  the  lot  to 
be  covered  by  a  tenement  house  within  said  municipality, 
the  number  of  stories  or  the  height  of  such  house,  the  number 
of  apartments  therein,  the  occupation  thereof,  the  materials 
to  be  used  in  its  construction,  or  increasing  the  size  of  yards 
or  courts,  the  air  space  to  each  individual  occupying  a  room, 
the  requirements  as  to  sanitation,  ventilation,  light,  protection 
against  fire. 

Except  as  herein  otherwise  provided,  every  tenement  house 
shall  be  constructed  and  maintained  in  conformity  with  the 
existing  law,  but  no  ordinance,  regulation  or  ruling  of  any 
municipal  authority  shall  repeal,  modify  or  dispense  with  any 
provisions  of  this  act. 

103.  Improvements  to  Be  Made  in  One  Year. — All  im- 
provements specifically  required  by  this  act  upon  tenement 
houses  erected  prior  to  its  date  of  passage,  shall  be  made 
within  one  year  from  said  date,  or  at  such  earlier  period  as 
may  be  fixed  by  the  boards  of  health  charged  with  the  en- 
forcement of  this  act. 

104.  Permits  and  Licenses. — Every  person  desiring  to 
construct  a  tenement  house  shall  obtain  a  permit  from  the 
department  charged  with  the  enforcement  of  this  act.  Every 
owner  or  lessee  of  a  tenement  house  shall  obtain  at  the 
beginning  of  each  year  a  license  from  the  department 
charged  with  the  enforcement  of  this  act. 

Act  of  the  Legislature,  approved  April  10,  1911. 


BUSINESS   CONTRACTS   AND   LEGAL  OBLIGATIONS.  393 

Mechanics'  Liens. 

Section  277.— NEW  LIEN  LAW.— The  Legislature  of 
1911  passed  a  new  lien  law,  which  repeals  all  the  provisions 
of  the  old  law  inconsistent  with  the  new;  and  the  new  law 
specifically  provides  that  mechanics'  liens  shall  hereafter  be 
direct  liens  upon  the  property.  The  new  lien  law  is  printed 
below  in  full. 

Section  278.  — THE  PERSONS  ENTITLED  TO 
LIENS.  —  Mechanics,  material-men,  contractors,  sub-con- 
tractors, artisans,  architects,  machinists,  builders,  miners, 
teamsters  and  draymen,  and  all  persons  and  laborers  of 
every  class  performing  labor  upon,  or  bestowing  skill  or 
other  necessary  services,  or  furnishing  materials  to  be  used 
or  consumed  in  or  furnishing  appliances,  teams  and  power 
contributing  to  the  construction,  alteration,  addition  to  or 
repair,  either  in  whole  or  in  part,  of  any  building,  wharf, 
bridge,  ditch,  flume,  aqueduct,  well,  tunnel,  fence,  machinery, 
railroad,  wagon  road  or  other  structure,  shall  have  a  lien 
upon  the  property  upon  which  they  have  bestowed  labor 
or  furnished  materials,  for  the  value  of  such  labor  done 
and  materials  furnished  and  for  the  value  of  the  use  of 
such  appliances,  teams  or  power,  whether  at  the  instance  of 
the  owner,  or  of  any  other  person  acting  by  his  authority 
or  under  him,  as  contractor  or  otherwise;  and  every  con- 
tractor, sub-contractor,  architect,  builder  or  other  person 
having  charge  of  the  construction,  alteration,  addition  to  or 
repair  either  in  whole  or  in  part  of  any  building,  or  other 
improvement  as  aforesaid,  shall  be  held  to  be  the  agent  of 
the  owner  for  the  purposes  of  this  law. 

Act  of  the  Legislature,  approved  May  1,  1911. 

Section  279.— MINING  CLAIM  LIENS.— Any  person 
who  performs  labor  in  any  mining  claim  or  claims,  or  in 
or  upon  any  real  property  worked  as  a  mine,  either  in  the 
development  thereof  or  in  working  thereon  by  the  sub- 
tractive  process,  or  furnishes  materials  to  be  used  or  con- 
sumed therein,   has   a   lien   upon   the    same   and   the   works 


394  BUSINESS   LAWS    FOR   BUSINESS   MEN. 

owned  and  used  by  the  owners  for  milling  or  reducing  the 
ores  from  the  same,  for  the  value  of  the  work  or  labor 
done  or  materials  furnished  by  each  respectively,  whether 
done  or  furnished  at  the  instance  of  the  owner  of  such 
mining  claim  or  claims  or  real  property  worked  as  a  mine, 
or  his  agent;  and  every  contractor,  sub-contractor,  superin- 
tendent or  other  person  having  charge  of  any  mining  or 
work  or  labor  performed  in  and  about  such  mining  claim 
or  claims  or  real  property  worked  as  a  mine,  either  as 
lessee  or  under  a  working  bond  or  contract  thereon,  shall 
be  held  to  be  the  agent  of  the  owner. 

Act  of  the  Legislature,  approved  May  1,   1911. 

Section  280.— LIMIT  OF  LIENS.— The  liens  provided 
for  shall  be  direct  liens,  and  shall  not  in  the  case  of  any 
claimants,  other  than  the  contractor,  be  limited,  as  to  amount, 
by  any  contract  price  agreed  upon  between  the  contractor 
and  the  owner  except  as  hereinafter  provided;  but  said 
several  liens  shall  not  in  any  case  exceed  in  amount  the 
reasonable  value  of  the  labor  done  or  material  furnished,  or 
both,  for  which  the  lien  is  claimed,  nor  the  price  agreed  upon 
for  the  same  between  the  claimant  and  the  person  by  whom 
he  was  employed;  nor  in  any  case,  where  the  claimant  was 
employed  by  a  contractor,  or  sub-contractor,  shall  the  lien 
extend  to  any  labor  or  materials  not  embraced  within  or 
covered  by  the  original  contract  between  the  contractor  and 
the  owner,  or  any  modification  thereof  made  by  or  with 
the  consent  of  such  owner,  and  of  which  such  contract,  or 
modification  thereof  the  claimant  shall  have  had  actual  notice 
before  the  performance  of  such  labor  or  the  furnishing  of 
such  materials. 

Act  of  the  Legislature,  approved  May  1,   1911. 

Section  281.— FILING  OF  CONTRACT  AND  BOND. 

— The  filing  of  the  original  contract,  or  modification  thereof, 
in  the  office  of  the  county  recorder  of  the  county  where  the 
property  is  situated,  before  the  commencement  of  the  work, 


BUSINESS    CONTRACTS    AND   LEGAL   OBLIGATIONS.  395 

shall  be  equivalent  to  the  giving  of  actual  notice  by  the 
owner  to  all  persons  performing  work  or  furnishing  materials 
thereunder.  In  case  said  original  contract  shall,  before  the 
work  is  commenced,  be  so  filed,  together  with  a  bond  of  the 
contractor  with  good  and  sufficient  sureties  in  an  amount 
not  less  than  50  per  cent  of  the  contract  price  named  in 
said  contract  (which  bond  shall  in  addition  to  any  conditions 
for  the  performance  of  the  contract,  be  also  conditioned  for 
the  payment  in  full  of  the  claims  of  all  persons  performing 
labor  upon  or  furnishing  materials  to  be  used  in  such  work, 
and  shall  also  by  its  terms  be  made  to  inure  to  the  benefit 
of  any  and  all  persons  who  perform  labor  upon  or  furnish 
materials  to  be  used  in  the  work  described  in  said  contract 
so  as  to  give  such  persons  a  right  of  action  to  recover  upon 
said  bond  in  any  suit  brought  to  foreclose  the  liens  or  in  a 
separate  suit  brought  on  said  bond),  then  the  court  must, 
where  it  would  be  equitable  so  to  do,  restrict  the  recovery 
under  such  liens  to  an  aggregate  amount  equal  to  the  amount 
found  to  be  due  from  the  owner  to  the  contractor,  and  render 
judgment  against  the  contractor  and  his  sureties  on  said  bond 
for  any  deficiency  or  difference  there  may  remain  between 
said  amount  so  found  to  be  due  to  the  contractor  and  the 
whole  amount  found  to  be  due  to  claimants  for  such  labor 
or  materials  or  both.  No  change  or  alteration  of  the  work 
or  modification  of  any  such  contract  between  the  owner  and 
his  contractor  shall  release  or  exonerate  any  surety  or  sure- 
ties upon  any  bond  given  under  this  section. 

Act  of  the  Legislature,  approved  May  1,  1911. 

Section  282.— LIMIT  TO   OWNER'S  LIABILITY.— 

It  is  the  intent  and  purpose  of  this  section  to  limit  the 
owner's  liability,  in  all  cases,  to  the  measure  of  the  contract 
price,  where  he  shall  have  filed  or  caused  to  be  filed  in  good 
faith  with  his  original  contract  a  valid  bond  with  good  and 
sufficient  sureties  in  the  amount  and  upon  the  conditions  as 
herein  provided.  It  shall  be  lawful  for  the  owner  to  protect 
himself  against  any  failure  of  the  contractor  to  perform  his 
contract    and    make    full    payment    for    all    work    done    and 


396  BUSINESS   LAWS   FOR   BUSINESS   MEN. 

materials  furnished  thereunder  by  exacting  such  bond  or 
other  security  as  he  may  deem  satisfactory. 

Act  of  the  Legislature,  approved  May  1,   1911. 

Section  283.— NOTICE    TO    OWNER    OF    LABOR 
PERFORMED    AND    MATERIALS    FURNISHED.— 

Any  of  the  persons  mentioned  in  the  preceding  section,  ex- 
cept the  contractor,  may  at  any  time  give  to  the  owner  a 
notice  that  they  have  performed  labor  or  furnished  materials, 
or  both,  to  the  contractor  or  other  person  acting  by  the 
authority  of  the  owner,  or  that  they  have  agreed  to  do  so, 
stating  in  general  terms  the  kind  of  labor  and  materials  and 
the  name  of  the  person  to  or  for  whom  the  same  was  done 
or  furnished,  or  both,  and  the  amount  in  value,  as  near  as 
may  be,  of  that  already  done  or  furnished,  or  both,  and  of 
the  whole  agreed  to  be  done  or  furnished,  or  both,  and  any 
of  said  persons  who  shall  on  the  written  demand  of  the 
owner  refuse  to  give  such  notice  shall  thereby  deprive  himself 
of  the  right  to  claim  a  lien  under  this  chapter.  Such  notice 
may  be  given  by  delivering  the  same  to  said  owner  person- 
ally, or  by  leaving  it  at  his  residence  or  place  of  business 
with  some  person  in  charge,  or  by  delivering  it  to  his  archi- 
tect, or  by  leaving  it  at  the  latter's  office  with  some  person 
in  charge.  No  such  notice  shall  be  invalid  by  reason  of  any 
defect  in  form,  provided  it  is  sufficient  to  inform  the  owner 
of  the  substantial  matters  herein  provided  for.  Upon  such 
notice  being  given  it  shall  be  lawful  for  the  owner  to  with- 
hold, and  in  the  case  of  property  which,  for  reasons  of  public 
policy  or  otherwise,  is  not  subject  to  the  liens  in  this  chapter 
provided  for,  the  owner  or  person  who  contracted  with  the 
contractor  shall  withhold  from  his  contractor  sufficient  money 
due  or  that  may  become  due  to  such  contractor  to  answer 
such  claim  and  any  lien  that  may  be  filed  therefor,  including 
the  reasonable  cost  of  any  litigation  thereunder. 

Act  of  the  Legislature,  approved  May  1,   1911. 

Section  284.— LAND  SUBJECT  TO  LIEN.— The  land 
upon  which  any  building,  improvement,  well  or  structure  is 


BUSINESS   CONTRACTS   AND  LEGAL   OBLIGATIONS.  397 

constructed,  together  with  a  convenient  space  about  the  same, 
or  so  much  as  may  be  required  for  the  convenient  use  and 
occupation  thereof,  to  be  determined  by  the  court  on  render- 
ing judgment,  is  also  subject  to  the  lien,  if  at  the  commence- 
ment of  the  work,  or  of  the  furnishing  of  the  material  for 
the  same,  the  land  belonged  to  the  person  who  caused  said 
building,  improvement,  well  or  structure  to  be  constructed, 
altered  or  repaired;  but  if  such  person  owned  less  than  fee 
simple  estate  in  such  land,  then  only  his  interest  therein  is 
subject  to  such  lien,  except  as  hereinafter  provided. 

Act  of  the  Legislature,  approved  May  1,   1911. 

Section  285.— WHEN    LIEN    MUST    BE    FILED.— 

Every  original  contractor,  claiming  the  benefit  of  this  law, 
within  sixty  days  after  the  completion  of  his  contract;  and 
every  person  save  the  original  contractor  within  thirty  days 
after  he  has  ceased  to  labor  or  has  ceased  to  furnish  ma- 
terials, or  both,  or  at  his  option,  within  thirty  days  after  the 
completion  of  the  original  contract,  if  any,  under  which  he 
was  employed,  must  file  for  record  with  the  county  recorder 
of  the  county  or  city  and  county  in  which  such  property  or 
some  part  thereof  is  situated  a  claim  of  lien. 

Act  of  the  Legislature,  approved  May  1,   19 IL 

Section  286.— CLAIM  OF  LIEN.— The  claim  of  lien  must 
be  in  writing,  and  must  contain  a  statement  of  his  demand  after 
deducting  all  just  credits  and  offsets,  with  the  name  of  the 
owner  or  reputed  owner,  if  known,  also  the  name  of  the  person 
by  whom  he  was  employed,  or  to  whom  he  furnished  the  ma- 
terials, with  a  statement  of  the  price  if  any  agreed  upon  for 
the  same  and  when  payable,  and  of  the  work  agreed  to  be 
done  and  when  the  same  was  to  be  done,  if  agreed  upon, 
and  also  a  description  of  the  property  to  be  charged  with  the 
lien,  sufficient  for  identification,  which  claim  must  be  verified 
by  the  oath  of  himself  or  of  some  other  person. 

Act  of  the  Legislature,  approved  May  1,   1911. 


398  BUSINESS   LAWS   FOR  BUSINESS   MEN. 

Section  287.— COMPLETION.— Any  trivial  imperfection 
in  the  said  work,  or  in  the  completion  of  any  contract  by  any 
lien  claimant,  or  in  the  construction  of  any  building,  improve- 
ment or  structure,  or  of  the  alteration,  addition  to,  or  repair 
thereof,  shall  not  be  deemed  such  a  lack  of  completion  as  to 
prevent  the  filing  of  any  lien.  And,  in  all  cases,  any  of  the 
following  shall  be  deemed  equivalent  to  a  completion  for 
all  the  purposes  of  this  law :  the  occupation  of  use  of  a 
building,  improvement,  or  structure,  by  the  owner,  or  his 
representative;  or  the  acceptance  by  said  owner  or  said  agent, 
of  said  building,  improvement,  or  structure;  or  cessation 
from  labor  for  thirty  days  upon  any  contract  or  upon  any 
building,  improvement  or  structure  or  the  alteration,  addition 
to,  or  repair  thereof;  or  the  filing  of  the  owner's  notice  of 
completion. 

Act  of  the  Legislature,  approved  May  1,   1911. 

Section  288.— OWNER'S  NOTICE  OF  COMPLE- 
TION.— The  owner  may  within  ten  days  after  completion 
of  any  contract,  or  within  forty  days  after  cessation  from 
labor  thereon,  file  for  record  in  the  office  of  the  county 
recorder  of  the  county  where  the  property  is  situated,  a 
notice  setting  forth  the  date  when  the  same  was  completed, 
or  on  which  cessation  from  labor  occurred,  together  with  his 
name  and  the  nature  of  his  title,  and  a  description  of  the 
property  sufficient  for  identification,  which  notice  shall  be 
verified  by  himself  or  some  other  person  on  his  behalf. 

The  fee  for  recording  the  same  shall  be  one  dollar. 

In  case  such  notice  be  not  so  filed,  then  the  said  owner 
and  all  person  deraigning  title  from  or  claiming  any  interest 
through  him  shall  be  estopped  in  any  proceedings  for  the 
foreclosure  of  any  lien  from  maintaining  any  defense  therein 
based  on  the  ground  that  said  lien  was  not  filed  within  the 
time  provided  in  this  law;  provided,  that  all  claims  of  lien 
must  be  filed  within  ninety  days  after  the  completion  of  any 
building,  improvement  or  structure,  or  the  alteration,  addition 
or  repair  thereto. 

Act  of  the  Legislature,  approved  May  1,  1911. 


BUSINESS   CONTRACTS   AND   LEGAL   OBLIGATIONS.  399 

Section  289.— HOW    LONG    LIEN    CONTINUES.— 

No  lien  binds  any  property  for  a  longer  period  than  ninety 
days  after  the  same  has  been  filed,  unless  proceedings  be 
commenced  in  a  proper  court  within  that  time  to  enforce  the 
sarrie;  or,  if  a  credit  be  given,  then  ninety  days  after  the 
expiration  of  such  credit;  but  no  lien  continues  in  force  for 
a  longer  time  than  one  year  from  the  time  the  work  is  com- 
pleted, by  any  agreement  to  give  credit.  In  case  such  pro- 
ceedings be  not  prosecuted  to  trial  within  two  years  after  the 
commencement  thereof,  the  court  may  in  its  discretion  dis- 
miss the  same  for  want  of  prosecution,  and  in  all  cases,  the 
dismissal  of  such  action  (unless  it  be  expressly  stated  that  the 
same  is  without  prejudice)  or  a  judgment  rendered  therein 
that  no  lien  exists,  shall  be  equivalent  to  the  cancellation  and 
removal  from  the  record  of  such  lien. 

Act  of  the  Legislature,  approved  May  1,   191L 

Section  290.— WHEN  BUILDING  WILL  BE  HELD 
TO  HAVE  BEEN  CONSTRUCTED  AT  OWNER'S 
INSTANCE. — Every  building  or  other  improvement  or 
work,  constructed,  altered  or  repaired  upon  any  land  with  the 
knowledge  of  the  owner  or  of  any  person  having  or  claiming 
any  estate  therein,  and  the  work  or  labor  done  or  materials 
furnished  with  the  knowledge  of  the  owner  or  persons  having 
or  claiming  any  estate  in  the  land,  shall  be  held  to  have 
been  constructed,  performed  or  furnished  at  the  instance  of 
such  owner  or  person  having  or  claiming  any  estate  therein; 
and  such  interest  owned  or  claimed  shall  be  subject  to  any 
lien  filed,  unless  such  owner  or  person  having  or  claiming 
any  estate  therein  shall,  within  ten  days  after  he  shall  have 
obtained  knowledge  of  such  construction,  alteration  or  repair 
or  work  or  labor,  give  notice  that  he  will  not  be  responsible 
for  the  same  by  posting  a  notice  in  writing  to  that  eflfect  in 
some  conspicuous  place  upon  the  property,  and  shall  also, 
within  the  same  period,  file  for  record  a  verified  copy  of  said 
notice  in  the  office  of  the  county  recorder  of  the  said  county 
in  which  said  property  or  some  part  thereof  is  situated.  Said 
notice   shall  contain   a  description   of   the   property   affected 


400  BUSINESS   LAWS   FOR   BUSINESS   MEN. 

thereby  sufficient  for  identification,  with  the  name,  and  the 
nature  of  the  title  or  interest  of  the  person  giving  the  same. 
The  notice  so  recorded  may  be  verified  by  anyone  having  a 
knowledge  of  the  facts,  on  behalf  of  the  owner  or  person  for 
whose  protection  the  notice  is  given. 

Act  of  the  Legislature,  approved  May  1,   1911. 

Section  291.—  CONTRACTOR  MAY  RECOVER 
ONLY  AMOUNT  DUE  HIM.— Any  contractor  shall  be 
entitled  to  recover,  upon  a  lien  filed  by  him,  only  such  amount 
as  may  be  due  him  according  to  the  terms  of  his  contract, 
after  deducting  all  claims  of  other  parties  for  work  done 
and  materials  furnished,  as  aforesaid,  and  embraced  within 
his  contract;  and  in  all  cases  where  a  lien  shall  be  filed  under 
this  act  for  work  done  or  for  materials  furnished  to  any 
contractor,  he  shall  defend  any  action  brought  thereon  at 
his  own  expense;  and  during  the  pendency  of  such  action, 
the  owner  may  withhold  from  the  contractor  the  amount  of 
money  for  which  such  lien  is  filed;  and  in  case  of  judgment 
against  the  owner  or  his  property  upon  the  lien,  the  said 
owner  shall  be  entitled  to  deduct  from  any  amount  due,  or 
to  become  due  by  him  to  the  contractor,  the  amount  of  such 
judgment  and  costs ;  and  if  the  amount  of  such  judgment 
and  costs  shall  exceed  the  amount  due  by  him  to  the  con- 
tractor, or  if  the  owner  shall  have  settled  with  the  contractor 
in  full,  he  shall  be  entitled  to  recover  back  from  the  con- 
tractor, or  his  bondsmen  or  sureties  on  any  bond  given  for 
the  faithful  performance  of  his  contract,  any  amount  so  paid 
by  him,  in  excess  of  the  contract  price,  and  for  which  the 
contractor  was  originally  the  party  liable.  No  act  ^one  by 
such  owner  in  compliance  with  any  of  the  provisions  of  this 
law  shall  be  held  to  be  a  prevention  of  the  performance  of 
any  such  contract  by  the  contractor,  or  to  have  exonerated 
the  sureties  on  any  bond  given  for  faithful  performance,  or 
for  the  payment  of  liens  of  persons  performing  labor  or  fur- 
nishing materials,  or  both;  provided  that  such  act  was  done 
in  good  faith  and  without  design  to  injure  or  harass  any  one. 
Act  of    he  Legislature,  approved  May  1,  1911. 


BUSINESS    CONTRACTS   AND   LEGAL   OBLIGATIONS.  401 

Section  292.— DEFICIENCY  OF  PROCEEDS  UN- 
DER DECREE  OF  FORECLOSURE.— Whenever  on  the 

sale  of  the  property  subject  to  liens,,  under  the  judgment  or 
decree  of  foreclosure  of  such  lien,  there  is  a  deficiency  of  pro- 
ceeds, judgment  for  the  deficiency  may  be  docketed  against  the 
party  personally  liable  therefor  in  like  manner  and  with  like 
effect  as  in  action  for  the  foreclosure  of  mortgages. 

Act  of  the  Legislature,  approved  May  1,   191L 

Section  i293.— CLAIMANTS  MAY  JOIN  IN  SUIT.— 

Any  number  of  persons  claiming  liens  may  join  in  the  same 
action,  and  when  separate  actions  are  commenced,  the  court 
may  consolidate  them.  The  court  must  also  allow,  as  a  part 
of  the  costs,  the  money  paid  for  verifying  and  recording  the 
lien,  such  costs  to  be  allowed  to  each  claimant  whose  Hen 
is  established,  whether  he  be  plaintiff  or  defendant,  or 
whether  they  all  join  in  one  action  or  separate  actions  are 
consolidated. 

Act  of  the  Legislature,  approved  May  1,   191L 

Section  294.— PERSONAL  ACTION  TO  RECOVER 
DEBT. — Nothing  contained  in  this  law  shall  be  construed 
to  impair  or  effect  the  right  of  any  person  to  whom  any  debt 
may  be  due  for  work  done  or  materials  furnished  to  maintain  a 
personal  action  to  recover  said  debt  against  the  person  liable 
therefor;  and  the  person  bringing  such  personal  action  may 
take  out  an  attachment  therefor,  notwithstanding  his  lien,  and 
in  his  affidavit  to  procure  an  attachment  need  not  state  that 
his  demand  is  not  secured  by  a  lien;  but  the  judgment,  if 
any,  obtained  by  the  plaintiff  in  such  personal  action  shall 
not  be  construed  to  impair  or  merge  any  lien  held  by  plain- 
tiff; provided,  only,  that  any  money  collected  on  said  judg- 
ment shall  be  credited  on  the  amount  of  such  lien  in  any 
action  brought  to  enforce  the  same. 

Act  of  the  Legislature,  approved  May  1,   191 L 

Section    295.— FALSE    NOTICE    OF    CLAIM.— Any 

person  who  shall  wilfully  give  a   false  notice  of  his  claim 


402  BUSINESS   LAWS   FOR  BUSINESS   MEN. 

to  the  owner  shall  forfeit  his  lien.  Any  person  who  shall 
wilfully  include  in  his  claim  work  or  materials  not  performed 
upon  or  furnished  for  the  property  described  in  the  claims 
shall  forfeit  his  lien. 

Act  of  the  Legislature,  approved  May  1,   1911. 

Section  296.— MISTAKES  IN  STATEMENT  NOT 
TO  INVALIDATE  LIEN. — No  mistake  or  errors  in  the 
statement  of  the  demand,  or  of  the  amount  of  credits  and 
offsets  allowed  or  of  the  balance  asserted  to  be  due  to  claim- 
ant, nor  in  the  description  of  the  property  against  which  the 
claim  is  filed,  shall  invalidate  the  lien,  unless  the  court  finds 
that  such  mistake  or  error  in  the  statement  of  the  demand, 
credits  and  offsets,  or  of  the  balance  due,  was  made  with  the 
intent  to  defraud,  or  the  court  shall  find  that  an  innocent 
third  party,  without  notice,  direct  or  constructive,  has  since 
the  claim  was  filed  become  the  bona  fide  owner  of  the  prop- 
erty liened  upon,  and  that  the  notice  of  claim  was  so  deficient 
that  it  did  not  put  the  party  upon  further  inquiry  in  any 
manner. 

Section  297.— LIEN  LAW  TO  BE  LIBERALLY 
CONSTRUED.— The  provisions  of  this  act  shall  be  liberally 
construed  with  a  view  to  effect  its  purpose.  They  are  not 
intended  as  a  re-enactment  of  the  provisions  of  former  stat- 
utes, with  the  policy  heretofore  impressed  upon  the  same  by 
the  courts  of  this  state,  but  are  intended  to  reverse  that  policy 
to  the  extent  of  making  the  liens  provided  for  direct,  and 
independent  of  any  account  of  indebtedness  between  the  owner 
and  contractor,  thereby  making  the  policy  of  this  state  con- 
form to  that  of  Nevada  and  the  other  Pacific  Coast  states. 
Act  of  the  Legislature,  approved  May  1,   1911. 

Section  298.— SECURITY  FOR  PAYMENT  BY  CON- 
TRACTORS ON  PUBLIC  WORK.— There  is  no  lien 
against  a  public  building.  But  the  law  provides,  instead  of 
a  lien,  certain  security,  by  means  of  a  bond  required  from 
every  public  contractor.     Every  contractor,  person,  company, 


BUSINESS    CONTRACTS   AND   LEGAL   OBLIGATIONS.  403 

or  corporation,  to  whom  is  awarded  a  contract  for  the  execu- 
tion or  performance  of  any  building,  excavating,  or  other 
mechanical  work,  for  this  state,  or  by  any  county,  city  and 
county,  city,  town,  or  district  therein,  shall,  before  entering 
upon  the  performance  of  such  work,  file  with  the  commis- 
sioners, managers,  trustees,  officers,  board  of  supervisors, 
board  of  trustees,  common  council,  or  other  body  by  whom 
such  contract  was  awarded,  a  good  and  sufficient  bond,  to  be 
approved  by  such  contracting  body,  officers  or  board,  in  a 
sum  not  less  than  one-half  of  the  total  amount  payable  by 
the  terms  of  the  contract;  such  bond  shall  be  executed  by 
the  contractor,  and  at  least  two  sureties,  in  an  amount  not 
less  than  the  sum  specified  in  the  bond,  and  must  provide 
that  if  the  contractor,  person,  company,  or  corporation,  fails 
to  pay  for  any  materials  or  supplies  furnished  for  the  per- 
formance of  the  work  contracted  to  be  done,  or  for  any  work 
or  labor  done  thereon  of  any  kind,  that  the  sureties  will  pay 
the  same,  in  an  amount  not  exceeding  the  sum  specified  in 
the  bond;  provided,  that  such  claims  shall  be  filed  as  here- 
after required. 

(a)  Filing  of  Claim. — Any  material-man,  person,  com- 
pany, or  corporation,  furnishing  materials  or  supplies  used 
in  the  performance  of  the  work  contracted  to  be  executed  or 
performed,  or  any  person  who  performed  work  or  labor  upon 
the  same,  or  any  person  who  supplies  both  work  and  mater- 
ials, and  whose  claim  has  not  been  paid  by  the  contractor, 
company,  or  corporation,  to  whom  the  contract  has  been 
awarded  shall,  within  ninety  days  from  the  time  such  contract 
is  completed,  file  with  the  commissioners,  managers,  trustees, 
officers,  board  of  supervisors,  board  of  trustees,  common 
council,  or  other  body  by  whom  such  contract  was  awarded, 
a  verified  statement  of  such  claims,  together  with  a  statement 
that  the  same  has  not  been  paid. 

(b)  Suit  on  Bond. — At  any  time  within  six  months  after 
the  filing  of  such  claim,  the  person,  company  or  corporation 
filing  the  same  may  commence  an  action  against  the  sureties 
on  the  bond. 

Act  of  the  Legislature,  approved  May  1,  1911. 


404  BUSINESS   LAWS   FOR   BUSINESS   MEN. 

Section  299.— BUILDING  CONSTRUCTED  UNDER 
DISTINCT  CONTRACTS  — WHO  IS  ORIGINAL 
CONTRACTOR.— Where  a  building  is  constructed  under 
distinct  contracts  for  the  different  departments  of  work  in- 
volved, each  person  contracted  with  is  an  original  contractor, 
and  can  file  his  claim  of  lien  within  sixty  days  after  the 
completion  of  his  contract,  irrespective  of  the  time  when  the 
entire  building  is  completed.  The  provisions  of  the  Code 
relating  to  mechanics'  liens  do  not  contemplate  that  there  can 
be  no  original  contractor  except  for  the  entire  work  of  con- 
structing the  building.  For  the  purpose  of  constructing  the 
building,  the  owner  may  enter  into  different  original  con- 
tracts, for  the  different  departments  of  work  involved.  If  the 
owner  should  enter  into  a  contract  with  one  person  for  the 
construction  of  a  building  in  all  its  parts,  except  the  paint- 
ing, and  should  afterwards  enter  into  a  contract  with  an- 
other person  to  do  the  painting  of  the  building,  each  of  these 
individuals  would  be  an  original  contractor,  within  the  mean- 
ing of  the  law. 

Section  300.— ATTORNEY'S  FEES.— The  court  cannot 
allow,  in  suits  to  foreclose  mechanics'  liens,  any  attorney's 
fees  to  any  lien  claimant.  The  law  until  recently  had  been 
for  many  years  that  a  person  foreclosing  a  mechanics'  lien 
would  be  allowed  reasonable  attorney's  fees,  in  both  the 
Superior  and  Supreme  Courts;  but  the  Supreme  Court  of 
California  rendered  a  decision,  in  a  suit  brought  to  foreclose 
a  mechanics'  lien,  declaring  the  law  allowing  an  attorney's 
fee  unconstitutional  and  void.  In  San  Francisco,  the  Build- 
ers' Supply  Depot  foreclosed  a  lien  for  materials  and  labor 
furnished  in  the  construction  of  a  building.  The  Superior 
Court  allowed  the  plaintiff  attorney's  fees  and  included  such 
fees  in  the  judgment.  The  defendants  appealed  the  case  to 
the  Supreme  Court,  and  this  court  decided  that  attorney's 
fees  could  not  be  allowed,  and  that  the  law  giving  such  fees 
was  void.  The  court  says:  "The  court  allowed  an  attor- 
ney's fee  in  each  of  the  cases,  and  appellants  contend  that 
such  allowance  was  erroneous  because  the  statutory  provision 


BUSINESS   CONTRACTS  AND   LEGAL  OBLIGATIONS.  405 

directing  the  allowance  of  such  a  fee  is  unconstitutional  and 
void.  In  our  opinion  this  contention  must  be  sustained.  In 
a  few  instances  this  court  has  affirmed  judgment  for  plain- 
tiff's in  mechanics'  lien  cases  which  included  attorney's  fees; 
but  our  attention  has  not  been  called  to  any  case  where  the 
question  of  the  constitutionality  of  the  statute  providing  for 
such  fees  has  been  raised,  or  presented  to  the  court  for  ad- 
judication. In  the  case  at  bar  the  question  has  been  for  the 
first  time  raised."  The  court  decided  that  the  expense  of 
filing  the  liens  may  be  allowed  as  costs  of  suit,  but  that  no 
attorney  fee  can  be  lawfully  claimed  or  allowed.  (Decided 
by  the  Supreme  Court  of  California  in  the  case  of  Builders' 
Supply  Depot  vs.  Dennis  O'Conner,  which  decision  is  printed 
in  Volume  33,  California  Decisions,  page  97.) 

Section  301.— WHEN  LIEN  FOR  MATERIALS  BE- 
GINS.— A  lien  for  the  furnishing  of  materials  relates  to  the 
date  of  beginning  to  furnish  them,  and  includes  all  the 
materials  thereafter  furnished  for  the  building;  and  such  lien 
has  priority  over  a  mortgage  executed  after  the  date  of  the 
commencement  to  furnish  the  materials. 

Section   302.  — LIEN   FOR   MOVING   A   HOUSE.— 

Under  the  law,  a  contractor  performing  labor  upon  a  house, 
by  moving  it  from  one  place  to  another,  is  entitled  to  a  lien 
thereon. 

Section  303.— LIEN  ON  HOMESTEAD.— A  mechanic's 
lien  may  be  created  on  a  homestead  without  the  joint  action 
of  husband  and  wife.  A  homestead  is  free  from  forced  sale, 
except  as  provided  by  the  statute.  Among  the  cases  in  which  a 
homestead  may  be  sold  under  execution,  precisely  as  though 
it  was  not  a  homestead,  are  those  under  judgments  obtained 
upon  debts  secured  by  Hens  of  "mechanics,  contractors,  arti- 
sans, architects,  builders,  laborers  of  every  class,  and  material- 
men." 


406  BUSINESS  LAWS  FOR  BUSINESS   MEN. 

Section  304.— LIEN  AGAINST  RAILROAD.— A  lien 
may  be  filed  against  a  railroad,  and  where  a  railroad  lies  in 
two  counties,  it  is  not  necessary  to  file  the  lien  in  both 
counties.  It  is  sufficient  if  the  lien  is  filed  in  one  of  the 
counties  only  through  which  the  railroad  runs. 

Section  305.— ABANDONMENT  AND  NEW  CON- 
TRACT.— Where  a  building  contract  is  abandoned,  it  is  im- 
material whether  the  building  is  subsequently  completed  by 
the  owner  or  not;  and  a  subsequent  contract  by  the  owner 
for  the  completion  of  the  work  is  as  disconnected  with  the 
original  contract  as  if  it  were  for  the  construction  of  a 
different  building. 

Section  306.— WHAT  IS  MEANT  BY  "OWNER."— 

When  the  law  requires  the  claim  of  lien  filed  in  the  record- 
er's office  to  state  "the  name  of  the  owner  or  reputed  owner, 
if  known,"  it  means  the  name  of  the  person  who  is  the 
owner  at  the  time  the  claim  is  filed.  The  law  does  not  refer 
to  the  owner  with  whom  the  contract  for  the  improvement 
was  made,  or  to  the  owner  at  any  other  time  than  at  the 
date  of  filing  the  claim.  The  object  of  requiring  the  claim 
to  be  filed  in  order  to  perfect  the  lien  is  to  give  notice  of  the 
lien  to  those  interested  in  the  property  upon  which  it  is 
claimed;  and,  as  the  owner  at  the  time  of  filing  the  claim 
is  the  party  to  be  affected  by  it,  rather  than  one  who  has 
parted  with  the  property  subsequent  to  the  making  of  the 
original  contract,  it  is  reasonable  to  suppose  that  the  Legis- 
lature intended  the  name  of  the  owner  at  the  time  the  claim 
is  filed,  rather  than  that  of  any  previous  owner. 

Section    307.— REAL    OR    REPUTED    OWNER.— It 

was  not  the  intention  of  the  Legislature  that  in  the  claim  of 
lien  filed  for  record  the  claimant  must  state  the  name  of  the 
real  owner,  at  the  risk  of  losing  his  lien  if  it  shall  turn  out 
that  he  was  in  error.  The  provision  of  the  law  that  the 
claimant  shall  give  the  "name  of  the  owner,  or  reputed  owner, 
if  known,"  implies  that,  if  he  does  not  know  the  name  of 


BUSINESS    CONTRACTS   AND   LEGAL   OBLIGATIONS.  407 

the  owner,  he  may  state  this  fact,  and  perfect  his  hen  without 
naming  an  owner;  and  also  that,  if  in  good  faith  he  gives 
the  name  of  a  reputed  owner,  he  will  not  lose  his  lien  if  it 
afterwards  appears  that  some  other  person  was  the  owner. 

Section  308.— PRIORITY  OF  MATERIAL-MAN'S 
CLAIM  OVER  MORTGAGE.— The  lien  of  a  material- 
man for  lumber  furnished  for  a  dwelling  will  take  precedence 
of  a  mortgage  on  the  land  executed  immediately  upon  a 
conveyance  thereof,  but  after  the  time  when  the  materials 
were  commenced  to  be  furnished,  notwithstanding  the  mort- 
gage was  given  for  the  purchase  price  of  the  land. 

Section  309.  — DWELLING-HOUSE  — LAND  SUB- 
JECT TO  LIEN.— Only  so  much  of  the  land  around  a 
dwelling-house  is  subject  to  lien  as  may  be  necessary  for 
the  convenient  use  and  occupation  of  the  house.  So,  where 
a  house  was  situated  on  a  forty-acre  tract,  the  Supreme  Court 
has  said  that  the  whole  tract  was  not  subject  to  the  lien.  The 
statute  does  not  contemplate  anything  of  that  kind.  It  means 
exactly  what  it  says — a  sufficient  space  around  the  dwelling 
for  its  convenient  use  and  occupation.  It  does  not  contemplate 
that  sufficient  land  around  the  dwelling-house  to  support  the 
owner  while  living  there  be  set  apart.  Neither  the  pro- 
ductiveness or  non-productiveness  of  the  soil,  nor  the  profit 
derived  from  the  cultivation  of  the  land,  is  a  material  element 
to  be  considered  in  determining  the  amount  of  land  to  be 
set  apart  with  the  dwelling-house.  The  statute  simply  allows 
the  dwelHng-house  and  a  quantity  of  land  around  it  sufficient 
for  its  convenient  use,  as  the  subject  of  a  lien. 

Section  310.— ELEVATOR  PART  OF  BUILDING.— 

Where  the  original  plans  for  a  large  building  provided  for 
an  elevator,  and  the  contract  for  the  construction  of  the 
elevator  was  let  when  contracts  for  other  work  were  let,  the 
elevator  was  a  substantial  part  of  the  building,  and  the 
building  was  not  completed,  so  that  the  limitations  for  fiUng 
mechanics'  liens  would  run,  until  it  was  finished.    An  elevator 


408  BUSINESS  LAWS   FOR  BUSINESS   MEN. 

was  called  for  by  the  original  plans  and  specifications.  A 
contract  was  let  for  its  construction  at  the  same  time  that 
other  contracts  were  let.  It  was  attached  to  the  building, 
and  formed  an  integral  part  of  it.  The  fact  that  the  building 
might  have  been  used  without  it,  and  that  it  was  a  convenience 
merely,  is  immaterial.  Conceding  an  elevator  to  be  a  mere 
convenience — still  conveniences  are  a  material  part  of  the 
building,  when  provided  for  by  the  plans  and  specifications; 
and,  so  provided  for,  the  building  is  not  completed  until  the 
demands  of  the  plans  and  specifications  in  this  regard  have 
been  satisfied. 

Section  311.— MATERIALS  MUST  BE  EXPRESSLY 
FURNISHED  FOR  STRUCTURE  CHARGED  WITH 
LIEN.  —  In  order  to  enforce  the  lien  of  a  material-man 
against  a  building  or  structure,  the  materials  must  not  only 
have  been  used  in  the  construction  of  the  building,  but  they 
must  have  been,  by  the  express  terms  of  the  contract,  furnished 
for  the  particular  building  on  which  the  lien  is  claimed. 

Section  312.  — ASSIGNMENT  OF  MECHANIC'S 
LIEN. — A  mechanic's  lien  can  be  assigned,  after  the  claim 
of  lien  has  been  filed  for  record,  but  not  before.  Before  the 
claim  of  lien  has  been  filed  for  record,  the  right  to  the  lien 
is  a  mere  personal  privilege,  which  the  laborer,  mechanic,  or 
material-man  may  exercise  or  not,  as  he  sees  fit;  hence  it  is 
not  the  subject  of  assignment.  But  after  the  claim  of  lien 
has  been  filed  for  record,  it  can  be  assigned,  and  the  assignee 
will  have  all  the  rights  of  the  original  holder  of  the  lien. 

Section  313.— IF  BUILDING  IS  DESTROYED  BY 
FIRE,  NO  LIEN  CAN  AFTERWARDS  BE   FILED. 

— Where  a  building  in  course  of  construction  is  destroyed  by 
fire,  without  any  fault  of  the  owner,  before  any  mechanic's 
lien  has  been  filed  thereon,  the  party  who  furnished  materials 
for  the  building,  or  who  performed  labor  upon  it,  can  have 
no  lien  upon  the  land  upon  which  the  building  was  being 


BUSINESS   CONTRACTS   AND   LEGAL  OBLIGATIONS.  409 

constructed.  The  benefit  conferred  upon  the  owner,  by  plac- 
ing the  labor  and  materials  in  his  building,  is  the  true  con- 
sideration in  law  for  conferring  the  right  of  lien  upon  the 
parties  furnishing  such  labor  and  materials.  It  cannot  be  said 
that  this  consideration  exists,  where  the  building  is  destroyed 
before  completion  and  before  delivery  to  the  owner.  In  such 
case,  the  owner  has  not  derived  and  can  never  derive  any 
benefit  from  the  labor  and  materials  furnished.  (Decided  by 
the  Supreme  Court  of  California  in  the  case  of  Humboldt 
Lumber  Mill  Company  vs.  Edward  Crisp,  which  decision  is 
printed  in  Volume  29,  California  Decisions,  page  629.) 

Section  314.— LIEN  FOR  WORK  DONE  BY  ORDER 
OF  HEALTH  OFFICER.— A  law  passed  in  1909  provides 
as  follows : 

"Any  health  officer  or  governing  board  of  any  city,  town 
or  sanitary  district,  having  served  written  notice  upon  the 
owner  or  reputed  owner  of  real  estate  upon  which  there  is  a 
dwelling  house,  and  such  owner  or  reputed  owner,  after 
thirty  days,  having  refused,  neglected  or  failed  to  connect 
such  dwelling  house,  together  with  all  toilets,  sinks,  and  other 
plumbing  therein,  properly  vented,  and  in  a  sanitary  manner, 
with  the  adjoining  street  sewer,  may  construct  the  same  at 
a  reasonable  cost,  and  the  person  doing  said  work  at  the 
request  of  such  health  officer  or  governing  board  has  a  lien 
upon  said  real  estate  for  his  work  done  and  materials 
furnished." 

Act  of  the  Legislature,  approved  April  19,  1909. 

Section  315.  — MINER'S  LIEN  MUST  BE  UPON 
THE  WHOLE  CLAIM.— A  mechanic's  lien  cannot  be 
claimed  upon  part  of  a  structure,  or  upon  a  structure  which 
is  part  of  a  larger  structure,  or  upon  part  of  an  entire  prop- 
erty. Therefore,  it  has  been  held  by  the  Supreme  Court  of 
California  that  a  claim  of  lien  for  materials  furnished  for  the 
construction  of  a  mill,  tramway,  boarding-house,  or  reduction 
works  upon  a  mining  claim,  should  be  against  the 
mining     claim,   and     not     against     the     specific     structure 


410  BUSINESS   LAWS   FOR   BUSINESS   MEN. 

upon     the     mine.      One     contributing     labor     or     materials 
to  a  structure  which  is  an  appurtenance  to  a  mine,  or  which, 
when  constructed,  is  to  form  part  of  it,   must  be  held  to 
have  anticipated  its  future  use,  and  cannot  claim  a  lien  upon 
the  structure  alone.    And  the  procedures  provided  for  acquir- 
ing liens  upon  structures  are  not,  in  all  respects,  applicable  to 
those  claiming  liens  upon  mining  claims.     They  cannot   all 
date  back  to  the  commencement  of  the  work.     On  a  mine 
the  work  is  always  going  on,  may  have  commenced  before 
the  laborers  were  born,  and  may  continue  indefinitely.    There 
is   no   special   thirty    days,    therefore,    within    which    mining 
lienors  must  record  their  notices  and  claims  of  lien.     The 
labor  cannot  generally  be   said  to  have  contributed  to  the 
creation  of  the  property,  or  added  to  its  value;  on  the  con- 
trary, it  may  diminish  its  value — perhaps  render  it  valueless. 
The  Code  does  not  seem  to  have  provided  for  all  the  cases 
which  may  arise  in  regard  to  liens  upon  mining  claims.     We 
can  only  follow  the  procedure  so  far  as  applicable.     For  that 
purpose,  the  mining  claim  must  stand  in  the  place  of  the  "struc- 
ture" as  the  property  to  be  charged  with  the  lien.     It  is  the 
property  which  should  be  described  in  the  notice  and  claim 
of  lien.    One  who  has  built  a  chimney  in  a  house,  or  a  porch, 
or  a  door-step,  has  helped  to  build  a  structure ;  but  he  cannot 
acquire  a  lien  upon  these  specific  structures,  and  by  detached 
sales  destroy  the  value  of  the  claims  depending  upon  liens 
upon  the  whole  house.    A  structure  may  be  a  part  of  another 
larger  structure,  and  in  reference  to  it  constitute  but  a  part 
of  a  structure.    In  such  cases  it  is  well  settled  the  lien  must 
cover  the  entire  structure.    The  mining  lien,  if  it  exists  at  all, 
extends  to  the  whole  claim.     Strictly  speaking,  of  course,  a 
mining  claim  cannot  be  constructed,  altered,  or  repaired.    The 
intention  of  the  lawmakers  seems  to  have  been  to  give  a  lien 
upon  the  whole  claim,  for  labor  performed  on  and  for  ma- 
terials furnished  for  and  used  in  any  structure,  on  or  in  the 
mining  claim.     The   lien  given  by  the   statute   is   upon  the 
mining  claim  as  a  whole,  and  not  upon  the  separate  pieces 
of  work  done  in  its  repairs.     A  claim  of  lien  for  material 
furnished,  to  be  used  in  a  building  upon  a  mining  claim, 


BUSINESS   CONTRACTS   AND  LEGAL  OBLIGATIONS,  411 

should  be  against  the  mining  claim,  and  not  against  the 
specific  structure  upon  the  mine. 

Section    316.—  MINING     GROUND  —  PATENTED 

LAND. — A  lien  for  work  and  labor  may  be  taken  upon 
mining  ground  owned  by  a  patentee  of  the  United  States. 
The  words  "mining  claim"  in  the  statute  include  "mining 
ground"  and  all  "mines,"  whether  the  title  is  perfect  or  not. 
But  the  lien  will  not  extend  to  adjacent  land  which  is  not 
mineral  in  its  character.  The  words  "mining  claim,"  as  used 
in  the  law,  have  no  reference  to  the  different  stages  in  the 
acquisition  of  the  Government  title.  It  includes  all  mines 
where  no  patent  has  been  issued,  as  in  the  case  of  a  mining 
claim  in  its  strict  sense,  and  also  where  the  patent  has  issued. 

Section    317.— PERSONAL     PROPERTY     LIENS.— 

Every  person  who,  while  lawfully  in  possession  of  an  article 
of  personal  property  renders  any  service  to  the  owner  thereof, 
by  labor  or  skill,  employed  for  the  protection,  improvement, 
safe  keeping,  or  carriage  thereof,  has  a  special  lien  thereon, 
dependent  on  possession,  for  the  compensation,  if  any,  which 
is  due  to  him  from  the  owner  for  such  service;  a  person 
who  makes,  alters,  or  repairs  any  article  of  personal  property, 
at  the  request  of  the  owner,  or  legal  possessor  of  the  prop- 
erty, has  a  lien  on  the  same  for  his  reasonable  charges  for  the 
balance  due  for  such  work  done  and  materials  furnished, 
and  may  retain  possession  of  the  same  until  the  charges  are 
paid;  and  livery  or  boarding  or  feed  stable  proprietors,  and 
persons  pasturing  horses  or  stock,  have  a  lien,  dependent 
on  possession,  for  their  compensation  in  caring  for,  boarding, 
feeding,  or  pasturing  such  horses  or  stock;  and  laundry  pro- 
prietors and  persons  conducting  a  laundry  business,  have  a 
general  lien,  dependent  on  possession,  upon  all  personal  prop- 
erty in  their  hands  belonging  to  a  customer,  for  the  balance 
due  them  from  such  customer  for  laundry  work;  and  veteri- 
nary proprietors  and  veterinary  surgeons,  shall  have  a  lien, 
dependent  on  possession,  for  their  compensation  in  caring  for, 
boarding,    feeding,   and   medical   treatment   of   animals;   and 


412  BUSINESS   LAWS   FOR   BUSINESS   MEN. 

keepers  of  garages  for  automobiles,  shall  have  a  lien,  depend- 
ent on  possession,  for  their  compensation  in  caring  for  and 
safe  keeping  such  automobiles. 

Act  of  the  Legislature,  approved  April  12,  1911. 

Section   318.— FORM   OF   CONTRACTOR'S    BOND. 

— The  following  is  a  form  of  bond  to  be  given  by  the  con- 
tractor to  the  owner,  and  to  be  filed  for  record  together  with 
the  contract: 

CONTRACTOR'S   BOND. 

KNOW  ALL  MEN  BY  THESE  PRESENTS :    That  we, 

,  as   principal, 

(Here  insert  name  of  contractor.) 

and 

(Here  insert  name  of  surety.) 

and  .....  4 

(Here  insert  name  of  surety.) 
as  sureties,  are  held  and  firmly  bound  unto 

.    (Here  insert  name  of  owner.) 

in   the    sum   of 

(Here  insert  an  amount  not  less  than  fifty  percent  of  con- 
tract price.) 

Dollars,  lawful  money  of  the  United  States  of  America,  to 

be  paid  to  the  said 

(Here  insert  name  of  owner.) 
for  which  payment  well  and  truly  to  be  made,  we  bind  our- 
selves firmly  by  these  presents. 

Sealed  with  our  seals  and  dated  the day 

of ,  191... 

The    conditions    of    the    above    obligation    are    such,    that 

whereas,  the  said 

(Name  of  contractor.) 

did  on  the day  of ,  191. ., 

enter  into  a  contract  with  the  said 

(Name  of  owner.) 
by  the  terms  of  which  he  agreed  to 


BUSINESS   CONTRACTS   AND   LEGAL  OBLIGATIONS.  413 

(Here  state  the  substance  of  the  contract,  time  of  payments, 
amounts,  progress  of  work  and  completion,  etc.) 


the  said  contract  shall  be  performed  in  all  respects  by  said 
contractor  as  specified  therein. 

It  is  also  a  condition  of  this  bond  that  the  said 

(Name  of  contractor.) 
shall  pay  in  full  the  claims  of  all  persons  performing  labor 
upon  or  furnishing  materials  to  be  used  in  the  work  specified 
in  said  contract;  and  this  bond  shall  inure  to  the  benefit  of 
any  and  all  persons  who  perform  labor  upon  or  furnish  ma- 
terials to  be  used  in  the  work  described  in  said  contract,  and 
they  and  each  of  them  shall  have  a  right  of  action  to  recover 
upon  this  bond  and  the  sureties  named  herein,  in  any  law- 
ful suit  brought  to  foreclose  a  mechanic's  lien  by  such 
persons  or  in  a  separate  suit  brought  on  this  bond;  and  if 
these  conditions  above  stated  are  fulfilled  and  fully  complied 
with,  then  the  above  obligation  to  be  void,-  otherwise  to 
remain  in  full  force  and  virtue. 

, ■ (Seal.) 

(Seal.) 

(Seal.) 

(Acknowledgment  in  usual  form.) 

Section  319.— FORM  OF  NOTICE  OF  AGREEMENT 
TO    FURNISH   MATERIALS    TO    CONTRACTOR.— 

To    

(Here  insert  name  of  owner.) 

Please  take  notice  that  in  the  month  of. ,  191 . ., 

I,  the  undersigned,  agreed  with 

(Here  insert  name  of  contractor.) 

the  contractor  with  whom  you  contracted  to   construct  the 

building  at Street,  San  Francisco,  California 

(of  which  building  you  are  the  reputed  owner),  to  supply 
him    with 

(Here   describe   the    materials    which    were    agreed   to    be 
supplied. ) 


414  BUSINESS   LAWS   FOR  BUSINESS   MEN. 

to  be  used  in  constructing  said  building.  That  the  value  of 
said  materials,  agreed  to  be  supplied  as  aforesaid,  is  the  sum 
of  $ 


Section  320.— FORM  OF  NOTICE  TO  OWNER  OF 
MATERIALS    FURNISHED    TO    CONTRACTOR.— 

The  following  is  a  form  of  notice  to  owner  of  materials 
furnished  to  the  contractor.  This  notice  may  be  given  by 
delivering  it  to  the  owner  personally,  or  by  leaving  it  at  his 
residence  or  place  of  business  with  some  person  in  charge, 
or  by  delivering  it  to  his  architect,  or  by  leaving  it  at  the 
architect's  office  with  some  person  in  charge  there: 

To    

(Here  insert  name  of  owner.) 

Please  take  notice  that  in  the  month  of ,  191 . . , 

I,  the  undersigned  sold  and  delivered  at  his  request 

(Here  insert  name  of  contractor.) 
the  contractor  who  was  at  that  time  constructing  that  certain 

building  at  number Mission  Street,  San  Francisco, 

California  (of  which  building  you  are  the  reputed  owner), 
all  the  materials  described  as  follows,  to-wit :  


(Here  insert  description  of  materials.) 


to  be  used  and  which  material  was  used  by  said  contractor 
in  constructing  said  building.     And  that  the  value   of  said 

materials  is  $ ,  and  is  and  was  the  value  of  said 

materials  agreed  to  be  furnished  to  said  contractor  by  me. 
That  the  first  delivery  of  said  materials  to  said  contractor  for 

use  in  said  building  was  on  the day  of ,  191 , ,, 

and  the  last  lot  of  said  materials  was  delivered  on  the 

day  of ' ,  191... 


Section  321.— FORM  OF  NOTICE  TO  OWNER  OF 
LABOR  PERFORMED.— The  following  is  a  form  of 
notice  to  owner  to  be  given  by  the  person  having  performed 


BUSINESS   CONTRACTS   AND    LEGAL   OBLIGATIONS.  415 

labor  upon  the  building  at  the  instance  of  the  contractor. 
This  notice  may  be  given  by  delivering  it  to  the  owner  per- 
sonally, or  by  leaving  it  at  his  residence  or  place  of  business 
with  some  person  in  charge,  or  by  delivering  it  to  his  archi- 
tect, or  by  leaving  it  at  the  latter's  office  with  some  person 
in  charge  there: 

To 

(Here  insert  name  of  owner.) 

Please  take  notice  that  between  the day  of , 

191..,  and  the day  of ..,  191..,!,  the 

undersigned,  performed  labor  for 

(Here  insert  name  of  contractor.) 
the  contractor  with  whom  you  agreed  to  construct  that  build- 
ing at  number Mission  Street,  San  Francisco, 

California   (of  which  building  you  are  the  reputed  owner), 
to-wit :   

(Here  insert  the  kind  of  labor  performed  in  the  construc- 
tion of  said  building.) 

and  he  agreed  to  pay  me  $ for  each  day's  work  of 

hours.     That  I  worked  on  said  building  under 

said  agreement days.    That  the  said 

,  the  contractor, 

has  not  paid  me  anything  on  account  of  said  work.     (Or  if 
anything  has  been  paid,  state  how  much.) 

And  he  is,  at  this  date  indebted  to  me  in  the  sum  of  $ 

lawful  money  of  the  United  States,  and  the  value  of  said 

work  was  and  is  $ per  day  for  each  of  said 

days,  amounting  to  the  sum  of  $ 

Dated  the day  of ,  191 .. . 


Section  322.— FORM  OF  NOTICE  OF  MECHANIC'S 
LIEN  FOR  LABOR. — The  following  is  a  form  of  notice 
of  mechanic's  lien  for  labor  performed.  The  notice  of  lien 
must  be  filed  for  record  with  the  county  recorder  of  the  county 
or  city  and  county  in  which  the  property  or  some  part  thereof 
is   situated: 


416  BUSINESS   LAWS   FOR   BUSINESS   MEN. 

NOTICE  OF  MECHANIC'S  LIEN  FOR  LABOR. 

Claimant 
vs. 

Notice  is  hereby  given  that 

residing  at ,  State  of  California, 

hereby  claims  a  lien  against  the  interest  of 

in  the  real  property  hereinafter  described. 

That  the  name  of  the  owner  of  said  real  property,  against 
whose  interest  therein  a  lien  is  hereby  claimed,  is 

(Here  insert  name  of  owner.) 

and  that  the  interest  of  said 

in  said  real  property,  as  far  as  known  to  said  lienor,  is  as 
follows,  to-wit : 

(Here  state  nature  of  interest  of  owner  in  the  property.) 

That  the  name  of  the  claimant  herein  is 

and  his  residence  is  at ,  State  of  California; 

That  claimant  was  employed  by 

(Here  state  name  of  employer.) 

on  the day  of ,  191 .. ,  to  perform 

labor   in   and  about  the  construction   of   a  building   on   the 
premises  hereinafter  described,  and  commenced  work  on  said 

building  as  a on  the day  of 

,  191 . . ,  and  performed days  of 

labor  as  such ,  ending  on  the day  of 

,  191 . . ,  at  the  agreed  price  of  $ 

per  day; 

That  the  amount  unpaid  to  the  said  claimant  for  such  labor 
is  the  sum  of  $ ; 

That  the  property  subject  to  this  lien,  and  against  which 

the  said hereby  claims  a 

lien,  is  described  as  follows,  to-wit : 

All  that  certain  lot  or  tract  of  land  situate  in  the  City  of 

,  County  of ,  State  of 

CaHfornia,  particularly  described  as  follows:     (If  in  a  city  or 
village,  describe  the  location  by  street  and  number  if  known.) 

(Here  describe  the  property.) 

Claimant. 


BUSINESS   CONTRACTS   AND   LEGAL  OBLIGATIONS.  417 

STATE  OF  CALIFORNIA,  }  ^^ 

County   of 3 

,  being  duly  sworn, 

deposes  and  says,  that  he  is  the  person  named  as  claimant 
in  the  foregoing  claim  of  lien ;  that  he  has  read  the  foregoing 
claim  of  lien,  and  knows  the  contents  thereof,  and  that  the 
statements  therein  contained  are  true  of  his  own  knowledge- 
Subscribed  and  sworn  to  before  me  this day  of 

191... 


Notary  Public  in  and  for  the  County  of 
,  State  of  California. 

Section  323.— FORM  OF  MECHANIC'S  LIEN  BY 
CONTRACTOR  OR  SUB-CONTRACTOR.— The  follow- 
ing is  a  form  of  notice  of  mechanic's  lien  by  contractor  or 
sub-contractor.  The  notice  of  lien  must  be  filed  for  record 
with  the  county  recorder  of  the  county  or  city  and  county 
where  the  property  or  some  part  thereof  is  situated: 

NOTICE  OF  MECHANIC'S  LIEN   BY  CONTRACTOR 
OR  SUB-CONTRACTOR. 

Claimant, 
vs. 

Notice  is  hereby  given  that 

residing  at ,  State  of  California, 

hereby  claims  a  lien  against  the  interest  of 

in  the  real  property  hereinafter  described : 

That  the  name  of  the  owner  of  said  real  property,  against 

whose  interest  therein  a  lien  is  hereby  claimed  is 

and   that   the   interest   of 

said    

in  said  real  property,  as  far  as  known  to  said  lienor,  is  as 
follows,    to-wit : 

(Here  describe  nature  of  interest  of  owner  in  the  property.) 


That  the  name  of  the  claimant  herein  is 

,  and  his  residence,  is  at 

,  State  of  California. 


418  BUSINESS   LAWS   FOR   BUSINESS    MEN. 

That  on  the day  of ,  191 .. ,  claimant 

entered  into  a  contract  with 

to   

(Here  describe  work  contracted  for.) 


for  the  agreed  price  of  $ ,  payable  as  follows, 

to- wit :   

(Here  state  terms  of  payment.) 

That  claimant  completed  his  said  contract  on  the 

day  of ,  191..; 

That  the  amount  unpaid  to  the  said  claimant  on  said  con- 
tract is  the  sum  of  $ ; 

That  the  property  subject  to  this  lien  and  against  which 

the  said  

hereby  claims  a  lien,  is  described  as  follows,  to-wit : 

All  that  certain  lot  or  tract  of  land  situate  in  the  City  of 

,  County  of , 

State  of  California,  particularly  described  as  follows :   


(Here  describe  the  property.     If  in  a  city  or  village,  de- 
scribe the  location  by  street  and  number,  if  known.) 


That  the  said  claimant,   , 

hereby  claims  a  lien  on  the  property  above  described  for  the 
sum    of   $ 


^1 


Claimant. 

STATE  OF  CALIFORNIA, 
County   of 

,  being  duly  sworn, 

deposes  and  says,  that  he  is  the  person  named  as  claimant 
in  the  foregoing  claim  of  lien ;  that  he  has  read  the  foregoing 
claim  of  lien,  and  knows  the  contents  thereof,  and  that  the 
statements  therein  contained  are  true  of  his  own  knowledge. 

Subscribed  and  sworn  to  before  me  this day  of 

,191... 


Notary  Public  in  and  for  the  County  of 
State  of  California. 


BUSINESS    CONTRACTS   AND   LEGAL   OBLIGATIONS.  419 

Section  324.  — FORM  OF  NOTICE  OF  CLAIM 
AGAINST  PUBLIC  IMPROVEMENT  FUND.— The 
law  does  not  allow  a  Hen  on  public  property,  property  owned 
by  the  state  or  a  municipality.  But  the  law  does  allow  a 
claim  on  public  funds  appropriated  to  certain  public  improve- 
ments, and  makes  it  the  duty  of  the  state  or  municipal  officer 
in  charge  of  said  public  improvement  to  withhold  from  the 
contractor  sufficient  money  due  or  that  may  become  due  to 
such  contractor  to  answer  the  claim,  including  the  reasonable 
cost  of  any  litigation  thereunder.  This  notice  may  be  given 
by  delivering  the  same  personally  to  the  officer  of  the  muni- 
cipality whose  duty  it  is  to  pay  the  contractor  from  the  public 
funds : 

NOTICE   OF   CLAIM   AGAINST   PUBLIC   IMPROVE- 
MENT  FUND. 

Notice  is  hereby  given  that , 

residing  at ,  State  of  California, 

hereby  claims  a  lien  against  the  interest  of 

,  contractor,  in  that  certain  fund 

appropriated  and  set  apart  by  the  City  and  County  of  San 
Francisco,  in  the  State  of  California,  to  pay  said  contractor 
for  public  work,  as  follows : 

That  the  name  of  claimant  is , 

and  his  residence  is  at ,  State  of  California. 

That  on  the day  of ,  191 .. , 

(Here  insert  name  of  contractor.) 
entered  into  a  contract  with  the  said  City  and  County  of  San 
Francisco  to 

(Here  state  nature  of  work  contracted  for.) 

That  between  the day  of ,  191 .. , 

claimant  furnished  materials  to  said  contractor  to  be  used 
in  the  construction  of  said  public  work,  and  that  the  first 
materials  were  delivered  to   said  contractor  by  him  on  the 

day  of ,  191 . .,  and  the  last  materials 

were  delivered  on  the day  of ,   191 . . , 

That  the  materials  so  furnished  consisted  of 

(Here  insert  description  of  materials.) 


420  BUSINESS   LAWS   FOR   BUSINESS   ME>* 

and  which  said  materials  were  used  in  the  construction  of 

(Here  describe  the  public  improvement.) 

at ■ .,  in  the  said  City  and  County  of 

San  Francisco. 

That  said  materials  were  of  the  reasonable  value  (or  agreed 
price)  of dollars. 

That  the  amount  unpaid  to  said  claimant  from  said  con- 
tractor for  said  materials  is  the  sum  of dollars, 

which  said  sum  of dollars  became  due  to  said 

claimant  on  the day  of ,  191 . . . 

That  said   

hereby  claims  a  lien  on  all  moneys  due  or  to  become  due  the 

said    

on  said  contract  with  said  City  of  San   Francisco   for  the 
sum  of dollars. 


Claimant. 


STATE  OF  CALIFORNIA,      ^^ 
County   of 

,  being  duly  sworn, 

deposes  and  says,  that  he  is  the  person  named  as  claimant 
in  the  foregoing  claim  of  lien ;  that  he  has  read  the  foregoing 
claim  of  lien,  and  knows  the  contents  thereof,  and  that  the 
statements  therein  contained  are  true  of  his  own  knowledge. 


Subscribed  and  sworn  to  before  me  this day  of 

,191... 


Notary  Public  in  and  for  the  County  of 
,  State  of  California. 

Section  325.  — OWNER'S  NOTICE  OF  COMPLE- 
TION.— The  owner  may,  within  ten  days  after  completion 
of  any  contract,  or  within  forty  days  after  cessation  from 
labor  thereon,  file  for  record  in  the  office  of  the  county 
recorder  of  the  county  where  the  property  is  situated  a  notice 
of  completion,  in  accordance  with  the  law  stated  in  sec- 
tion 296.  The  following  is  a  form  of  owner's  notice  of 
completion : 


BUSINESS    CONTRACTS   AND   LEGAL   OBLIGATIONS.  421 


NOTICE  OF  COMPLETION  OF  WORK. 


Notice  is  hereby  given  that  I, 

(Here  insert  name  of  owner.) 

as  owner  of  the  property  herein  described,  caused  a  building 
to  be  erected  upon  the  property  hereinafter  described,  the 
contract   for   doing  which   work  was   heretofore  made   with 

(Here  insert  name  of  contractor.) 
and   which   contract   was   filed    for    record   in    the    office   of 
the  Recorder  of  the  City  and  County  of  San  Francisco,  State 
of  California,  on  the day  of ,  191 . . . 

That   the   work   on   said   building   was   completed   on   the 
day  of ,  191... 

That  the  nature  of  the  title  to  said  property  of  said  owner 
is  as  follows,  that  is  to  say,  he  owns  it  in  fee. 

That  the  property  hereinbefore  referred  to,  and  on  which 
said  building  is  situated,  is  described  as  follows,  to-wit: 


(Here  insert  description  of  property.) 


STATE  OF  CALIFORNIA,    ) 
City  and  County  of  San  Francisco}    ^^' 

,  being  duly  sworn, 

deposes  and  says,  that  he  is  the  owner  of  the  property  de- 
scribed in  the  foregoing  notice ;  that  he  has  read  the  same 
and  knows  the  contents  thereof,  and  that  the  same  is  true 
of  his  own  knowledge. 

Subscribed  and  sworn  to  before  me  this 

day  of ,  191... 


Notary  Public  in  and  for  the  City  and  County 
of  San  Francisco,  State  of  California. 

Section  326. NOTICE    OF    OWNER    THAT    HE 

WILL  NOT  BE  RESPONSIBLE  FOR  IMPROVE- 
MENTS ON  HIS  PREMISES.— The  owner  of  property, 
or  persons  having  or  claiming  any  estate  in  the  land  upon 
which  improvements  are  being  made  or  buildings  constructed, 


422  BUSINESS   LAWS   FOR   BUSINESS   MEN. 

may  within  ten  days  after  he  shall  have  obtained  knowledge 
of  said  construction,  labor  or  repair  or  work  or  labor,  give 
notice  that  he  will  not  be  responsible  for  the  same,  in  accord- 
ance with  the  law  stated  in  section  298,  and  this  notice  must 
be  posted  and  recorded  in  the  manner  stated  in  section  298. 
The  following  is  a  form  of  notice  by  owner  that  he  will  not 
be  responsible: 

To  Whomsoever  It  May  Concern: 

Notice  is  given  that  I  am  the  owner  of  all  that  property 
described   as   follows :    

(Here  insert  description  of  property.) 


and  I  hereby  give  notice  that  I  will  not  be  responsible  for 
the  construction,  or  for  the  material  or  labor,  used  or  to  be 
used,  or  for  any  alteration  or  repair,  or  for  any  work,  labor, 
material  furnished  or  to  be  furnished  upon  that  structure, 
or  addition  thereof,  now  upon  said  land,  or  which  has  been 
performed,  furnished  or  used  in  any  manner  or  way  upon 
said  land  or  upon  the  buildings  thereon,  or  additions  thereto, 
or  which  may  heretofore  be  performed,  furnished  or  used, 
upon  said  land  or  buildings  or  additions  thereto,  or  for  the 
services  of  any  architect. 

Dated  the day  of ,  191... 

STATE  OF  CALIFORNIA,    1 
City  and  County  of  San  Francisco)    ^^' 

,  being  duly  sworn, 

(Here  insert  name  of  owner.) 
deposes  and  says,  that  he  is  the  owner  of  the  property  de- 
scribed in  the  foregoing  notice;  that  he  has  read  the  same 
and  knows  the  contents  thereof,  and  that  the  same  is  true 
of  his  own  knowledge. 


Subscribed  and  sworn  to  before  me  this, 
day  of ,  191... 


Notary  Public  in  and  for  the  City  and  County 
of  San  Francisco,  State  of  California. 


BUSINESS   CONTRACTS   AND  LEGAL  OBLIGATIONS.  423 

Section  327.— FORM  OF  ASSIGNMENT  OF  LIEN. 
— It  has  already  been  stated  that  a  mechanic's  Hen  can  be 
assigned,  after  it  is  filed  for  record,  but  not  before.  The 
following  is  a  form  of  assignment  of  lien. 

ASSIGNMENT  OF  LIEN. 

THIS  INDENTURE,  made  the day  of 

,   191 . . ,  witnesseth : 


That   ,  residing 

at ■ .,  State  of  California,  hereby  assigns 

for  valuable  consideration  to , 

residing  at ,  State  of  California, 

that  certain  lien  and  all  moneys  due  or  to  become  due  thereon, 
amounting  at  the  date  of  filing  notice  of  lien  to  the  sum  of 

dollars,  which  said  notice  of  lien  was 

filed  in  the  office  of  the  clerk  of County, 

State  of  California,  on  the.  ..... .day  of ,  191. .  ; 

in  which  said  notice  of  lien  the  said 

was  named  as  lienor  and 

as   owner,   and  the  real   property  therein   mentioned   as   the 
subject  of  said  lien  particularly  described  as  follows,  to-wit: 


(Here  describe  the  property.) 

In  witness  whereof,  I  have  hereunto  set  my  hand  and  seal 
the  day  and  year  first  above  written. 

(Seal.) 

STATE  OF  CALIFORNIA, 


County  of.  ''      ' 

On  this day  of ,  191 . . ,  before  me 

personally  appeared   , 

to  me  known  to  be  the  person  described  in  the   foregoing 
instrument,  and  acknowledged  that  he  executed  the  same. 


Notary  Public  in  and  for  the  County  of 
,  State  of  California. 


424  BUSINESS   LAWS   FOR   BUSINESS   MEN. 

Architects 

Section  328.— COMPENSATION    OF    ARCHITECT. 

— The  compensation  of  an  architect  who  draws  plans  and 
specifications  is  left  to  an  agreement  between  himself  and 
his  employer.  But  if  there  is  no  agreement  as  to  what  is 
to  be  paid  for  the  architect's  work,  the  law  will  allow  him 
a  reasonable  compensation  for  his  services.  What  is  a  rea- 
sonable compensation  will  depend  upon  the  character  of  the 
work  he  has  done,  and  will  be  determined  by  the  knowledge 
and  experience  of  persons  skilled  in  that  kind  of  work.  Cus- 
tom may  also  enter  into  the  question  of  the  architect's  com- 
pensation, as  where  he  has  superintended  the  construction  of 
the  building,  and  it  is  the  local  custom  to  pay  architects  so 
much  for  such  serivce;  in  which  case  it  will  be  presumed 
that  his  services  of  like  character  were  worth  the  customary 
compensation,  unless  some  fact  is  shown  which  makes  these 
services  worth  more  or  less  than  the  customary  rate. 

Section  329.— ARCHITECT'S  LIEN.— An  architect  has 
.a  lien  on  the  building  for  his  pay,  provided  he  superintends 
the  erection  of  the  building.  He  must,  to  enforce  his  lien, 
file  the  same  claim  of  lien  in  the  office  of  the  County  Re- 
corder as  is  required  of  laborers,  mechanics,  and  material- 
men, referred  to  in  preceding  sections. 

Code  of  Civil  Procedure,  Section  1183. 

Section  330.— ARCHITECT  CANNOT  FILE  LIEN 
AGAINST  PUBLIC  BUILDING.— If  an  architect  pre- 
pares plans  and  specifications  for  a  public  building,  such  as 
a  Court  House,  Jail,  City  Hall,  Hall  of  Records,  or  School 
House,  he  cannot  file  a  lien  against  any  such  property,  and 
he  must  look  only  to  the  public  funds  provided  by  law  for 
such  public  improvements.  Justice  Temple,  in  the  Supreme 
Court  of  California,  in  the  case  of  Mayrhofer  against  the 
Board  of  Education  of  San  Diego,  in  which  case  it  was 
decided  that  in  California  no  lien  will  be  allowed  against  a 


BUSINESS   CONTRACTS   AND   LEGAL  OBLIGATIONS.  425 

public  building-,  stated  the  reason  thus:  "The  claim  is  made 
that  public  buildings  are  included  both  in  the  word  'property/ 
used  in  the  Constitution,  and  in  the  phrase  'any  building,' 
used  in  the  Code,  and  therefore  it  must  necessarily  follow  that 
mechanics  and  material-men  are,  by  these  provisions,  given  a 
right  to  a  lien  upon  such  buildings.  But  this  ignores  the 
rule  of  statutory  construction,  that  the  State  is  not  bound 
by  general  words  in  a  statute,  which  would  operate  to  trench 
upon  its  sovereign  rights,  injuriously  affect  its  capacity  to 
perform  its  functions,  or  estabHsh  a  right  of  action  against  it. 
The  Government  was  created  and  shaped  by  the  Constitution. 
It  is  not  an  end  in  itself,  but  a  mere  instrumentality  for  public 
services.  Its  powers  and  functions  exist  only  for  the  people. 
One  of  its  functions  is  to  enact  laws  for  the  government  of 
the  inhabitants  within  its  limits,  thereby  affording  them  pro- 
tection and  advancing  their  general  welfare.  The  property 
it  holds  is  simply  to  enable  it  to  perform  the  services  required 
of  it.  It  is  as  much  devoted  to  public  use  as  are  the  streets 
and  highways,  though  in  a  different  way.  Instead  of  being 
the  natural  and  obvious  conclusion,  that  a  general  law  pro- 
viding remedies  for  private  individuals  was  intended  to  enable 
a  creditor  of  the  State  to  seize  this  property  for  the  satis- 
faction of  his  debt,  it  would  be  a  most  unnatural  inference. 
The  Constitution  has  itself  provided,  as  the  only  means  which 
the  State  has  for  the  payment  of  its  debts,  the  exercise  of 
the  sovereign  power  of  taxation.  And  for  each  political 
subdivision  the  rule  is  the  same.  These  revenues  are  divided 
into  specific  funds,  and  one  furnishing  labor  or  material  to 
the  State  knows  to  what  he  must  look  for  payment.  He  be- 
comes a  creditor  of  a  specific  fund,  and  has  no  right  except 
with  reference  to  such  fund."  (Decided  by  the  Supreme 
Court  of  California  in  the  case  of  Mayrhofer  vs.  Board  of 
Education  of  San  Diego,  which  decision  is  printed  in  Volume 
89  of  the  California  Reports,  page  110.) 

Section  331.— ARCHITECT  HAS  NO  LIEN  AGAINST 
MONUMENT  IN  PUBLIC  PARK.— Where  an  architect 
is  employed  by  a  contractor  for  the  erection  of  a  monument 


^6  BUSINESS   LAWS   FOR  BUSINESS   MEN. 

in  a  public  park,  he  has  no  lien  for  his  pay  upon  the  monu- 
ment or  the  land  on  which  it  is  erected.  This  question  was 
decided  by  our  Supreme  Court  in  the  matter  of  the  Gar- 
field Monument,  in  Golden  Gate  Park,  San  Francisco.  The 
Supreme  Court  said :  "The  monument,  though  built  by 
private  contribution,  was  erected  upon  and  as  an  adornment 
of  one  of  the  public  parks  of  the  municipality.  It  was  affixed 
to  the  freehold,  and  thus  became  a  part  of  the  land,  the  prop- 
erty of  the  municipality.  The  monument  could  not  be  made 
subject  to  a  lien."  (Decided  by  the  Supreme  Court  of 
California  in  the  case  of  Griffith  vs.  Happersberger,  which 
decision  is  printed  in  Volume  86  of  the  California  Reports, 
page  605.) 

Section  332.—  PAYMENTS  MADE  ON  ARCHI- 
TECT'S CERTIFICATE.— Where  a  contract  provides 
that  payments  shall  be  made  on  the  certificate  of  the  architect 
— who  is  required  by  the  contract,  among  other  things,  to 
certify  that  all  the  work  of  the  mechanics,  laborers,  and  others 
employed  by  the  original  contractor,  has  been  paid — his  certi- 
ficate is  conclusive  of  the  rights  of  all  parties  concerned, 
unless  it  can  be  shown  that  it  was  obtained  by  the  owner  by 
collusion  or  fraud. 

Section  333.  — ARCHITECT'S  CERTIFICATE  AS 
TO  LIENS. — Where  a  building  contract  provides  that  for 
each  of  the  payments  a  certificate  shall  be  obtained  from  the 
architect,  and  that  at  the  time  of  the  presentation  of  any 
certificate  there  shall  not  be  any  liens  against  the  building, 
and  a  lien  is  filed  before  the  last  installment,  it  does  not 
become  due  while  such  condition  exists ;  and  the  amount  of 
the  lien  must  be  deducted  from  the  amount  due  the  contractor. 

Section  334.— CONDITION  AS  TO  CERTIFICATE 
MAY  BE  WAIVED  BY  OWNER.— The  condition  in  a 
contract  for  the  erection  of  a  building,  that  all  installments 
of  payments  shall  be  made  upon  certificates  of  the  architect 
that  the  materials  and  labor  have  been  furnished  in  accordance 


BUSINESS    CONTRACTS   AND   LEGAL   OBLIGATIONS.  427 

with  the  plans  and  specifications,  may  be  waived  by  the 
owner.  The  clause  as  to  the  production  of  the  certificates 
is  for  the  benefit  of  the  owner,  and  he  may  waive  it  at  his 
option,  and  accept  other  proofs. 

Section  335.— ARCHITECT'S  PLANS  PART  OF 
CONTRACT.— When  the  contract  mentions  the  architect's 
drawings  and  specifications,  and  refers  to  them  for  conditions 
of  the  agreement,  they  form  an  essential  part  of  the  building 
contract,  and  should  be  annexed  to  the  contract  before  filing. 
The  plans  and  specifications  cannot  be  left  in  the  architect's 
office,  and  at  the  same  time  be  considered  as  annexed  to  the 
contract.  If  intended  to  co-operate  with  and  be  incorporated 
into  the  formal  contract,  the  drawing  and  specifications 
must  be  in  fact  attached  to  the  contract. 

Section  336.  — SERVICES     OF     ARCHITECT.— The 

services  of  an  architect,  in  the  preparation  of  drawings, 
plans,  and  specifications  for  a  building  and  in  superintending 
its  erection  are  "work  and  labor  upon  a  building,"  within 
the  meaning  of  the  mechanic's  lien  law.  The  architect  who 
superintends  the  construction  of  a  building  performs  labor  as 
truly  as  the  carpenter  who  frames  it,  or  the  mason  who  lays 
the  wall,  and  labor  of  a  most  important  character.  The 
language  quoted  makes  no  distinction  between  skilled  and 
unskilled  labor,  or  between  mere  manual  labor  and  the  labor 
of  one  who  supervises,  directs,  and  applies  the  labor  of  others. 
The  general  principle  upon  which  the  lien  laws  proceed  is, 
that  any  person  who  has  contributed  by  his  labor  or  by  fur- 
nishing materials,  to  a  structure  erected  by  an  owner  upon 
his  premises,  shall  have  a  claim  upon  the  property  for  his 
compensation.  An  architect  who  prepares  the  drawings, 
plans,  and  specifications  for  a  building,  and  superintends  its 
erection,  may  as  truly  be  said  to  perform  labor  on  it  as  any 
one  who  takes  part  in  the  work  of  construction. 


428  BUSINESS  LAWS  FOR  BUSINESS  MEN. 

Section  337.— LIABILITY  OF  ARCHITECT  FOR 
NEGLIGENCE. — An  architect  must  perform  his  services 
with  diligence  and  ordinary  care.  If  by  his  negligence  long 
delay  occurs  in  finishing  drawings,  plans,  and  specifications 
which  he  has  agreed  to  furnish,  and  the  other  party  is  dam- 
aged by  the  delay,  he  is  liable  for  the  loss.  Or  if,  as  super- 
intendent he  neglects  his  duty,  to  the  detriment  of  his  em- 
ployer, he  is  also  liable  to  him  in  damages.  The  architect 
is  bound  to  devote  to  his  employer  the  skill  and  energy  he 
possesses,  and  will  be  liable  in  damages  for  any  failure  in 
this  respect. 

Section  338.— CONTRACT  FOR  PERCENTAGE  ON 
COST  OF  BUILDING.— Under  a  contract  with  an  archi- 
tect to  furnish  the  necessary  drawings,  specifications,  and 
details  for  the  construction  of  a  building,  for  a  certain  per- 
centage of  the  total  cost  of  the  construction  of  the  building, 
the  architect,  after  furnishing  the  drawings,  etc.,  in  case 
his  employment  is  terminated  before  the  completion  of  the 
building,  is  entitled  to  the  agreed  commission  on  the  total 
cost  of  the  building.  This  was  determined  by  our  Su- 
preme Court,  in  a  case  where  Charles  I.  Havens  sued  Annie 
Donahue,  at  San  Francisco,  for  a  commission  of  two  and  a 
half  per  cent  upon  the  total  cost  of  the  building,  according 
to  his  contract  with  Mrs.  Donahue.  He  was  paid  a  portion 
of  the  commission,  but  his  employment  was  terminated 
before  the  building  was  completed,  and  he  sued  to  recover 
the  balance.  Mrs.  Donahue  contended  that  Havens  was 
only  entitled  to  recover  his  commission  upon  the  cost  of 
construction  so  far  as  the  building  had  proceeded  at  the 
time  his  employment  was  terminated.  The  Supreme  Court 
decided  that  the  architect  in  question  had  nothing  to  do 
with  the  construction  of  the  building.  His  contract  was 
simply  to  furnish  the  plans,  drawings,  and  specifications, 
and  this  he  did.  (Decided  by  the  Supreme  Court  of  Cali- 
fornia in  the  case  of  Havens  vs.  Donahue,  which  decision 
is  printed  in  Volume  111  of  the  California  Reports,  page 
297.) 


BUSINESS    CONTRACTS   AND   LEGAL   OBLIGATIONS.  429 

Section  339.— LIABILITY  FOR  DISCLOSING  IN- 
TENTION OF  OWNER.— An  architect  employed  to  fur- 
nish plans  for  the  erection  of  a  building  on  a  site  on  which 
there  is  another  building,  occupied  by  tenants,  is  not  liable 
to  the  owner,  by  telling  people  of  the  intended  erection  of 
the  new  building — the  architect  having  neither  contracted 
nor  been  requested  to  keep  such  a  fact  secret — for  the  loss 
of  rent  caused  by  the  vacation  of  the  building  by  the  tenants. 

Section  340.— TIME  SPENT  ON  PLANS  AND 
SPECIFICATIONS.— Where  an  architect  is  compelled  to 
sue  for  his  compensation,  and  there  is  no  agreement  fixing 
the  amount  of  his  pay,  he  may  prove  the  reasonable  value  of 
his  services.  And  evidence  as  to  the  length  of  time  spent 
by  an  architect  on  certain  plans  and  specifications  is  ad- 
missible on  the  question  of  the  value  of  his  services  in 
preparing  them,  the  jury  not  being  limited  to  a  considera- 
tion of  the  expert  testimony  on  that  question. 

Section  341.— CERTIFICATE  AND  LICENSE  OF 
ARCHITECT. — It  is  unlawful  and  a  misdemeanor,  punish- 
able by  fine  of  not  less  than  fifty  dollars  nor  more  than  five 
hundred  dollars,  for  any  person  to  practice  architecture 
without  a  certificate  in  this  state,  or  to  advertise,  or  put 
out  any  sign  or  card,  or  other  device  which  might  indicate 
to  the  public  that  he  was  an  architect;  provided,  that  nothing 
in  this  act  shall  prevent  any  person  from  making  plans  for 
his  own  buildings,  nor  furnishing  plans  or  other  data  for 
buildings  for  other  persons,  provided  the  person  so  furnish- 
ing such  plans  or  data  shall  fully  inform  the  person  for 
whom  such  plans  or  data  are  furnished,  that  he,  the  person 
furnishing  such  plans,  is  not  a  certified  architect;  provided, 
that  nothing  in  this  act  shall  prevent  the  employment  of  an 
architect  residing  out  of  the  state  of  California  to  prepare 
plans  and  specifications  for  buildings  or  other  structures 
within  the  state,  conditioned  he  shall  present  satisfactory 
evidence  to  the  board  of  the  district  in  which  the  structure 
is  to  be  erected  that  he  is  a  competent  architect,  when  such 


430  BUSINESS   LAWS   FOR  BUSINESS   MEN. 

board  shall  issue  to  such  architect  a  temporary  certificate 
for  such  employment,  upon  the  payment  of  a  fee  of  five 
dollars.  Architects'  certificates  issued  in  accordance  with 
the  provisions  of  this  act  shall  remain  in  full  force  until 
revoked  for  cause,  as  hereinafter  provided  for  in  this  act. 
A  certificate  may  be  revoked  for  dishonest  practices,  or  for 
gross  incompetency  in  the  practice  of  the  profession,  which 
questions  shall  be  determined  by  the  district  board  of  archi- 
tecture of  the  district  in  which  the  person  whose  certificate 
is  called  in  question  shall  reside,  or  shall  be  doing  business; 
and  upon  a  full  investigation  of  the  charges  by  the  district 
board,  an  opportunity  having  been  given  the  accused  to  be 
heard  in  his  own  defense  or  by  counsel ;  and  upon  the  verdict 
of  at  least  four  members  of  the  district  board,  the  board 
may  issue  its  certificate  to  the  secretary  of  state  revoking  the 
certificate  of  the  person  accused;  and  the  secretary  of  state 
shall  thereupon  cancel  such  certificate.  And  on  the  cancella- 
tion of  such  certificate,  it  shall  be  the  duty  of  the  secretary 
of  the  district  board  to  give  notice  of  such  cancellation  to 
the  county  recorder  of  each  county  in  this  state,  whereupon 
the  recorder  shall  mark  the  certificate  recorded  in  his  office 
"Cancelled." 

After  the  expiration  of  six  months  the  person  whose  certi- 
ficate was  revoked  may  have  a  new  certificate  issued  to  him 
by  the  secretary  of  state  upon  the  certificate  of  the  district 
board  by  which  the  certificate  was  revoked. 

Every  certificated  architect  shall  have  a  seal,  the  impres- 
sion of  which  must  contain  the  name  of  the  architect,  his 
place  of  business,  and  the  words  "Certificated  architect,"  with 
which  he  may  stamp  all  plans  prepared  by  him. 

Each  regularly  certificated  architect  shall  pay  an  annual 
license  fee  of  five  dollars,  said  fee  to  be  paid  to  the  secretary 
of  the  board  of  the  district  of  which  he  shall  be  a  resident, 
and  shall  be  payable  in  advance  on  January  1,  and  shall 
become  delinquent  the  first  day  of  April,  of  each  year,  after 
which  date  it  shall  be  delinquent;  and  the  certificate  of  such 
architects  who  shall  fail  to  pay  their  license  fees  by  April  1 
of  each  year,  shall  be  subject  to  cancellation  by  said  district 


BUSINESS   CONTRACTS   AND   LEGAL   OBLIGATIONS.  431 

board,  and  notice  of  such  cancellation  shall  be  sent  to  each 
county  recorder  of  the  state  of  California  and  to  the  secre- 
tary of  state,  for  cancellation  of  certificates.  And  the  secre- 
tary of  the  said  district  shall  issue  a  receipt  signed  by  the 
president  and  secretary  of  the  district,  and  under  the  seal  of 
the  district  board,  to  each  architect  paying  said  license  fee, 
showing  that  said  certificated  architect  has  paid  his  annual 
license  fee,  which  license  receipt  shall  be  displayed  in  a 
prominent  place  in  the  office  of  said  architect.  The  fees  so 
collected  shall  be  used  to  meet  the  expenses  of  the  state 
board  of  architecture. 

General  Laws  of  California,  page  30. 


Liens  for  Salaries  and  Wages. 

Section  342.— PREFERRED  CLAIMS  FOR  SALARY 
AND  WAGES. — The  law  of  California  provides  for  cer- 
tain liens  for  salary  and  wages,  which  do  not  come  in  the 
class  of  mechanics'  liens,  because  including  other  persons 
in  other  occupations.  In  all  assignments  for  the  benefit 
of  creditors,  or  in  proceedings  for  insolvency,  the  wages 
and  salaries  of  miners,  mechanics,  salesmen,  servants,  clerks, 
or  laborers,  are  preferred  claims.  It  must  appear  that  the 
services  were  rendered  or  work  done  within  the  previous 
sixty  days.  These  claims  will  be  preferred  to  the  amount 
of  one  hundred  dollars  each,  and  must  be  paid  before  any 
other  creditors  of  the  person  who  makes  the  assignment. 
Code  of  Civil  Procedure,  Section  1204. 

Section  343.— PREFERRED  CLAIMS  FOR  WAGES 
AND  SALARIES  AGAINST  ESTATES.— In  case  of 
the  death  of  any  employer,  the  wages  of  each  miner,  me- 
chanic, salesman,  clerk,  servant,  or  laborer,  who  has  rendered 
services  or  performed  work  within  the  sixty  days  next  pre- 
ceding the  death  of  the  employer,  not  exceeding  one  hun- 
dred  dollars    in   amount,   are   preferred   claims   against   the 


432  BUSINESS   LAWS   FOR   BUSINESS   MEN. 

estate,  and  must  be  paid  by  the  executor  or  administrator 
of  the  estate  before  any  other  claims,  except  the  funeral 
expenses,  expenses  of  the  last  sickness,  expenses  of  adminis- 
tration, and  family  allowance. 

Code  of  Civil  Procedure,  Section  1205, 

Section  344.— WAGES  AND  SALARIES  IN  CASE 
OF  ATTACHMENT  AND  EXECUTION.— In  cases  of 
attachments  and  executions  (not  issued  in  suits  for  wages) 
served  on  the  employer  of  any  miners,  mechanics,  sales- 
men, servants,  clerks,  or  laborers,  the  latter  may  give  notice 
to  the  creditor  and  the  officer  levying  the  attachment  or 
execution  of  their  claims  for  wages  or  salaries;  the  notice 
may  be  given  at  any  time  before  the  actual  sale  of  the 
property  levied  on,  or,  in  the  event  of  a  levy  upon  money, 
at  any  time  before  the  transfer  of  such  money  under  ex- 
ecution. After  the  notice  is  given,  unless  the  claim  is 
disputed,  by  the  debtor  or  a  creditor,  for  services  rendered 
within  the  sixty  days  next  preceding  the  levy  of  the  attach- 
ment or  execution,  not  exceeding  one  hundred  dollars,  the 
officer  must  make  this  payment  out  of  the  proceeds  of  sales  of 
property,  or  out  of  money  coming  into  his  hands  by  the  levy. 
The  claim  for  wages  or  salary  referred  to  must  be  sworn  to 
by  the  person  making  the  claim.  If  the  claim  as  made  is 
disputed,  by  the  debtor  or  a  creditor,  the  person  presenting 
the  claim  must  commence  a  suit  on  it  within  ten  days;  the 
officer  in  the  meantime  holding  enough  money  to  pay  the 
claim  until  the  determination  of  the  suit. 

Code  of  Civil  Procedure,  Section  1206. 


Vendor's    Lien. 

Section  345.— LIEN  OF  SELLER  OF  REAL  PROP- 
ERTY.— One  who  sells  real  property  has  a  vendor's  lien, 
independent  of  possession,  for  so  much  of  the  price  as  re- 
mains unpaid  and  unsecured.     The  vendor  may  have  the 


BUSINESS    CONTRACTS   AND   LEGAL   OBLIGATIONS.  433 

personal  obligation  of  the  buyer,  but  this  is  not  a  security 
which  will  defeat  his  vendor's  lien. 
Civil  Code,  Section  3046. 

Section  346.— WHEN  TRANSFER  OF  CONTRACT 
WAIVES  VENDOR'S  LIEN.— The  seller  of  real  estate 
may  waive  his  vendor's  lien  for  the  purchase  price.  And 
where  the  buyer  has  given  to  the  seller  a  written  contract 
for  payment  of  all  or  part  of  the  price,  and  the  seller  assigns 
and  transfers  the  contract  to  a  third  person,  this  will  be  con- 
sidered a  waiver  of  his  vendor's  lien  to  the  extent  of  the  sum 
payable  under  the  contract.  But  a  transfer  of  the  contract, 
in  trust  to  pay  debts,  and  the  surplus  to  belong  to  the  seller, 
is  not  a  waiver  of  the  lien. 

Civil  Code,  Section  3047. 

Section  347.— EXTENT    OF    VENDOR'S    LIEN.— A 

vendor's  lien  is  valid  against  every  one  claiming  under  the 
debtor,  except  a  purchaser  or  encumbrancer  in  good  faith  and 
for  value.  If  the  buyer  transfers  the  property  to  one  who 
has  no  notice  of  the  lien  of  the  vendor,  no  notice  or  knowl- 
edge that  any  part  of  the  price  remains  unpaid,  and  who 
pays  a  valuable  consideration  for  the  property,  and  acts 
throughout  the  transaction  in  good  faith,  the  vendor  will 
lose  his  lien.  So,  as  to  a  mortgagee,  where  the  vendee  has 
given  a  mortgage  on  the  property  to  one  who  has  no  notice 
of  the  real  facts,  and  takes  the  mortgage  in  good  faith  and 
for  value,  the  vendor  cannot  assert  his  lien  against  the 
mortgagee. 

Civil  Code,  Section  3048. 

Section  348.— LIEN  OF  SELLER  OF  PERSONAL 
PROPERTY. — One  who  sells  personal  property  has  a  special 
lien,  dependent  on  possession,  for  its  price,  if  the  property 
is  in  his  possession  when  the  price  becomes  payable.  The  lien 
may  be  enforced  in  the  same  manner  as  when  property  is 
pledged.  That  is  to  say,  he  may  store  the  property,  and  sue 
the  vendee  for  the  price ;  or  he  may  resell  the  property,  to  the 


434  BUSINESS   LAWS   FOR  BUSINESS   MEN. 

best  advantage,  and  recover  from  the  vendee  the  difference 
between  the  contract  price  and  the  price  obtained  on  the 
re-sale. 

Civil  Code,  Section  3049. 

Logger's  Lien. 

Section  349.— LIEN  FOR  LABOR  ON  LOGS  AND 
LUMBER. — All  persons  who  labor  at  cutting,  hauling,  raft- 
ing, or  drawing  logs,  or  lumber,  or  who  perform  any  labor 
in  or  about  a  logging-camp  necessary  for  the  getting  out  or 
transportation  of  logs  or  lumber,  have  a  lien  on  the  property 
for  the  amount  due  for  their  personal  services.  This  lien 
takes  precedence  of  all  other  claims,  and  continues  for  thirty 
days  after  the  logs  or  lumber  arrive  at  the  place  of  destina- 
tion, for  sale  or  manufacture.  If  logs  are  rafted  down  a 
river,  to  a  sawmill  for  manufacture ;  or  if  logs  are  hauled  on 
a  railroad,  to  the  mill;  in  either  case  the  lien  of  the  logger 
continues  for  thirty  days  after  the  logs  reach  the  mill. 

Section  350.— CLAIM  OF  LIEN  TO  BE  FILED  FOR 
RECORD. — Within  twenty  days  after  the  completion  of  his 
work,  if  a  logger  or  laborer  in  the  woods  or  camps  desires 
to  take  advantage  of  the  lien  law,  he  must  file  for  record  in 
the  office  of  the  Recorder  of  the  county  a  claim,  sworn  to  by 
him,  containing  a  statement  of  his  demand,  after  deducting 
all  just  credits  and  offsets;  the  time  within  which  the  labor 
was  done ;  the  name  of  the  person  or  persons  for  whom  he 
worked;  the  place  where  the  logs  or  timber  upon  which  the 
lien  is  claimed  are  believed  to  be  situated,  and  how  they  are 
marked;  the  name  of  the  reputed  owner;  and  the  name  of 
the  reputed  owner  of  the  land  from  which  the  logs  were  cut 
and  hauled. 

Section  351.— WHEN  SUIT  MUST  BE  COMMENCED 
TO  FORECLOSE  LIEN.— After  the  claim  of  lien  has 
been  filed,  a  suit  to  foreclose  the  lien  must  be  commenced 


BUSINESS   CONTRACTS   AND  LEGAL  OBLIGATIONS.  435 

within  twenty-five  days;  and  if  this  is  not  done,  the  lien  will 
be  at  an  end. 

Section  352.— ATTACHMENT  AS  FURTHER  SE- 
CURITY.— The  law  provides,  that  when  the  suit  to  foreclose 
the  lien  has  been  commenced, .  the  logger  may  have  the  logs 
or  timber  attached  as  further  security  for  the  payment  of  any 
judgment  he  may  recover  in  the  suit.  The  writ  of  attachment 
is  issued  by  the  Clerk  when  he  issues  the  summons,  or  it 
may  be  issued  at  any  time  afterwards,  upon  receiving  an 
affidavit  from  the  plaintiff  showing  the  defendant's  indebted- 
ness to  him,  and  that  the  attachment  is  asked  for  in  good 
faith.  The  Sheriff  will  levy  the  attachment  by  taking  the 
logs  or  timber  into  his  possession,  and  will  be  bound  to  keep 
possession  of  the  property  unless  the  defendant  gives  him 
security  to  pay  the  judgment,  if  any  is  obtained  against  him 
in  the  suit.  If  the  defendant  gives  the  security,  the  Sheriff 
will  release  the  property,  free  from  the  lien;  for  if  the  logger 
obtains  good  security  that  his  claim  will  be  paid,  if  he  gets 
a  judgment,  this  is  all  he  needs,  and  the  lien  will  no  longer 
be  necessary. 

Section  353.— UNDERTAKING  ON  ATTACHMENT. 

— Before  the  attachment  will  issue,  a  bond  will  have  to  be 
filed  with  the  Clerk,  in  a  sum  not  less  than  two  hundred 
dollars,  for  costs  and  damages  if  the  defendant  wins  the  suit. 

Section  354.— EXTENT  OF  THE  LIEN.— The  logger's 
lien  in  no  case  extends  beyond  the  limits  of  the  county  in 
which  the  logs  or  timber  in  controversy  were  cut. 

Section  355.— ATTACHMENT  NOT  NECESSARY 
TO  HOLD  LIEN.— The  attachment  of  the  logs  and  timber 
is  not  necessary  to  hold  the  lien.  It  is  at  the  option  of  the 
logger  whether  any  attachment  at  all  shall  be  issued,  and  it 
is  only  provided  as  additional  security,  and  for  the  purpose 
of  compelling  the  defendant  to  give  a  bond  for  the  amount 
of  the  claim.     The  logger  may  file  his  claim   of   lien,   and 


436  BUSINESS   LAWS   FOR  BUSINESS   MEN. 

then  proceed  and  foreclose  it,  without  getting  out  any  attach- 
ment at  all. 

Statutes  of  1877,  page  747;  Statutes  of  1880,  page  38; 
Statutes  of  1887,  page  53. 

Lien     of  Persons  Working  on  Threshing 
Machines. 

Section  356.  — PERSONS  ENTITLED  TO  THE 
LIEN. — Every  person  performing  work  or  labor  with  or 
about  any  threshing-machine  or  engine,  horse-power,  wagon, 
or  other  of  the  appliances,  while  engaged  in  threshing,  has  a 
lien  on  the  property  to  the  extent  of  the  value  of  his  services. 

Section  357.— EXTENT  OF  LIEN.— This  lien  extends 
for  ten  days  after  the  claimant  has  ceased  such  work  or  labor. 

Section  358.  — SUIT  MUST  BE  COMMENCED 
WITHIN  TEN  DAYS.— The  lien  expires  unless  a  suit  to 
recover  the  amount  of  the  claim  is  commenced  within  ten 
days  after  the  party  ceases  work. 

Section  359— PROCEEDS  OF  SALE  DISTRIBUTED 
PRO  RATA. — In  any  suit  to  enforce  a  lien  on  a  threshing- 
machine  outfit,  when  a  judgment  is  obtained  in  favor  of  the 
plaintiff,  and  the  property  is  sold,  the  proceeds  of  the  sale 
are  required  by  the  law  to  be  distributed  pro  rata  to  all  judg- 
ment creditors  who  have,  within  ten  days,  begun  suits  to  re- 
cover judgments  for  the  amount  due  them  for  such  work.  The 
meaning  of  this  is,  that  where  there  are  a  number  of  laborers 
who  have  filed  their  suits,  they  shall  all  share  alike  in  the 
final  disposition  of  the  property.  If  the  property  will  sell 
for  enough  to  pay  all  in  full,  they  will  each  receive  full  pay; 
but  if  the  proceeds  of  the  sale  are  not  sufficient  to  pay  all  in 
full,  then  each  must  lose  in  proportion  to  the  amount  of  his 
claim. 


BUSINESS   CONTRACTS  AND  LEGAL   OBLIGATIONS.  437 

Section  360.— NO  NOTICE  REQUIRED.— To  enforce 
a  lien  upon  a  threshing-machine,  no  notice  is  required  to  be 
recorded,  or  given  to  anybody.  The  law  creates  the  lien, 
without  any  formality,  and  the  only  thing  required  of  the 
laborer  is,  that  he  shall  commence  suit  within  ten  days  after 
he  quits  work. 

Section  361.— LIEN    IS    ASSIGNABLE.— The  lien  of 

laborers  on  or  with  a  threshing-machine  is  assignable.     All 

may  assign  to  one  person,  before  suit  is  brought,  and  the 

assignee  may  bring  suit  upon  all  the  claims  at  the  same  time. 

Statutes  of  1885,  page  109. 

Liens  in  Favor  of  Owners  of  Stallions,  Jacks 
and  Bulls. 

Section  362.—  PERSONS  ENTITLED  TO  THE 
LIEN. — There  had  been  so  many  complaints  by  owners  of 
stallions,  jacks,  and  bulls,  kept  for  breeding  purposes,  of  in- 
ability to  collect  their  charges  for  services  rendered,  that  the 
Legislature  was  induced  to  pass  a  law  giving  them  a  lien 
upon  the  animals  served.  This  law  provides  that  any  owner 
or  person  having  in  charge  a  stallion,  jack,  or  bull,  used  for 
propagating  purposes,  shall  have  a  lien  for  the  agreed  price 
for  the  service  of  such  stallion,  jack,  or  bull,  upon  any  mare 
or  cow  served  for  pay  and  upon  their  offspring. 

Section  363.— CLAIM  TO  BE  FILED.— A  claim  must 
be  filed  in  the  office  of  the  County  Recorder,  in  the  county 
where  the  mare  or  cow  is  served  or  kept,  which  must  contain 
a  particular  description  of  the  mare  or  cow  served ;  the  date 
and  place  of  serving;  the  name  of  the  owner  or  reputed 
owner  of  the  mare  or  cow  served;  a  p'roper  description,  by 
name  or  otherwise,  of  the  stallion,  or  jack,  or  bull,  performing 
the  service,  and  the  name  of  the  owner  or  person  in  charge 
of  it;  and  the  amount  of  the  lien  claimed. 


438  BUSINESS   LAWS   FOR  BUSINESS    MEN. 

Section  364.  — NOTICE  TO  SUBSEQUENT  PUR- 
CHASERS.— The  claim  of  lien,  when  filed,  operates  as 
notice  to  subsequent  purchasers  and  encumbrancers  of  the 
mare  or  cow  for  the  term  of  one  year  from  the  date  of  the 
filing  of  the  claim. 

Section  365.-— FALSE  REPRESENTATIONS  IN- 
VALIDATE LIEN. — Any  wilfully  false  representations 
concerning  the  breeding  or  pedigree  of  the  stallion,  jack,  or 
bull,  made  or  published  by  the  owner  or  person  in  charge 
of  it,  will  invalidate  the  lien. 

Section  366.— SUITS  TO  FORECLOSE.— Suits  to  fore- 
close these  liens  may  be  brought  in  any  county  where  the 
mare  or  cow,  or  the  offspring  from  such  service,  may  be 
found. 

Section  367.  —  ATTACHMENT     AS     SECURITY.— 

Plaintiff  may  have  an  attachment  put  on  the  mare  or  cow, 
or  their  offspring,  at  the  time  of  issuing  the  summons,  or  at 
any  time  afterwards  before  judgment,  as  further  security 
for  his  pay;  an  undertaking  on  attachment  is  required  to  be 
given,  before  the  attachment  will  issue;  and  the  Sheriff  must 
then  take  into  his  possession  the  mare  or  cow,  or  offspring, 
and  keep  them  pending  the  suit,  unless  the  owner  or  person 
in  charge  of  the  animals  gives  him  a  bond  to  pay  the  judg- 
ment, if  one  should  be  obtained. 
Statutes  of  1891,  page  90. 

Damages  for  Breach  of  Contract. 

Section  368.— MEASURE  OF  DAMAGES.— The  meas- 
ure of  damages  allowed  by  the  law  of  this  State,  for  the 
breach  of  an  obligati'on  arising  from  contract,  is  the  amount 
which  will  compensate  the  injured  party  for  all  the  detriment 
proximately  caused  by  the  breach,  or  which  in  the  ordinary 
course  of  things  would  be  likely  to  result. 
Civil  Code,  Section  3300.. 


BUSINESS   CONTRACTS    AND   LEGAL   OBLIGATIONS.  439 

Section  369.— BREACH  OF  CONTRACT  TO  PAY 
MONEY. — The  detriment  caused  by  the  breach  of  an  obUga- 
tion  to  pay  money  only  is  the  amount  due  by  the  terms  of 
the  obligation,  with  interest.  The  holder  of  a  note  may  be 
greatly  damaged  by  the  failure  of  the  other  party  to  pay  it; 
for  he  may  have  to  borrow  money  himself  at  high  rates  of 
interest ;  or  he  may  be  unable  to  borrow,  and  thus  incur  ruin- 
ous loss  which  might  have  been  avoided  if  his  debtor  had 
paid  him.  Yet  the  law  considers  that  to  allow  any  damages, 
further  than  the  amount  due  on  the  contract,  would  be  to  fix 
a  measure  of  damages  too  uncertain  and  unreliable  to  meet 
the  requirements  of  daily  business  and  commercial  life;  and, 
therefore,  the  law  has  placed  the  measure  of  damages  for 
breach  of  a  contract  for  the  payment  of  money  only  at  the 
amount  due  by  the  terms  of  the  obligation,  with  interest. 
Civil  Code,  Section  3302. 

Section  370.  —  BREACH  OF  WARRANTY  OF 
TITLE. — When  one  sells  property  and  warrants  the  title, 
and  the  title  proves  bad,  the  law  allows  the  grantee  the  price 
paid  to  the  grantor,  if  the  title  to  the  whole  property  is  bad; 
or,  if  there  proves  to  be  no  title  to  a  part  only  of  the  prop- 
erty, such  proportion  of  the  price  as  that  portion  bears  to  the 
whole  property;  and,  also,  interest  at  seven  per  cent  on  the 
price  paid  for  the  time  during  which  the  grantee  derived  no 
benefit  from  the  property,  not  exceeding  five  years. 
Civil  Code,  Section  3304. 

Section  371.— DAMAGES  IN  CASE  OF  EXCHANGE 
OF  LANDS. — When  lands  are  exchanged,  and  the  title  to 
one  of  the  tracts  fails,  which  in  the  exchange  between  the 
parties  was  conveyed  with  general  warranty,  a  recovery  may 
be  had  against  the  grantor  of  that  tract  for  the  value  of  the 
land,  with  interest  and  costs. 

Section  372.— BREACH  OF  AGREEMENT  TO  CON- 
VEY REAL  PROPERTY.— The  damages  caused  by  the 
breach  of  an  agreement  to  convey  an  estate  in  real  property  is 


440  BUSINESS   LAWS    FOR   BUSINESS    MEN. 

the  price  paid,  and  the  expenses  properly  incurred  in  examining 
the  title  and  preparing  the  necessary  papers,  with  interest. 
Civil  Code,  Section  3306. 

Section  373.— BREACH  OF  AGREEMENT  TO  BUY 
REAL  PROPERTY.— The  damages  caused  by  the  breach 
of  an  agreement  to  buy  an  estate  in  real  property  is  deemed 
to  be  the  excess,  if  any,  of  the  amount  which  would  have 
been  due  to  the  seller  under  the  contract,  over  the  value  of 
the  property  to  him. 

Civil  Code,  Section  3307. 

Section  374.— BREACH  OF  WARRANTY  OF  TITLE 
TO  PERSONAL  PROPERTY.— Where  the  title  to  per- 
sonal property  is  warranted,  and  there  proves  to  be  no  title, 
the  damage  is  the  value  of  the  property  to  the  buyer,  when 
he  is  deprived  of  its  possession,  together  with  any  costs  which 
he  has  become  liable  to  pay  in  a  suit  brought  by  the  true 
owner  to  recover  the  property. 
Civil  Code,  Section  3312. 

Section  375.— DAMAGES  FOR  BREACH  OF  WAR- 
RANTY OF  QUALITY  OF  PERSONAL  PROPERTY. 

— Where  personal  property  sold  is  warranted  to  be  of  a 
certain  quality,  and  turns  out  not  to  be  of  that  quality  at  all, 
the  buyer  is  entitled  to  damages  for  the  difference  in  value 
between  what  he  bargained  for  and  that  which  was  actually 
delivered  to  him. 

Section  376.— BREACH  OF  WARRANTY  FOR  SPE- 
CIAL PURPOSE. — If  personal  property  is  sold  for  a  special 
purpose,  as  a  machine  designed  to  do  certain  work,  and  is 
warranted  fit  for  that  purpose,  and  turns  out  to  be  unfit,  the 
buyer  is  entitled  to  damages;  and  his  damages  will  be  the 
difference  between  the  value  of  the  thing  as  it  is  arid  its 
value  as  it  would  have  been  had  it  been  as  warranted.  And 
if  the  buyer,  before  he  discovers  that  the  property  is  unfit 
for  the  purpose  for  which  it  was  warranted,  makes  an  effort 


BUSINESS    CONTRACTS   AND   LEGAL   OBLIGATIONS.  441 

in  good  faith  to  use  it  for  that  purpose,  he  will  also  be  en- 
titled to  damages  for  his  loss  in  trying  to  make  use  of  it. 
Civil  Code,  Section  3314. 

Section  377.— DAMAGES  FOR  BREACH  OF  CAR- 
RIER'S OBLIGATIONS.— A  carrier  of  freight,  passen- 
gers, or  messages,  is  bound  to  accept  them  when  tendered  to 
it.  If  it  refuses,  the  person  requiring  the  service,  and  who  is 
thus  compelled  to  look  elsewhere  to  have  it  performed,  is  en- 
titled to  damages,  being  the  difference  between  the  rate  which 
the  first  carrier  had  a  right  to  charge  and  the  rate  which  he 
was  afterward  compelled  to  pay.  If  a  carrier  of  freight  fails 
to  deliver  it,  the  law  makes  the  carrier  liable  in  damages,  and 
fixes  the  measure  of  the  damage  at  the  value  of  the  property 
at  the  place  and  on  the  day  at  which  it  should  have  been 
delivered,  deducting  whatever  the  freight  charges  would  have 
been.  So,  if  freight  is  lost  on  the  way,  the  carrier  will  be 
liable  to  pay  such  damages.  The  carrier  and  the  con- 
signor may,  however,  make  a  valid  contract  limiting  the 
liability  of  the  carrier.  While  the  ordinary  measure  of  dam- 
ages for  breach  of  a  carrier's  obligation  to  deliver  freight 
is  the  value  of  the  goods  at  the  time  and  place  of  delivery, 
the  liability  of  the  carrier  may  be  limited  by  a  special  contract 
signed  by  the  consignor,  making  the  invoice  price  at  the 
point  of  shipment  the  measure  of  damages,  or  otherwise  limit- 
ing the  carrier's  liability.  A  carrier  of  freight  is  also  liable 
to  pay  damages  for  delay  in  delivering  the  freight.  The 
damages  allowed  will  be  the  depreciation  in  the  intrinsic  value 
of  the  freight  during  the  delay,  and  also  the  depreciation  in 
the  market  value  of  the  goods. 

Civil  Code,  Sections  3315,  3316,  3317. 

Section  378.— DAMAGES  FOR  BREACH  OF  OTHER 
CONTRACTS.— The  damages  allowed  for  the  breach  of 
any  contract  must  be  the  proximate  result  of  the  breach. 
The  damages  must  not  be  speculative  and  uncertain,  and  they 
must  be  capable  of  being  traced  to  the  act  complained  of. 
For  the  breach  of  any  contract,  the  injured  party  is  entitled 


442  BUSINESS   LAWS   FOR   BUSINESS   MEN. 

to  enough  damages  to  make  him  whole  again,  provided  the 
damages  claimed  are  the  proximate  or  natural  results  of  the 
breach.  The  damages  allowed  must  be  such  as  are  proxi- 
mately caused  by  the  breach,  or  such  as  in  the  ordinary 
course  of  things  would  be  likely  to  result  from  it. 

Partnership. 

Section  379.— WHAT  CONSTITUTES  A  PARTNER- 
SHIP.— The  Civil  Code  of  California  defines  a  partnership 
as  being  "the  association  of  two  or  more  persons  for  the 
purpose  of  carrying  on  business  together,  and  dividing  its 
profits  between  them."  This  definition  of  partnership  is  not 
as  comprehensive  as  many  that  have  been  adopted  by  eminent 
writers  on  legal  subjects.  Judge  Story  defines  a  partnership 
thus :  "Partnership,  often  called  co-partnership,  is  usually  de- 
fined to  be  a  voluntary  contract  between  two  or  more  competent 
persons  to  place  their  money,  eflfects,  labor,  and  skill,  or 
some  or  all  of  them,  in  lawful  commerce  or  business,  with 
the  understanding  that  there  shall  be  a  communion  of  the 
profits  between  them."  But  whether  we  consider  the  definition 
of  Judge  Story,  or  the  definition  to  be  found  in  the  Civil  Code 
of  California,  first  quoted,  it  is  very  evident  that  in  all  one 
essential  thing  is  omitted.  They  state  that  there  is  to  be  a 
division  of  the  profits,  but  say  nothing  about  sharing  the 
losses.  A  better  definition  of  partnership,  and  one  more  in 
accord  with  the  established  conditions  of  modern  business, 
might  be  suggested  thus:  Partnership  is  the  voluntary  asso- 
ciation of  two  or  more  persons  for  the  purpose  of  carrying 
on  business  together,  and  dividing  its  profits  and  sharing  its 
losses  between  them.  For  there  may  be,  and  often  is,  a 
sharing  of  the  profits  of  a  business  venture,  when  there  is  no 
partnership.  Agents,  or  brokers,  or  commission  merchants 
may  be  offered  and  accept  a  share  of  the  profits,  as  an  induce- 
ment to  greater  effort  on  their  part,  but  this  will  not  consti- 
tute them  partners  with  their  principals.  There  must  be  a 
community  of  interest  in  both  the  profits  and  the  losses,  to 
constitute  a  valid  partnership. 


BUSINESS   CONTRACTS   AND   LEGAL  OBLIGATIONS.  443 

Section   380.  — FORMATION    OF    PARTNERSHIP. 

— A  partnership  can  be  formed  only  by  the  consent  of  all 
the  parties.  As  the  voluntary  consent  of  all  the  members 
is  necessary  in  the  formation  of  a  partnership,  it  is  the 
law  that  no  new  partner  can  be  admitted  into  a  partnership 
without  the  consent  of  every  member.  If  one  partner  sells 
his  interest  in  the  partnership  property,  this  will  not  make 
the  purchaser  a  partner,  without  the  consent  of  the  partner 
who  stays  in  the  business.  Neither  member  of  a  partnership 
can  force  a  new  member  into  the  firm. 

Section   381.  — PARTNERSHIP     PROPERTY.  —  The 

property  of  a  partnership  consists  of  all  that  is  contributed 
to  the  common  stock  at  the  formation  of  the  partnership, 
and  all  that  is  subsequently  acquired  by  the  partnership. 
But  while  every  partnership  presupposes  that  there  must 
be  something  brought  into  the  common  stock  or  fund  by 
each  member,  it  is  not  necessary  that  each  should  con- 
tribute or  contract  to  contribute  money,  goods,  effects,  or 
other  property,  towards  the  common  stock;  for  one  may 
contribute  labor,  or  skill,  and  another  may  contribute  prop- 
erty, and  another  may  contribute  money,  according  as  they 
shall  agree.  Sometimes  it  happens  that  each  partner  con- 
tributes only  skill,  or  labor,  or  services,  for  the  common 
benefit.  But  all  must  contribute  something,  and  thus  join 
together  either  money,  or  goods,  or  other  property,  or 
labor,  or  skill.  Whether  the  partners  in  the  first  place 
contribute  money,  or  real  or  personal  property,  or  only 
their  personal  labor  and  services,  if  they  afterwards  acquire 
any  property  in  the  partnership  business  and  with  part- 
nership funds,  it  belongs  to  the  firm,  and  not  to  the  members 
individually. 

Civil  Code,  Section  2401. 

Section  382.— PARTNER'S  INTEREST  IN  PART- 
NERSHIP PROPERTY.— The  interest  of  each  member  of 
a  partnership  extends  to  every  portion  of  its  property.  One 
partner  has  no  interest  distinct  from  the  other  in  the  assets 


444  BUSINESS   LAWS    FOR   BUSINESS    MEN. 

of  the  firm.  One  partner  has  no  control  of  the  partnership 
assets  which  the  other  cannot  have.  The  property  of  the 
partnership  is  common,  held  by  a  community  of  interest;  and 
it  is  always  first  liable  for  the  partnership  debts,  before  any 
of  it  can  be  applied  to  the  individual  use  or  individual  debts 
of  either  partner. 

Section  383.  — POSSESSION  OF  PARTNERSHIP 
PROPERTY. — Partners  are  equally  entitled  to  possession 
of  the  partnership  property.  Partners  are  joint  owners  and 
possessors  of  all  the  capital  stock,  funds,  and  effects  belong- 
ing to  the  partnership,  as  well  as  of  those  which  belonged  to 
it  at  the  time  of  its  first  formation  and  establishment;  so  that, 
whether  its  stock,  funds,  or  effects  be  the  product  of  their 
labors  or  manufactures,  or  be  received  or  acquired  by  sale, 
barter,  or  otherwise,  in  the  course  of  their  trade  or  business, 
there  is  an  entire  community  of  right  and  interest  between 
them. 

Neither  partner  has  any  right  or  possession  of  the  partner- 
ship property  to  the  exclusion  of  the  other.  One  partner  is 
as  much  entitled  to  the  possession  as  the  other.  Nor  would 
it  make  any  difference  if  the  partnership  was  dissolved;  for 
in  that  case  both  partners  would  be  entitled  equally  to  the 
possession  of  the  partnership  assets,  until  the  partnership 
affairs  could  be  finally  settled  up. 

Section  384.— PARTNER'S  SHARE  IN  PROFITS 
AND  LOSSES. — In  the  absence  of  any  agreement  on  the 
subject,  the  shares  of  partners  in  the  profits  or  losses  of  the 
business  are  equal,  and  the  share  of  each  in  the  partnership 
property  is  the  value  of  his  original  contribution,  increased 
or  diminished  by  his  share  of  profit  or  loss.  Where  there 
is  no  agreement  between  the  partners,  they  are  to  contribute 
equally  to  every  loss,  whether  the  loss  be  unpaid  advances, 
or  the  loss  of  the  original  capital  brought  in;  and  this  is  the 
rule,  whether  the  partners  contribute  to  the  capital  in  equal 
shares  or  not.  It  is  essential  to  the  interest  of  a  valid  part- 
nership that  there  should  be  a  sharing  of  profits  and  a  sharing 


BUSINESS   CONTRACTS   AND   LEGAL  OBLIGATIONS.  445 

of  losses.  Profits  and  losses  will  be  shared  equally,  if  there 
is  no  agreement  to  the  contrary,  no  matter  what  proportion 
of  the  firm  assets  was  originally  contributed  by  each.  But 
the  partners  may  agree  between  themselves  that  one  shall 
have  a  larger  share  of  the  profits  than  the  other,  or  that  one, 
if  losses  occur,  shall  bear  a  larger  share  of  the  loss  than 
the  other,  and  this  agreement  will  be  valid  and  binding.  An 
agreement  to  divide  the  profits  of  a  business  implies  an  agree- 
ment for  a  corresponding  division  of  its  losses,  unless  it  is 
otherwise  expressly  stipulated.  But  the  law  recognizes  the 
fact  that  the  inequality  of  skill,  of  labor,  or  of  experience, 
which  the  partners  may  bring  into  the  particular  business, 
may  not  only  justify  but  positively  require  an  inequality  of 
compensation,  and  of  exemption  from  loss,  as  a  matter  of 
justice  and  equity  between  the  parties.  And  the  law  has, 
therefore,  wisely  not  prohibited  it;  but  has  left  it  to  the 
parties  to  exercise  their  own  discretion  in  these  matters,  tak- 
ing care  that  no  fraud,  imposition,  or  undue  advantage  is 
taken  by  one  of  the  other.  And  wherever  stipulations  are 
fairly  made  between  partners,  for  unequal  sharing  of  profits 
and  losses,  the  law  will  uphold  and  enforce  them  as  valid 
agreements. 

Civil  Code,  Sections  2403,  2404. 

Section  385.— APPLICATION  OF  PARTNERSHIP 
PROPERTY  TO  PAYMENT  OF  DEBTS.— Each  mem- 
ber of  a  partnership  may  require  its  property  to  be  applied 
to  the  discharge  of  its  debts,  and  has  a  lien  upon  the  shares 
of  the  other  partners  for  this  purpose,  and  for  the  payment 
of  the  general  balance,  if  any,  due  to  him.  The  debts  of  a 
partnership  must  be  paid  out  of  the  partnership  property, 
before  any  portion  of  it  can  be  applied  to  the  individual  debts 
of  the  partners.  The  interest  of  a  partner  may  be  levied 
upon  for  the  payment  of  his  debts,  but  when  this  is  done,  the 
creditors  of  the  firm  must  be  first  satisfied,  before  the  prop- 
erty can  be  taken  to  pay  anybody  else. 


446  BUSINESS  LAWS  FOR  BUSINESS   MEN. 

Section  386.— WHAT  IS  PARTNERSHIP  PROP- 
ERTY.— All  property,  whether  real  or  personal,  acquired 
with  partnership  funds,  is  presumed  to  be  partnership  prop- 
erty. There  is  little  difficulty  in  determining  the  partnership 
character  of  personal  or  movable  property,  as  a  stock  of 
goods,  for  instance ;  but  there  is  sometimes  difficulty  in  deter- 
mining the  true  character  of  real  estate.  The  deed  to  real 
estate  must  necessarily  be  made  to  and  be  recorded  in  the 
individual  names  of  one  or  more  members  of  the  firm.  Cases 
often  occur  where  the  partner  in  whose  name  real  property 
stands  of  record  denies  that  it  is  partnership  property  and 
claims  it  as  his  own.  Whenever  this  occurs,  it  is  important 
to  know  the  law  governing  the  matter.  It  is  the  general 
rule  in  law  that  real  or  immovable  property  is  deemed  to 
belong  to  the  persons  in  whose  name  the  deed  stands.  But, 
as  to  partners,  however  the  recorded  title  may  stand,  or  in 
whose  name  it  may  be,  real  estate  bought  with  partnership 
funds  for  partnership  purposes  will  always  be  considered 
partnership  property. 

Section  387.— MUTUAL  OBLIGATIONS  OF  PART- 
NERS.— The  relations  of  partners  are  necessarily  confidential, 
and  they  are  always  bound  to  deal  in  good  faith  one  with 
another.  In  all  proceedings  connected  with  the  formation, 
conduct,  dissolution,  and  liquidation  of  a  partnership,  every 
partner  is  bound  to  act  in  the  highest  good  faith  toward  his 
co-partners.  He  must  not  obtain  any  advantage  over  them 
in  the  partnership  affairs,  by  the  slightest  misrepresentation, 
concealment,  threat,  or  pressure  of  any  kind.  The  contract 
of  partnership  has  its  foundation  in  the  mutual  respect,  con- 
fidence, and  belief  in  the  entire  integrity  of  each  partner,  and 
his  sincere  devotion  to  the  business  and  true  interests  of  the 
partnership;  and  good  faith,  reasonable  skill  and  diligence, 
and  the  exercise  of  sound  judgment  and  discretion,  are  neces- 
sarily and  naturally  expected  of  each  party  to  the  partnership. 
Judge  Story  in  his  book  on  partnership  says,  on  this  subject: 
"Good  faith  not  only  requires  that  every  partner  should  not 
make  any  false  representations  to  his  partners,  but  also  that 


BUSINESS    CONTRACTS    AND   LEGAL   OBLIGATIONS.  447 

he  should  abstain  from  all  concealments,  which  may  be  injuri- 
ous to  the  partnership  business.     If,  therefore,  any  partner  is 
guilty  of  any  such  concealment,  and  derives  a  private  benefit 
therefrom,  he  will  be  compelled  to  account  therefor  to  the 
partnership.     Upon  the  like  ground,  where  one  partner,  who 
exclusively  superintended  the  accounts  of  the  concern,  had 
agreed  to  purchase  the  share  of  his  co-partners  in  the  business 
for  a  sum,  which  he  knew,  from  the  accounts  in  his  posses- 
sion, but  which  he  concealed   from  them,  to  be  for  an  in- 
adequate consideration,  the  bargain  was  set  aside  in  equity, 
as  a  constructive   fraud;   for  he  could  not  in   fairness   deal 
with  the  other  partners  for  their  share  of  the  profits  of  the 
concern  without  putting  them  in  possession  of  all  the  infor- 
mation, which  he  himself  had,  with  respect  to  the  state  of 
the  accounts  and  the  value  of  the  concern."     As  illustrations 
of  the  good  faith  which  must  be  observed  by  one  partner  to 
another,  so  clearly  explained  by  Judge  Story,  it  is  a  violation 
of  good  faith  for  any  partner,  in  conducting  the  partnership 
business,    to    contract    secretly    with    third    persons    for    any 
private   and    selfish    advantage    and    benefit   to    himself,    ex- 
clusive of  the  partnership;  for  all  the  partnership  property 
and  partnership  contracts  should  be  managed  for  the  equal 
benefit  of  all  the  partners.'    If,  therefore,   any  one  partner 
should  contract  secretly  in  a  matter  of  partnership  concern 
for  any  private  advantage  or  benefit  to  himself,  to  the  dis- 
advantage or  in  fraud  of  his  partners,  he  will  be  compelled 
to  divide  his  gains  with  them.     So,  if  a  purchase  is  made  on 
the  partnership  account  by  one  partner,  who  secretly  stipulates 
for  and  receives  any  reward  or  allowance   from  the  seller, 
for  his  own  private  profit,  he  will  be  compelled  to  share  with 
his   partners.      So,   where   one   partner   secretly    obtains   the 
renewal  of  a  partnership  lease  in  his  own  name,  he  will  be 
held  a  trustee  for  the  firm  in  the  renewed' lease.    The  obliga- 
tions of  partners,  however,  whatever  they  may  be,   do   not 
prevent  either  member  of  the  firm  from  engaging  in  other 
business  on  his  own  account,  but  it  must  not  be  such  busi- 
ness as  interferes   with  or  is  in  any   way  injurious   to   the 
partnership. 

Civil  Code,  Section  2411. 


448  BUSINESS   LAWS   FOR   BUSINESS    MEN. 

Section  388.  — LIABILITY  OF  PARTNERS  TO 
ACCOUNT. — Each  member  of  a  partnership  mu?t  account 
to  it,  for  everything  that  he  receives  on  account  of  the  firm. 
While  he  must  render  an  account  of  everything  he  receives, 
he  is  at  the  same  time  entitled  to  reimbursement  from  the 
firm  for  everything  that  he  has  properly  expended  for  its 
benefit,  and  he  is  entitled  to  be  reimbursed  for  all  losses  and 
risks  which  he  has  necessarily  incurred  on  behalf  of  the 
firm. 

Civil  Code,  Section  2412. 

Section  389.— COMPENSATION  FOR  SERVICES 
TO  FIRM. — A  partner  is  not  entitled  to  any  compensation 
for  services  rendered  by  him  to  the  partnership.  A  special 
agreement  may  be  made  among  the  partners  that  one  shall 
be  paid  an  extra  compensation  above  his  share  of  the  profits, 
for  his  services,  but  the  obligation  rests  entirely  upon  the 
agreement  of  the  parties.  Where  there  is  no  agreement  of 
the  kind,  the  law  will  not  allow  one  partner  to  take  from  the 
partnership  assets  any  compensation  for  his  services.  The 
reason  is,  that  each  partner  is  under  obligations  to  devote 
his  skill  and  efforts  to  the  promotion  of  the  common  benefits 
of  the  firm. 

Civil  Code,  Section  2413. 

Section  390.  — RENUNCIATION  OF  PARTNER- 
SHIP.— The  law  of  California  provides,  that  a  partner  may 
exonerate  himself  from  all  future  liability  to  a  third  person, 
on  account  of  the  partnership,  by  renouncing,  in  good  faith, 
all  participation  in  its  future  profits.  To  do  so,  he  must  give 
notice  to  third  persons,  and  to  his  partner,  that  he  renounces 
all  participation  in  the  future  profits  of  the  firm,  and  that, 
so  far  as  may  be  in  his  power,  he  dissolves  the  partnership, 
and  does  not  intend  to  be  liable  on  its  account  for  the  future. 
After  a  partner  has  given  notice  of  his  renunciation  of  the 
partnership,  he  cannot  claim  any  of  its  subsequent  profits, 
and  his  partners  may  proceed  to  dissolve  the  partnership. 
As  to  the  partners,  this   renunciation  ends  the  partnership. 


BUSINESS   CONTRACTS   AND   LEGAL  OBLIGATIONS.  449 

But  as  to  all  other  persons  the  liabilities  of  the  retiring  part- 
ner continue  until  proper  notice  is  given.     General  notice  is 
sufficient  as  to  the  public  in  general;  but  as  to  such  persons 
as  have  had  dealings  with  the  firm,  actual   notice   must  be 
given.     A  partner  retiring  from  the  partnership,  in  order  to 
relieve    himself    from    further    liabilities    of    the    firm,    must 
give  actual  notice  of  such  retirement,  and  of  the  dissolution 
of  the  partnership,  to  such  persons  as  have  been  accustomed 
to  deal  with  it.     It  is  not  essential  that  such  notice  shall  be 
given  in  any  particular  form;  it  may  be  verbal,  or  in  writing; 
it  may  be  expressed,  or  it  may  be  implied  from  circumstances. 
It  must  appear,  however,  with  reasonable  certainty,  that  such 
persons  in  some  way  received  actual  notice.     This  is  so,  be- 
cause established  business  relations  might  lead  such  parties 
more  readily  to  give  the  firm  credit.     Moreover,   they   are 
known  to  the  firm,  and  may  be  readily,  in  some  proper  way, 
notified.    Such  notice  given  in  a  regular  newspaper  of  general 
circulation,  published  in  the  city,  town,  or  county  where  the 
partnership  business  is  carried  on,   is   the  usual  method  of 
giving  information ;  and  this  will  be  sufficient,  when  continued 
for  a  reasonable  length  of  time — this   depending  somewhat 
upon  the  nature,  extent,  and  place  of  the  business. 
Civil  Code,  Sections  2417,  2418. 

Section  391.— POWER  OF  MAJORITY  OF  PART- 
NERS.— Where  the  partnership  consists  of  more  than  two 
members,  the  decision  of  the  majority  binds  the  firm  in  the 
conduct  of  its  business.  The  minority  must  be  consulted  in 
good  faith,  and  when  this  is  done  the  majority  of  the  mem- 
bers have  a  right  to  control  the  manner  of  conducting  the 
business.  The  majority  can  govern  only  in  the  due  course 
of  business,  and  cannot  change  the  general  character  of  the 
business  against  the  will  of  one  dissenting  partner. 
Civil  Code,  Section  2428. 

Section  392.—  AUTHORITY  OF  INDIVIDUAL 
PARTNER. — Every  general  partner  is  agent  for  the  part- 
nership in  the  transaction  of  its  business,  and  has  authority 


450  BUSINESS   LAWS   FOR   BUSINESS    MEN. 

to  do  whatever  is  necessary  to  carry  on  such  business  in  the 
ordinary  manner,  and  for  this  purpose  may  bind  his  co- 
partners by  an  agreement  in  writing.  Each  partner  is  the 
general  agent  of  his  co-partners  as  to  firm  business,  and  the 
members  of  the  firm  are  considered  as  sanctioning  his  con- 
tracts. Whenever  there  are  written  articles,  or  particular 
stipulations  between  the  partners,  these  will  regulate  their 
respective  power  and  authority  as  between  themselves,  al- 
though not,  if  unknown,  in  their  dealings  with  third  persons. 
But  independently  of  any  such  articles  or  stipulations,  each 
partner  possesses  an  equal  and  general  power  and  authority 
in  behalf  of  the  firm,  to  transfer,  pledge,  exchange,  or  other- 
wise dispose  of  the  partnership  property  and  effects,  for  any 
and  all  purposes  within  the  scope  and  objects  of  the  partner- 
ship, and  in  the  course  of  its  trade  and  business.  One  partner 
by  virtue  of  that  relation  is  constituted  a  general  agent  for 
another  as  to  all  matters  within  the  scope  of  the  partnership 
dealings,  and  has  communicated  to  him,  by  virtue  of  that 
relation,  all  authority  necessary  for  carrying  on  the  partner- 
ship, and  all  such  authority  as  is  usually  exercised  by  partners 
in  the  business  in  which  they  are  engaged.  Any  restrictions 
which,  by  agreement  amongst  the  partners,  are  attempted  to 
be  imposed  upon  the  authority  which  one  possesses  as  a  gen- 
eral agent  for  the  other,  are  operative  only  between  the 
partners  themselves,  and  do  not  limit  the  authority  as  to 
third  persons,  who  acquire  rights  by  their  exercise,  unless 
they  know  that  such  restrictions  have  been  made.  Each 
partner  may  enter  into  any  contracts  or  engagements  on 
behalf  of  the  firm  in  the  ordinary  trade  and  business;  as, 
for  example,  by  buying,  or  selling,  or  pledging  goods,  or  by 
paying,  or  receiving,  or  borrowing  moneys,  or  by  drawing, 
or  negotiating,  or  indorsing,  or  accepting  bills  of  exchange, 
and  promissory  notes,  and  checks,  and  other  negotiable  secur- 
ities, or  by  procuring  insurance  for  the  firm,  or  by  doing 
any  acts  which  are  appropriate  to  such  trade  or  business, 
according  to  the  common  course  and  usages  of  the  business. 
So,  each  partner  may  consign  goods  to  an  agent  or  factor 
for  sale  on  account  of  the  firm,   and  give  instructions   and 


BUSINESS    CONTRACTS   AND    LEGAL   OBLIGATIONS.  451 

orders  relating  to  the  sale.  All  such  contracts  and  engage- 
ments, acts  and  things,  he  has  authority  to  make  and  do  in 
the  name  of  the  firm;  and  in  order  to  bind  the  firm,  they 
must  ordinarily  be  made  and  done  in  the  name  of  the  firm, 
otherwise  they  will  bind  the  individual  partner  only. 
Civil  Code,  Section  2429. 

Section    393.— WHAT    PARTNER    CANNOT    DO.— 

There  are  some  things  which  the  law  of  California  specially 
declares  one  partner  alone  has  no  authority  to  do.  (1)  He 
cannot  make  an  assignment  of  any  portion  of  the  partnership 
property  to  a  creditor,  or  to  a  third  person  in  trust  for 
creditors.  (2)  He  cannot  dispose  of  the  good-will  of  the 
business.  (3)  He  cannot  dispose  of  the  whole  of  the  part- 
nership property  at  once,  unless  it  consists  entirely  of  mer- 
chandise. (4)  He  has  no  authority  to  do  any  act  which 
would  make  it  impossible  to  carry  on  the  ordinary  business 
of  the  partnership.  (5)  One  partner  has  no  authority  to 
confess  a  judgment  against  the  partnership.  (6)  One  part- 
ner cannot  submit  a  partnership  claim  to  arbitration. 
Civil  Code,  Section  2430. 

Section  394.— PARTNER  ENGAGING  IN  OTHER 
BUSINESS. — A  general  partner,  who  agrees  to  give  his 
personal  attention  to  the  business  of  the  partnership,  may 
not  engage  in  any  business  which  gives  him  an  interest  ad- 
verse to  that  of  the  partnership,  or  which  prevents  him  from 
giving  to  such  business  all  the  attention  which  would  be 
advantageous  to  it.  A  partner  may  engage  in  any  separate 
business  which  does  not  create  an  interest  adverse  to  the 
partnership,  and  which  does  not  take  too  much  of  his  time 
from  the  firm's  business. 

Civil  Code,  Sections  2436,  2437. 

Section  395.— GENERAL  LIABILITY  OF  PART- 
NER.— Every  general  partner  is  liable  to  third  persons  for 
all  the  obligations  of  the  partnership,  jointly  with  his  co- 
partners. 

Civil  Code,  Section  2442. 


452  BUSINESS    LAWS   FOR   BUSINESS    MEN. 

Section  396.— LIABILITY  OF  ONE  WHO  PERMITS 
HIMSELF  TO  BE  HELD  OUT  AS  A  PARTNER.— 

Any  one  permitting  himself  to  be  represented  as  a  partner  is 
liable  as  such  to  third  persons  to  whom  such  representation 
is  communicated,  and  who,  on  the  faith  of  it,  give  credit 
to  the  partnership.  Thus,  one  who  is  not  actually  a  partner 
may  make  himself  liable  for  the  partnership  debts,  if  he 
knows  that  he  is  being  represented  by  the  firm  as  a  partner 
in  it,  and  allows  such  representation  to  be  made,  and  it  is 
acted  upon  in  good  faith. 

Civil  Code,  Section  2444. 

Section  397.— DOING  BUSINESS  UNDER  FICTI- 
TIOUS NAME. — The  law  provides  that  every  partnership 
transacting  business  in  this  State  under  a  fictitious  name,  or 
designation  not  showing  the  names  of  the  persons  interested 
as  partners  in  such  business,  must  file  with  the  clerk  of  the 
county  in  which  its  principal  place  of  business  is  situated,  a 
certificate  stating  the  names  in  full  of  all  the  members  of 
such  partnership  and  their  places  of  residence,  and  must 
publish  the  same  once  a  week  for  four  successive  weeks  in 
a  newspaper  published  in  the  county,  if  there  be  one,  and  if 
there  be  none  in  such  county,  then  in  a  newspaper  published 
in  an  adjoining  county.  There  is  one  exception,  in  the  case 
where  a  commercial  or  banking  partnership,  established  and 
doing  business  in  a  foreign  country,  seeks  to  do  business  in 
this  State ;  a  foreign  firm  may  use  the  same  partnership  name 
it  uses  at  home,  although  fictitious,  and  although  it  does  not 
show  the  names  of  the  persons  interested  as  partners.  The 
certificate  must  be  signed  by  the  partners,  and  acknowledged 
by  them,  and  must  be  published  within  one  month  after  the 
formation  or  commencement  of  the  partnership.  A  new 
certificate  must  be  made  and  published  whenever  there  is  a 
change  in  the  membership  of  the  partnership. 

Civil  Code,  Sections  2466,  2467,  2468,  2469. 

No  person,  doing  business  under  a  fictitious  name,  or  his 
assignee   or   assignees,   nor   any   persons    doing   business   as 


BUSINESS   CONTRACTS   AND   LEGAL  OBLIGATIONS.  453 

partners  contrary  to  the  provisions  of  this  law,  or  their 
assignee  or  assignees,  shall  maintain  any  action  upon  or  on 
account  of  any  contract  or  contracts  made,  or  transactions 
had,  under  such  fictitious  name,  or  in  their  partnership  name, 
in  any  court  of  this  state  until  the  certificate  has  been  filed 
and  the  publication  has  been  made  as  herein  required. 

Act  of  the  Legislature,  approved  March  23,  1911. 

Section  398.— FORM  OF  CERTIFICATE  OF  PART- 
NERSHIP TRANSACTING  BUSINESS  UNDER 
FICTITIOUS  NAME.— The  following  is  a  form  of  certi- 
ficate of  partnership  transacting  business  under  fictitious  name 
to  be  filed  with  the  county  clerk  as  provided  in  section  397: 

STATE  OF  CALIFORNIA      1^^ 
City  and  County  of  San  Francisco  f 

John  A.  Smith  and  Henry  T.  Jones,  being  duly  sworn,  say 
that  they  are  partners,  doing  business  in  the  City  and  County 
of  San  Francisco,  State  of  California,  under  the  firm  name  of 
John  A.  Smith  &  Co. ;  that  the  names  in  full  of  all  the  mem- 
bers of  such  partnership,  and  their  places  of  residence,  are 
as  follows,  to-wit:  John  Augustus  Smith,  residing  at  914 
Harrison  Street,  City  and  County  of  San  Francisco,  State  of 
California,  and  Henry  Thomas  Jones,  residing  at  212  Mission 
Street,  City  and  County  of  San  Francisco,  State  of  Cali- 
fornia; that  the  place  where  the  business  of  said  partnership 
is  transacted  is  at  400  Market  Street,  City  and  County  of 
San  Francisco,  State  of  California. 

In  witness  whereof  we  have  hereunto  set  our  hands  and 

seals  this day  of ,  191 

(Seal) 

(Seal) 

STATE  OF  CALIFORNIA      1 
City  and  County  of  San  Francisco  y' 

On  this day  of ,   191. .,  before  me, 

a  notary  public  in  and  for  the  City  and  County  of  San 
Francisco,  State  of  California,  personally  appeared  John 
Augustus  Smith,  and  Henry  Thomas  Jones,  known  to  me 
to  be  the  persons  whose  names  are  subscribed  to  the  within 
instrument,  and  acknowledged  that  they  executed  the  same. 

Notary  Public  in  and  for  the  City  and  County 
of  San  Francisco,  State  of  California. 


454.  BUSINESS    LAWS    FOR   BUSINESS   MEN. 

Section  399.— SPECIAL  PARTNERSHIPS.— A  special 
partnership  may  be  formed  in  this  State  by  two  or  more 
persons,  for  the  transaction  of  any  business  except  banking 
or  insurance.  A  special  partnership  may  consist  of  one  or 
more  general  partners  and  one  or  more  special  partners. 

Section  400.— CERTIFIED  STATEMENT  OF  SPE- 
CIAL PARTNERSHIP.— When  a  special  partnership  is 
formed  the  partners  must  sign  a  certificate  stating  the  name 
under  which  the  partnership  is  to  be  conducted;  the  general 
nature  of  the  business  intended  to  be  transacted;  the  names 
of  all  the  partners,  and  their  residences,  specifying  which  are 
general  and  which  are  special  partners ;  the  amount  of  capital 
which  each  special  partner  has  contributed  to  the  common 
stock;  and  the  time  at  which  the  partnership  will  begin  and 
end.  This  certificate  must  be  acknowledged  and  recorded  in 
all  the  counties  in  which  the  firm  has  places  of  business.  An 
affidavit  of  each  of  the  partners  must  be  filed  for  record  with 
the  certificate,  stating  that  each  of  the  special  partners  has 
paid  in  the  sum  named  in  the  certificate.  The  certificate,  or 
a  statement  of  its  substance,  must  also  be  published  in  a 
newspaper  in  the  county  where  the  original  certificate  is 
filed;  and  if  there  is  no  newspaper  in  that  county,  then  the 
publication  must  be  made  in  the  nearest  newspaper;  and 
this  publication  must  be  made  once  a  week  for  four  successive 
weeks,  beginning  within  one  week  from  the  time  of  filing  the 
certificate  for  record. 

Civil  Code,  Sections  2479,  2480,  2481,  2483,  2484. 

Section  401.— SPECIAL  PARTNERSHIP— LIABIL- 
ITY OF  THE  PARTNERS.— The  general  partners  in  a 
special  partnership  are  liable  to  the  same  extent  as  partners 
in  a  strictly  general  partnership.  They  are  each  liable  for 
all  the  debts  of  the  firm.  But  a  special  partner  is  only  liable 
for  the  debts  of  the  firm  to  the  extent  of  the  capital  he  has 
put  into  the  business.  A  special  partner  may  do  things  which 
will  make  him  liable  as  a  general  partner;  for  if  it  appears 
that  he  has  wilfully  made  a  false  statement  in  the  certificate 


BUSINESS   CONTRACTS   AND   LEGAL  OBLIGATIONS.  455 

of  partnership,  or  if  he  wilfully  interferes  with  the  business 
of-  the  firm,  or  if  he  represents  himself  as  a  general  partner 
in  the  firm,  he  will  be  liable  as  a  general  partner;  that  is, 
he  will  be  liable  for  all  debts  of  the  firm. 
Civil  Code,  Sections  2500,  2501. 

Section   402.— RIGHTS    OF    SPECIAL   PARTNERS. 

— Only  the  general  partners  have  authority  to  transact  the 
business  of  a  special  partnership.  The  special  partner,  while 
he  has  no  right  to  engage  in  or  interfere  with  the  authority 
of  the  general  partners  to  conduct  the  business  of  the  firm, 
yet  may  at  all  times  investigate  the  partnership  affairs,  and 
advise  his  partners,  or  their  agents,  as  to  their  management 
of  the  business.  A  special  partner  may  lend  money  to  the 
partnership,  or  advance  money  for  it,  and  take  from  it  secur- 
ity, and  as  to  such  loans  or  advances  he  will  have  the  same 
rights  as  any  other  creditor;  but  in  case  of  the  insolvency 
of  the  firm,  all  other  claims  which  he  may  have  against  it 
will  be  postponed  until  all  other  creditors  are  satisfied.  In 
all  matters  relating  to  a  special  partnership,  the  general  part- 
ners may  sue  and  be  sued  alone,  as  if  there  were  no  special 
partners.  No  special  partner,  under  any  pretense,  has  any 
right  to  withdraw  any  of  the  capital  invested  by  him  in  the 
partnership,  during  its  continuance. 

Civil  Code,  Sections  2489,  2490,  2491,  2492,  2493. 

Section  403.— FORM  OF  CERTIFICATE  OF  SPE- 
CIAL PARTNERSHIP.— The  following  is  a  form  of  the 
certified  statement  of  special  partnership  to  be  made  and 
recorded  as  specified  in   section  400: 

STATE  OF  CALIFORNIA,  , 

ss. 


County  of  Los  Angeles. 


i 


Henry  S.  Green,  John  A.  Jones,  and  Alfred  T.  Smith, 
being  duly  sworn,  say:  That  they  have  formed  a  special 
partnership  to  do  business  at  the  City  of  Los  Angeles,  State 
of  California,  under  the  firm  name  of  Henry  S.  Green  &  Co. ; 
that  the  name  under  which  said  •  partnership  is  to  be  con- 
ducted is  Henry  S.  Green  &  Co. ;  that  the  business  intended 


456  BUSINESS    LAWS   FOR   BUSINESS    MEN. 

to  be  transacted  by  said  partnership  is  the  dealing  in  general 
merchandise,  and  the  buying  and  selling  at  retail  of  groceries 
and  dry  goods ;  that  the  names  of  all  the  partners,  general 
and  special,  and  the  residence  of  each  of  said  partners,  are 
as  follows,  to-wit :  Henry  Samuel  Green,  a  general  partner, 
residing  at  No.  200  Hill  Street,  Los  Angeles,  State  of  Cali- 
fornia; John  Arthur  Jones,  a  general  partner,  residing  at 
No.  300  Green  Street,  Los  Angeles,  State  of  California;  and 
Alfred  Thomas  Smith,  a  special  partner,  residing  at  No. 
500  Mason  Street,  City  and  County  of  San  Francisco,  State 
of  California;  that  the  amount  of  capital  which  the  said 
Alfred  Thomas  Smith  has  contributed  to  the  common  stock 
of  said  partnership  is  the  sum  of  $5000;  and  that  said  part- 
nership will  begin  on  the day  of , 

19L  .,  and  end  on  the.  .' day  of ,  191. . 

In  witness  whereof,  we  have  hereunto  set  our  hands  and 

seals  this day  of ,  191 .. . 

(Seal.) 

(Seal.) 

(Seal.) 

STATE  OF  CALIFORNIA,  ]  ^^ 
County  of  Los  Angeles.      \ 

On  this day  of ,   191. .,  before  me, 

a  notary  public  in  and  for  the  County  of  Los  Angeles,  State 
of  California,  personally  appeared  Henry  Samuel  Green,  John 
Arthur  Jones,  and  Alfred  Thomas  Smith,  known  to  me  to 
be  the  persons  whose  names  are  subscribed  to  the  within 
instrument,  and  acknowledged  that  they  executed  the  same. 

Notary  Public  in  and   for  the   County   of 
Los  Angeles,  State  of  California. 

(a)  Affidavit  That  Special  Partner  Has  Paid  in  His 
Share. — An  affidavit  of  each  of  the  partners  must  be  filed  for 
record  with  the  certificate,  stating  that  each  of  the  special 
partners  have  paid  in  the  sum  named  in  the  certificate.  The 
following  is  a  form  of  this  affidavit: 

AFFIDAVIT  OF   HENRY  S.   GREEN. 
STATE  OF  CALIFORNIA, 


County  of  Los  Angeles. 


^'  I  ss. 


Henry  Samuel  Green,  being  duly  sworn,  says:  that  he  is  a 
general  partner  named  in  the  certified   statement  of  special 


BUSINESS    CONTRACTS    AND   LEGAL   OBLIGATIONS.  457 

partnership  this  day  filed  for  record,  in  which  he  and  John 
Arthur  Jones  are  named  as  general  partners  and  Alfred 
Thomas  Smith  as  special  partner,  under  the  firm  name  of 
Henry  S.  Green  &  Co. ;  that  the  said  Alfred  Thomas  Smith, 
named  in  the  said  certificate  of  partnership,  as  a  special  part- 
ner, has  paid  in  the  sum  of  $5000,  the  sum  named  in  said 
certificate. 

Subscribed  and  sworn  to  before  me  this day 

of ,  191... 

Notary   Public   in   and   for  the   County   of 
Los  Angeles,  State  of  California. 

AFFIDAVIT  OF  JOHN  A.  JONES. 

STATE  OF  CALIFORNIA,  ]  ^^ 
County  of  Los  Angeles.       f 

John  Arthur  Jones,  being  duly  sworn,  says :  that  he  is  a 
general  partner  named  in  the  certified  statement  of  special 
partnership  this  day  filed  for  record,  in  which  he  and  Henry 
Samuel  Green  are  named  as  general  partners  and  Alfred 
Thomas  Smith  as  special  partner,  under  the  firm  name  of 
Henry  S.  Green  &  Co. ;  that  the  said  Alfred  Thomas  Smith, 
named  in  the  said  certificate  of  partnership  as  a  special  part- 
ner, has  paid  in  the  sum  of  $5000,  the  sum  named  in  said 
certificate. 

Subscribed  and  sworn  to  before  me  this day 

of ,  191... 

Notary   Public   in   and   for  the   County   of 
Los  Angeles,  State  of  California. 

AFFIDAVIT  OF  ALFRED  T.  SMITH. 

STATE  OF  CALIFORNIA,  )  ^^ 
County  of  Los  Angeles.      3 

Alfred  Thomas  Smith,  being  duly  sworn,  says:  that  he  is 
the  special  partner  named  in  the  certified  statement  of  special 
partnership  this  day  filed  for  record,  in  which  he  is  named 
as  special  partner  and  Henry  Samuel  Green  and  John  Arthur 
Jones,  as  general  partners,  under  the  firm  name  of  Henry  S. 
Green  &  Co. ;  that  he,  the  said  Alfred  Thomas  Smith,  named 
in  the   said   certificate   of  partnership   as   a   special   partner, 


458  BUSINESS   LAWS    FOR   BUSINESS   MEN. 

has    paid   in    the    sum   of   $5000,    the    sum    named    in    said 
certificate. 

Subscribed  and  sworn  to  before  me  this day 

of ,  191... 

Notary   Public  in   and   for  the   County   of 
Los  Angeles,  State  of  California. 

Section  404. —INTEREST  AND  PROFITS  OF 
SPECIAL  PARTNER.— A  special  partner  may  receive 
such  interest  on  his  money  invested,  and  such  proportion  of 
the  profits,  as  may  be  agreed  upon  between  him  and  the 
general  partners. 

Section  405.— MINING  PARTNERSHIPS.— A  mining 
partnership  is  diflferent  in  its  nature  and  creation  from  the 
ordinary  partnerships  known  to  commercial  life.  An  ex- 
press agreement  to  become  partners,  or  to  share  the  profits 
and  losses,  is  not  necessary  in  the  creation  or  existence  of 
a  mining  partnership.  The  law  of  California  provides,  that 
a  mining  partnership  arises  from  the  ownership  of  shares 
or  interests  in  the  mine,  and  the  working  of  the  mine  for 
the  purpose  of  extracting  the  mineral  from  it.  The  miners 
must  own  or  have  acquired  the  mine,  and  be  actually  en- 
gaged in  working  it;  and  when  they  do  so,  the  law  looks 
upon  their  relations  as  those  of  a  partnership,  without  the 
necessity  of  a  written  or  oral  agreement  to  share  profits 
and  losses.  It  is  not  necessary  that  the  miners  hold  the 
legal  title  to  the  mine  in  order  to  become  partners.  If  they 
acquire  a  mining  claim,  though  it  is  not  patented,  and  may 
never  be,  still  they  are  mining  partners  if  they  actually  engage 
in  working  the  mine  for  the  purpose  of  extracting  the  mineral 
from  it.  The  mining  partners  need  not  all  have  equal  interests 
in  the  profits.  If  a  number  of  miners  acquire  a  claim  and 
work  it,  on  shares,  whether  the  shares  be  equal  or  not,  it  is 
a  mining  partnership.  The  essential  diflference  between  the 
ordinary  partnerships  and  a  mining  partnership  is,  that  in  a 
mining  partnership  there  is  no  choice  of  partners.    One  mem- 


BUSINESS   CONTRACTS   AND   LEGAL  OBLIGATIONS.  459 

ber  of  a  mining  partnership  may  sell  his  interest  or  share  in 
the  mine,  and  the  partnership  is  not  dissolved,  and  as  to 
those  who  continue  to  work  the  mine,  the  partnership  con- 
tinues to  exist;  while  in  a  general  partnership,  the  sale  by 
one  partner  dissolves  the  partnership,  because  none  of  the 
general  partners  can  force  a  new  member  into  the  firm. 
Civil  Code,  Sections  2511,  2512. 

Section  406.— PROFITS  AND  LOSSES  IN  MINING 
PARTNERSHIP. — A  mining  partner  shares  in  the  profits 
and  losses  in  proportion  to  the  interest  or  share  which  he 
owns  in  the  whole  mine,  and  the  proportion  which  his  in- 
terest bears  to  the  whole  partnership  capital  or  whole  number 
of  shares. 

Section  407.— LIABILITY  OF  MINING  PARTNERS. 

— Each  mining  partner  is,  as  to  third  parties,  liable  for  the 
entire  debts  of  the  partnership.  If  one  mining  partner  pays 
the  debts,  or  advances  money  for  the  use  of  the  partnership, 
he  has  a  lien  on  the  property  of  the  partnership  for  his 
money.  And  the  law  declares  that  this  lien  shall  exist,  even 
though  there  is  an  agreement  among  the  partners  that  it 
must  not. 

Civil  Code,  Section  2514. 

Section    408.— MINING    GROUND    PARTNERSHIP 

PROPERTY. — The  mining  ground  owned  and  worked  by 
partners  in  mining,  whether  purchased  with  partnership  funds 
or  not,  is  partnership  property.  But  a  mere  agreement  to 
work  a  mine  in  the  future,  upon  the  happening  of  a  con- 
tingency, does  not  make  it  partnership  property.  Justice 
Temple,  of  the  Supreme  Court  of  California,  in  the  mining 
case  of  Dorsey  vs.  Newcomer,  speaking  of  the  partnership 
property  of  miners,  said:  "It  is  not  always  easy  to  deter- 
mine what  constitutes  the  partnership  property  of  a  mining 
partnership.  The  statute  provides  that  the  mining  ground 
owned  and  worked  by  partners  in  mining,  whether  purchased 
by  the  partnership  or  not,  is  partnership  property.     It  does 


460  BUSINESS   LAWS   FOR   BUSINESS    MEN. 

not  follow  that  property  other  than  the  ground  owned  and 
worked  may  not  also  be  partnership  property.  No  doubt, 
other  property  acquired  by  the  partnership  for  the  purpose  of 
aiding  in  working  the  mining  claim,  such  as  a  mill  or  mill 
site,  would  also  be  property  of  the  partnership.  So,  other 
mining  ground  acquired  for  the  purpose  of  working  with  the 
mining  ground  already  being  worked,  and  so  situated  that  it 
can  be  worked  with  the  original  claim  as  parts  of  one  mine, 
would  be  partnership  property.  And,  generally,  property  ac- 
quired by  the  partnership  by  the  use  of  partnership  funds,  as 
distinguished  from  the  individuals  constituting  the  firm,  may  be 
so  regarded.  But  the  statute  evidently  distinguishes  between 
ground  owned  or  acquired  for  the  purpose  of  working,  and 
ground  actually  worked.  It  is  only  the  last  that  in  general 
can  be  regarded  as  partnership  property,  when  not  acquired 
by  the  partnership,  or  by  the  use  of  its  funds."  (Decided  by 
the  Supreme  Court  of  California,  in  the  case  of  Thomas  B. 
Dorsey  vs.  J.  T.  Newcomer,  which  decision  is  printed  in 
Volume  121  of  the  California  Reports,  page  213.) 
Civil  Code,  Section  2515. 

Section  409.— NEW  MEMBER  OF  MINING  PART- 
NERSHIP.— One  of  the  partners  in  a  mining  partnership 
may  sell  his  interest  in  the  mine  and  business  without  dis- 
solving the  partnership.  And  the  purchaser,  from  the  date 
of  his  purchase,  becomes  a  member  of  the  partnership.  But 
the  purchaser  of  an  interest  in  the  mining  ground  takes  it 
subject  to  the  liens  existing  in  favor  of  the  partners,  for  debts 
due  the  creditors,  or  advances  made  for  the  benefit  of  the 
partnership,  of  which  he  has  notice;  and  the  purchaser  of  the 
interest  of  a  partner  in  a  mine  when  the  partners  are  engaged 
in  working  it,  is  charged  by  the  law  with  notice  of  all  liens 
resulting  from  the  relation  of  the  partners  to  each  other  and 
to  the  creditors  of  the  partnership. 

Civil  Code,  Sections  2516,  2517,  2518. 

Section  410.— CONTRACT  IN  WRITING.— No  mem- 
ber of  a  mining  partnership,  or  any  agent  or  manager  of  the 


BUSINESS   CONTRACTS   AND  LEGAL  OBLIGATIONS.  461 

firm,  can  bind  the  partnership  by  a  contract  in  writing,  except 
by  express  authority  from  all  the  members  of  the  firm.  He 
cannot  bind  the  partnership  by  making  a  promissory  note, 
or  by  any  agreement  in  writing  afifecting  the  partnership 
property. 

Civil  Code,  Section  2519. 

Section  411.— OWNERS  OF  MAJORITY  OF  SHARES 
GOVERN  CONDUCT  OF  MINE.— The  decision  of  the 
partners  owning  a  majority  of  the  shares  or  interests  in  a 
mining  partnership  will  always  control  the  conduct  of  its 
business.  As  the  mining  property  can  only  be  used  as  a 
whole,  it  is  indispensable  in  conducting  the  business  of  mining 
that  those  owning  the  larger  portion  of  the  property  should 
have  the  power  to  control,  in  case  all  cannot  agree,  for  other- 
wise the  work  might  become  wholly  discontinued  at  any  time. 
The  powers  of  the  individual  members  of  a  mining  partner- 
ship are  much  more  limited  than  are  the  powers  of  the  in- 
dividual members  of  a  purely  commercial  or  trading  partner- 
ship. What  may  be  necessary  and  proper  for  carrying  on 
the  business  of  mining,  for  the  joint  benefit  of  all  concerned, 
must  always  be  determined  by  those  owning  and  holding  in 
the  aggregate  the  majority  interest  in  the  property.  And  if 
the  powers  which  are  thus  exercised  by  the  majority  are  not 
necessary  and  proper  for  the  success  of  the  enterprise,  those 
whose  interests  may  be  imperiled  or  disastrously  affected  by 
the  improper  conduct  of  the  majority  have  the  right  to  resort 
to  the  courts  for  redress  and  protection. 
Civil  Code,  Section  2520. 

Section  412.— DURATION    OF    PARTNERSHIP.— If 

no  term  is  prescribed  by  agreement  for  the  duration  of  a 
partnership,  a  general  partnership  will  continue  for  an  in- 
definite time,  until  dissolved  by  mutual  consent,  or  by  a 
partner,  or  by  the  law. 

Section  413.— TOTAL    DISSOLUTION    OF    PART- 
NERSHIP.— A  general  partnership  is  dissolved  as  to  all  of 


462  BUSINESS   LAWS    FOR   BUSINESS   MEN. 

the  partners:  (1)  By  lapse  of  the  time  prescribed  by  agree- 
ment for  its  duration;  (2)  By  the  expressed  will  of  any  part- 
ner, if  there  is  no  such  agreement;  (3)  By  the  death  of  a 
partner;  (4)  By  the  transfer  to  a  person,  not  a  partner,  of 
the  interest  of  any  partner  in  the  partnership  property;  (5) 
By  war,  or  the  prohibition  of  commercial  intercourse  between 
the  country  in  which  one  partner  resides  and  that  in  which 
another  resides;  or,  (6)  By  a  judgment  of  dissolution.  But, 
as  we  have  already  seen,  there  is  an  exception  in  the  case  of 
a  mining  partnership,  which  is  not  dissolved  by  the  death  of 
one  partner  or  the  sale  of  the  partner's  interest. 
Civil  Code,  Section  2450. 

Section  414.— PARTIAL  DISSOLUTION  OF  PART- 
NERSHIP.— A  general  partnership  may  be  dissolved,  as 
to  himself  only,  by  the  expressed  will  of  any  partner,  not- 
withstanding his  agreement  for  its  continuance;  subject,  how- 
ever, to  liability  to  his  co-partners  for  any  damage  caused 
them. 

Civil  Code,  Section  2451. 

Section  415,— WHEN  PARTNER  ENTITLED  TO 
DISSOLUTION.— A  partner  is  entitled  to  a  dissolution: 
(1)  When  he,  or  another  partner,  becomes  legally  incapable 
of  contracting;  (2)  When  another  partner  fails  to  perform 
his  duties  under  the  agreement  of  partnership,  or  is  guilty 
of  serious  misconduct;  or,  (3)  When  the  business  of  the 
partnership  can  be  carried  on  only  at  a  permanent  loss. 

Partners  may,  at  the  time  of  forming  the  partnership,  pre- 
scribe the  period  for  which  it  shall  endure,  and  how  and 
when  it  may  be  determined.  Its  continuance  may  be  for  a 
definite  term,  or  it  may  be  at  the  will  of  the  partners;  and 
it  is  well  settled  that  a  partnership  at  will  may  be  terminated 
at  the  pleasure  of  any  member  of  the  firm,  so  long  as  he 
acts  without  fraudulent  intent.  As  partnerships  are  formed 
by  the  mutual  agreement  of  all  the  partners,  so  may  they  be 
altered,  modified,  or  dissolved,  by  like  agreement.  A  partner- 
ship for  a  definite  period  may  be- dissolved  by  mutual  consent. 


BUSINESS    CONTRACTS   AND   LEGAL   OBLIGATIONS.  463 

But  an  express  agreement  to  dissolve  is  not  necessary.  Words 
and  acts  implying  such  intention  are  sufficient.  If  partners, 
by  mutual  consent,  cease  to  do  business,  and  divide  the 
partnership  property,  this  amounts  to  a  dissolution,  as  much 
as  if  done  by  an  express  agreement  to  that  effect.  A  partner- 
ship is  none  the  less  ended  by  reason  of  the  fact  that  certain 
specific  property  of  the  firm,  after  a  settlement  and  adjust- 
ment of  the  firm  business,  remains  unsold,  and  that  each 
partner,  under  the  settlement,  retains  his  proportionate  part 
of  such  property. 

Notwithstanding  that  a  time  for  the  dissolution  of  a  firm 
may  be  fixed  by  partnership  articles,  or  that  the  partners 
may  dissolve  by  agreement,  express  or  implied,  before  such 
time,  the  partnership  may  be  dissolved  by  the  happening  of 
any  of  the  events  which,  in  law,  are  held  to  effect  that  result. 
Thus,  the  withdrawal  of  a  partner  causes  a  dissolution  of 
the  firm ;  and  the  introduction  of  a  new  member  into  an  exist- 
ing partnership  works  its  dissolution,  and  the  creation  of  a 
new  partnership.  If  both  partners  refuse  to  perform  their 
part  of  the  partnership  agreement,  there  is  no  law  requiring, 
or  recognizing,  a  continuance  of  the  partnership.  A  firm 
is  dissolved  when  it  ceases  to  do  the  business  for  which  it 
was  organized. 

The  mere  fact,  alone,  that  a  partnership  is  insolvent  does 
not  operate  as  a  dissolution  of  the  firm.  There  must  be  a 
stoppage  of  payment,  assignment,  or  act  amounting  in  law 
to  a  declaration  of  insolvency,  to  work  a  dissolution.  An 
assignment,  however,  by  co-partners,  for  the  benefit  of  their 
creditors,  of  the  entire  firm  assets,  except  property  exempt 
from  execution,  operates  as  a  dissolution  of  the  partnership. 

The  mere  filing  of  an  attachment  against  partnership  prop- 
erty does  not  dissolve  the  partnership;  nor  will  the  mere 
seizure  of  such  property  under  a  writ  of  attachment  have  that 
effect;  and  it  has  been  held  by  the  courts  that  the  seizure 
under  execution  of  the  interest  of  a  defendant  in  partnership 
property  does  not  dissolve  the  partnership;  but  a  levy  of 
execution  against  one  partner  on  his  interest  in  the  firm,  and 
the  sale  of  such  interest,  does  dissolve  the  firm. 


464  BUSINESS   LAWS   FOR   BUSINESS   MEN. 

A  sale  which  practically  includes  all  of  the  property  used 
by  a  firm  in  carrying  on  its  business,  whether  made  by  the 
firm  or  by  a  member,  operates  as  a  dissolution  of  the  part- 
nership. The  destruction  of  the  property  which  is  the  subject 
matter  of  the  co-partnership  is  another  cause  which  will  work 
a  dissolution.  A  court  of  equity  may  decree  the  dissolution 
of  a  partnership  during  the  term  for  which  it  was  entered 
into,  and  declare  it  void,  where  there  is  fraud,  imposition,  mis- 
representation, or  oppression  in  the  original  agreement. 

Equity  has  jurisdiction,  where  a  person  has  been  induced 
by  fraudulent  representation  to  enter  into  a  partnership,  to 
rescind  the  contract  at  his  instance,  and  put  an  end  to  it. 
Misrepresentation  of  material  facts  is  a  ground  for  setting 
aside  a  partnership  contract.  A  person  who  has  been  induced 
to  enter  into  a  partnership,  by  a  material  misrepresentation 
of  the  other  party,  is  entitled  to  have  the  contract  set  aside. 

One  partner  cannot,  by  any  act  of  his  own,  and  at  his 
will,  terminate  a  partnership  for  a  fixed  period,  before  that 
period  has  elapsed.  A  partnership  agreement,  like  any  other, 
is  binding  upon  the  parties,  and  they  must  adhere  to  its  terms. 
Neither  partner  is  at  liberty  to  recede  from  it  against  the 
will  of  the  other,  without  a  sufficient  cause. 

A  court  of  equity  may  decree  a  dissolution  of  the  partner- 
ship, for  causes  arising  subsequently  to  the  formation  of  the 
contract,  founded  upon  misconduct,  or  fraud,  or  violation  of 
duty,  of  one  partner;  or  on  account  of  the  inability  or  in- 
capacity of  one  partner  to  perform  his  obligations  and  duties, 
and  to  contribute  his  skill,  labor,  and  diligence  in  the  pro- 
motion and  accomplishment  of  the  objects  of  the  partnership; 
or  for  the  existence  of  facts  rendering  it  impracticable  to 
carry  on  the  undertaking  for  which  the  partnership  was 
formed. 

A  court  of  equity  will  dissolve  a  partnership  where  all 
confidence  between  the  partners  has  been  destroyed,  so  that 
they  cannot  proceed  together  in  prosecuting  the  business  for 
which  it  was  formed.  And  this  result  follows,  not  only  where 
such  want  of  confidence  is  occasioned  by  the  misconduct  or 


BUSINESS    CONTRACTS   AND   LEGAL   OBLIGATIONS.  465 

gross  mismanagement  of  the  partner  against  whom  the  dis- 
solution is  sought,  but  also  when  such  want  of  confidence  and 
distrust  has  arisen  from  other  circumstances,  provided  it  has 
become  such  as  cannot  probably  be  overcome.  But  a  partner 
who,  by  his  own  wilful  misconduct,  has  caused  such  want  of 
confidence,  will  not  be  allowed  to  take  advantage  of  it  to 
procure  a  dissolution.  If  a  partner's  acts  are  inconsistent 
with  the  duty  of  partners,  and  of  a  nature  to  destroy  the 
mutual  confidence  which  ought  to  subsist  between  them,  and 
makes  it  impossible  that  the  business  can  be  conducted  in 
partnership  with  benefit  to  either  party,  a  court  of  equity  will 
decree  a  dissolution  before  the  expiration  of  the  term  for 
which  the  partnership  was  entered  into.  The  same  is  true 
where  the  circumstances  have  so  changed  as  to  render  it 
impossible  to  carry  on  the  partnership  without  injury  to  all 
the  partners.  A  partnership  will  be  dissolved  where  one  of 
the  firm  has  deliberately  resolved  to  break  up  and  ruin  its 
business,  or  where  ill  feeling  between  the  partners  renders  it 
impossible  to  conduct  the  business  successfully. 

The  wrongful  exclusion  of  one  partner  from  the  business, 
or  refusal  to  allow  him  to  inspect  the  books,  is  a  cause  for 
dissolution  of  the  partnership. 

It  is  a  sufficient  cause  for  dissolution  of  a  partnership  that 
it  clearly  appears  that  the  business  for  which  the  partnership 
was  formed  is  impracticable,  or  cannot  be  carried  on  except 
at  a  loss. 

A  partner's  failure  or  refusal  to  comply  with  the  terms 
of  the  partnership  agreement  as  to  contributing  capital  or 
funds  required  for  the  successful  prosecution  of  the  business 
is  also  a  cause  for  dissolution,  whether  such  failure  or  refusal 
arises  from  disincHnation  or  inability.  Thus,  if  a  partnership 
is  formed  for  the  purpose  of  buying  and  selling  land,  each 
partner  to  furnish  an  equal  share  of  money,  the  refusal  of  one 
to  make  the  necessary  advances  would  be  a  good  cause  for 
putting  an  end  to  the  partnership.  And,  if  a  partner  refuses 
to  manufacture  articles  as  agreed,  so  as  to  make  the  works 
profitable,  it  is  a  cause  for  dissolution. 


466  BUSINESS   LAWS   FOR   BUSINESS   MEN. 

If  a  partner,  by  reason  of  his  infirmities,  becomes  totally 
incapable  of  performing  the  partnership  duties  incumbent 
upon  him,  a  dissolution  will  be  decreed,  not  only  to  protect 
the  partner  who  has  become  incapacitated,  but  to  relieve  the 
other  from  the  difficult  position  in  which  he  is  placed.  Con- 
firmed and  incurable  insanity  is  a  ground  for  dissolving  a 
partnership,  and  when  it  is  shown  that  a  partner  is  so  far 
disordered  in  his  mind  as  to  be  incapable  of  conducting  the 
firm  business  according  to  the  terms  of  the  contract  of  co- 
partnership, a  court  of  equity  will  dissolve  the  firm.  After 
an  adjudication  of  the  insanity  of  one  partner,  the  continuing 
partner  may  apply  for  a  dissolution  of  the  partnership,  if  he 
so  desires;  or,  if  it  is  a  partnership  at  will,  he  may  dissolve 
it  of  his  own  volition ;  but  where  one  partner  has  been  ad- 
judged insane,  and  the  remaining  partner  continues  the  busi- 
ness as  before,  without  objection  or  notice  to  any  one,  it  is 
presumed  that  he  did  not  intend  a  dissolution  of  the  firm, 
but  that  he  waited  to  determine  whether  the  incapacity  of  his 
partner  would  prove  merely  temporary,  and  whether  it  would 
become  practicable  for  him  to  resume  business.  So  long  as 
he  thus  continues  to  carry  on  the  business,  without  seeking 
to  dissolve  the  partnership,  there  is  no  dissolution,  nor  is  he 
excused  from  accounting  for  the  profits  derived  by  him  from 
the  business  of  the  firm. 

Partners  may  provide  in  their  contract  that  certain  acts 
or  conduct  shall  operate  to  dissolve  the  partnership;  but,  in 
the  absence  of  special  agreement,  courts  may  dissolve  a 
partnership  for  misconduct,  gross  neglect,  or  breach  of  part- 
nership duty.  As  a  general  rule,  gross  misconduct,  want  of 
good  faith,  or  gross  want  of  diligence,  or  such  cause  as  is 
productive  of  serious  and  permanent  injury  to  the  partnership 
concerns,  or  renders  it  impracticable  to  carry  on  the  partner- 
ship business,  is  proper  ground  for  dissolution.  Habitual  in- 
toxication, extravagance,  and  dishonesty  are  good  grounds  for 
dissolution. 

If  quarrels,  dissensions,  or  chronic  hostility  between  part- 
ners are  of  such  serious  and  permanent  character  as  to  pre- 
vent the  profitable  continuance  of  the  partnership  business, 


BUSINESS   CONTRACTS  AND   LEGAL  OBLIGATIONS.  467 

on  the  terms  of  the  agreement  between  the  partners,  a  diss- 
olution will  be  decreed.  Violent  disputes,  ill  will,  or  dissen- 
sions between  the  partners,  which  entirely  prevent  the  bene- 
ficial effects  of  a  connection,  are  sufficient  to  justify  a  decree 
of  dissolution.  A  dissolution  should  be  decreed  where  it  ap- 
pears that  the  partners  are  in  a  constant  state  of  quarrel; 
that  one  makes  a  rule  of  going  to  the  office  at  an  early  hour, 
opening  all  the  letters  addressed  to  the  firm,  and  failing  to 
communicate  the  contents  to  the  other;  that  the  other  partner 
is  always  arbitrary  in  his  action ;  and  that,  generally,  what 
one  wants  to  do  the  other  objects  to. 

A  court  of  equity  will  not  dissolve  a  co-partnership  unless 
cause  is  shown,  and  the  mere  desire  of  a  partner  for  a 
dissolution  is  not  a  sufficient  cause.  It  is  not  for  every  act 
of  misconduct  on  the  part  of  one  partner  that  a  court  of 
equity,  at  the  instance  of  another  partner,  will  dissolve  the 
partnership  and  close  up  the  affairs  of  the  company.  The 
court  will  require  a  strong  case  to  be  made,  and  it  is  a 
general  principle  that  a  court  has  no  jurisdiction  to  make 
a  separation  between  partners  for  trifling  causes,  or  tem- 
porary grievances,  involving  no  permanent  mischief.  Thus, 
it  is  not  sufficient  cause  for  the  dissolution  of  a  firm  that 
a  loss  occurs  to  it  through  a  partner's  mere  error  of  judg- 
ment, or  that  there  is  a  mere  dissatisfaction  between  partners. 
A  court  of  equity  will  not  decree  a  dissolution  of  a  partner- 
ship, unless  it  is  shown  that  the  defendant  has  substantially 
failed  in  the  performance  of  his  part  of  the  partnership 
agreement. 

Civil  Code,  Section  2452. 

Section  416.— NOTICE  OF  DISSOLUTION  OF 
PARTNERSHIP.— The  liability  of  a  general  partner  for 
the  acts  of  his  co-partners  continues,  even  after  a  dissolution 
of  the  co-partnership,  in  favor  of  persons  who  have  had  deal- 
ings with  and  given  credit  to  the  partnership  during  its  exist- 
ence, until  they  have  had  personal  notice  of  the  dissolution. 
The  liability  of  a  partner  may  extend  beyond  the  indebted- 
ness  existing   at   the    dissolution,    and   include    indebtedness 


468  BUSINESS   LAWS   FOR  BUSINESS   MEN. 

subsequently  contracted  in  favor  of  persons  relying  on  the 
partnership,  and  who  did  not  have  any  notice  of  its  dissolu- 
tion. Those  who  have  dealt  with  the  firm  before  dissolution 
are  entitled  to  hold  all  the  partners  liable  for  debts  con- 
tracted afterwards  in  good  faith,  in  the  belief  that  the  firm 
still  continues,  and  in  reliance  upon  its  assets  and  the  personal 
responsibility  of  its  members.  As  to  such  customers,  actual 
notice  is  required  to  exempt  from  liability  any  member  of 
the  firm,  though  he  has  retired.  The  fact  that  notice  was 
mailed  to  such  customer,  or  was  published  in  a  newspaper 
of  general  circulation,  and  such  newspaper  mailed  to  a  cred- 
itor with  a  red  line  drawn  about  the  notice  for  the  purpose 
of  attracting  attention  to  it,  or  that  the  dissolution  had  at- 
tained general  notoriety,  cannot  defeat  the  customer's  claim 
to  hold  all  the  members  of  the  firm  answerable,  if  it  appears 
that  he  did  not  have  actual  notice  of  the  dissolution.  Persons 
who  have  not  dealt  with  the  firm  before  its  dissolution  are 
not  entitled  to  actual  notice,  and  cannot  hold  a  retiring  mem- 
ber answerable  if  notice  of  the  dissolution  has  been  given  by 
publication  in  a  newspaper.  A  change  of  the  partnership 
name,  which  plainly  indicates  the  withdrawal  of  a  partner, 
is  sufficient  notice  of  the  fact  of  such  withdrawal  to  all  per- 
sons to  whom  it  is  communicated;  but  a  change  in  the  name, 
which  does  not  contain  such  an  indication,  is  not  notice  of 
the  withdrawal  of  any  partner. 

Civil  Code,  Sections  2453,  2454. 

Section  417.— WINDING  UP  THE  PARTNERSHIP 
AFFAIRS. — After  the  dissolution  of  a  partnership,  its  aflfairs 
must  be  wound  up,  and  its  property  disposed  of.  No  new 
contracts  are  to  be  made,  no  new  business  transacted ;  but 
only  the  final  disposition  of  the  assets  of  the  firm,  the  collec- 
tion of  the  accounts,  the  payment  of  the  debts,  the  distribu- 
tion of  the  property  left  over.  Any  member  of  a  general 
partnership  may  act  in  the  winding  up  of  its  affairs.  By  con- 
sent of  all  the  partners,  the  final  settlement  of  the  affairs  of 
the  firm  may  be  committed  to  one  of  the  partners,  and  the 
other  partners  will  then  have  no  right  to  act.     The  partner 


BUSINESS   CONTRACTS   AND   LEGAL  OBLIGATIONS.  469 

authorized  to  act  in  liquidation  may  collect,  compromise,  or 
release  any  debts  due  to  the  partnership,  and  pay  or  com- 
promise any  claims  against  it,  and  dispose  of  the  partnership 
property;  he  may  also  indorse,  in  the  name  of  the  firm, 
promissory  notes  or  other  obligations  held  by  the  partnership, 
for  the  purpose  of  collecting  them,  but  he  cannot  create  any 
new  obligation  in  the  name  of  the  firm. 

Civil  Code,  Sections  2459,  2460,  2461,  2462. 

Section  418.  — RIGHTS  OF  PARTNERS  AFTER 
DISSOLUTION.— Each  partner,  after  the  dissolution  of  the 
firm,  has  an  equal  right  to  the  possession  of  its  assets.  And 
if  the  liquidation  of  the  partnership  aflfairs  is  not  left  in  the 
hands  of  certain  members  of  the  firm,  by  consent  of  all  the 
partners,  then  each  partner  has  the  right  to  do  whatever  acts 
are  necessary  to  complete  the  business  of  the  partnership, 
and  fulfil  its  contracts ;  and,  as  each  partner  is  interested  in 
seeing  the  business  closed,  by  the  collection  of  the  assets,  and 
the  payment  of  the  firm's  obligations,  and  a  division  of  the 
remainder,  each  may  take  steps  looking  to  that  end,  and  exer- 
cise the  power  vested  in  him  as  a  partner  to  dispose  of  and 
preserve  the  property  of  the  firm,  and  pay  its  obligations. 
After  dissolution  of  the  firm  each  of  the  partners  has  the 
right  to  enter  into  the  same  or  any  other  business  on  his 
own  account.  If  property  of  the  firm  is  in  possession  of  one 
of  the  members  of  the  partnership,  he  has  the  power  to  take 
such  measures  as  are  necessary  for  its  preservation  and  pro- 
tection. Each  of  the  partners,  in  the  absence  of  an  agree- 
ment to  the  contrary,  is  bound  to  give  his  services  to  the 
business  of  the  firm,  and  this  remains  true  after  its  dissolution 
so  far  as  is  necessary  to  the  winding  up  of  its  aflfairs.  After 
the  dissolution  of  the  partnership,  each  partner  remains  liable 
for  the  indebtedness  of  the  firm,  to  the  same  extent  as  before. 

Section  419.— FORM  OF  PARTNERSHIP  AGREE- 
MENT.— The  following  is  a  form  of  partnership  agreement: 

Articles  of  Co-partnership,  made  and  entered  into  the 
day  of ,  191. .,  between 


470  BUSINESS   LAWS   FOR   BUSINESS   MEN. 

,   of 


State   of   California,    and 

,  of  the  same  place : 

The  said  parties  above  named  have  agreed,  and  by  these 
presents  do  agree,  to  become  partners  in  business  together, 
under  and  by  the  name,  firm,  and  style  of  (here  state  name 
of  firm),  in  the  business  of  (here  state  the  kind  of  business 
to  be  transacted  by  the  firm),  at  (here  state  name  of  place 
M'here  the  business  is  to  be  conducted).  State  of  California; 

their  co-partnership  to  commence  on  the 

day  of  ,  191 .  .,  and  to  continue 

years  thence  next  ensuing,  fully  to  be  completed  and  ended, 
and  to  that  end  and  purpose  the  said  parties  have  delivered 

in  as  capital  stock  the  sum  of 

Dollars,  gold  coin  of  the  United  States,  share  and  share 
alike,  to  be  used  and  employed  in  common  between  them, 
for  the  support  and  management  of  the  said  business,  to 
their  mutual  benefit  and  advantage.  And  it  is  agreed,  by 
and  between  the  said  parties,  that  at  all  times  during  the 
continuance  of  their  co-partnership,  they  and  each  of  them 
will  give  their  attendance,  and  do  their  and  each  of  their 
best  endeavors,  and  to  the  utmost  of  their  skill  and  power 
exert  themselves,  for  their  joint  interest,  profit,  benefit, 
and  advantage,  in  the  business  aforesaid ;  that  they  shall 
and  will,  at  all  times  during  their  co-partnership,  bear,  pay, 
and  discharge,  equally  between  them,  all  rents  and  other 
expenses  that  may  be  required  for  the  support  and  man- 
agement of  the  said  business;  that  all  gains,  profits,  and 
increase  that  shall  come,  grow,  or  arise  from  or  by  means 
of  the  said  business,  shall  be  divided  between  them,  share 
and  share  alike;  and  all  loss  that  shall  happen  to  their  said 
joint  business,  by  bad  debts,  or  otherwise,  shall  be  borne 
and  paid  equally  between  them;  that  there  shall  be  kept, 
at  all  times  during  the  continuance  of  their  co-partnership, 
perfect,  just,  and  true  books  of  accounts,  wherein  each  of 
the  said  co-partners  shall  enter  and  set  down,  as  well  all 
money  by  them,  or  either  of  them,  received,  paid,  laid  out, 
and  expended,  in  and  about  the  said  business,  as  also  all  the 
goods,  wares,  merchandise,  and  commodities,  by  them,  or 
either  of  them,  bought  or  sold,  by  reason  or  on  account  of 
the  said  business,  and  all  other  matters  and  things  whatsoever, 
to  the  said  business  and  management  thereof  in  anywise 
belonging;  which  said  books  shall  be  used  in  common  between 
the  said  co-partners,  so  that  either  of  them  may  have  access 
thereto  without  any  interruption  or  hindrance  of  the  other; 


BUSINESS    CONTRACTS   AND   LEGAL   OBLIGATIONS.  471 

that  the  said  co-partners,  once  in  each  year,  during-  the  con- 
tinuance of  the  said  co-partnership,  as  aforesaid,  to-wit:  on 

the   day  of ,  in  each  year, 

or  oftener  if  necessary,  shall  make,  yield,  and  render,  each 
to  the  other,  a  true,  just,  and  perfect  inventory  and  account, 
of  all  the  profits  and  increase  by  them,  or  either  of  them,  made, 
and  of  all  loss  by  them,  or  either  of  them,  sustained,  and  also 
of  all  payments,  receipts,  disbursements,  and  of  all  other 
things  by  them  made,  received,  disbursed,  acted,  or  suf- 
fered, in  their  said  business ;  and  the  said  account  being 
so  made,  they  shall  and  will  clear  and  adjust,  each  to 
the  other,  at  the  time,  their  just  share  of  the  profits  so  made 
as  aforesaid;  that  during  the  continuance  of  the  said  co- 
partnership, neither  of  them  shall  or  will  indorse  any  note, 
or  otherwise  become  security  for  any  person  or  persons 
whomsoever,  without  the  consent  of  the  other  said  co-partner ; 
that  at  the  end  of  said  term,  or  other  sooner  determination 
of  their  co-partnership,  the  said  co-partners,  each  to  the  other, 
shall  and  will  make  a  true,  just,  and  final  account  of  all 
things  relating  to  their  said  business,  and  in  all  things  truly 
adjust  the  same;  and  that  all  and  every  stock  and  stocks, 
as  well  as  the  gains  and  increase  thereof,  which  shall  appear 
to  be  remaining,  either  in  money,  goods,  wares,  fixtures, 
debts,  or  otherwise,  shall  be  divided  between  them,  share  and 
share  alike. 

In  witness  whereof  the  parties  hereto  have  hereunto   set 
their  hands  and  seals  the  day  and  year  first  above  written. 

(Seal.) 

(Seal.) 


Surveys  of  Land. 

Section  420.— PUBLIC  AND  PRIVATE  LAND  SUR- 
VEYS.— One  of  the  fruitful  causes  of  litigation  in  California, 
litigation  which  involves  the  title  and  possession  of  land  in 
nearly  every  county  in  the  State,  and  the  legal  rights  and 
obligations  of  thousands  of  people,  is  the  question  of  the 
correctness  of  public  and  private  land  surveys.  Therefore, 
every  owner  of  land,  especially  in  the  rural  districts  of  the 
State,  is  interested  in  knowing  something  about  the  law 
relative  to  public  and  private  land  surveys. 


472  BUSINESS   LAWS   FOR   BUSINESS   MEN. 

Section  421.  — GOVERNMENT  SURVEYS.— It  is  im- 
portant for  the  land  owner,  when  he  believes  or  is  informed 
that  others  are  encroaching-  upon  the  lines  of  his  land  as 
originally  surveyed  and  established,  to  know  what  the  law 
is  as  to  Government  surveys.  For  private  surveys,  made 
by  County  Surveyors  or  other  surveyors  at  the  request  of 
individual  owners,  can  have  but  one  object,  and  that  is  to 
find  where  the  lines  were  originally  established  by  the  Gov- 
ernment survey.  For  the  purpose  of  giving  such  information 
as  may  be  of  value  to  the  landowner,  the  following  sections 
under  the  head  of  "Surveys  of  Land"  have  been  prepared. 

Section  422.— GOVERNMENT  SURVEY  ACCEPTED 
AND  APPROVED  IS  FIXED  AND  UNCHANGE- 
ABLE.— First,  it  is  important  to  know,  that  a  survey  ac- 
cepted and  approved  by  the  Government  of  the  United  States 
is  fixed  and  unchangeable.  People  may  think  that  the 
original  survey  was  not  correct,  but  that  makes  no  difference. 
As  a  matter  of  fact,  very  few  Township  surveys  are  abso- 
lutely correct,  and  in  many  of  them  serious  errors  were  made 
as  reported  by  the  Government  surveyors.  And,  too,  many 
of  those  who  took  contracts  to  survey  Government  lands 
were  dishonest  or  incompetent,  or  both  together,  and  in- 
stead of  going  over  the  ground,  this  class  of  surveyors  con- 
tented themselves  with  sitting  on  a  rock  and  guessing  at 
the  surrounding  country.  But  it  was  in  the  interest  of 
the  peace  and  security  of  settlers  upon  the  public  domain 
that  their  occupation  of  the  land  should  not  be  disturbed 
afterwards  by  the  claim  that  the  Government  survey  was 
not  properly  or  correctly  made;  and  as  all  titles  to  land  in 
this  country  run  back  to  the  original  ownership  of  the  Gov- 
ernment, it  is  evident  that  the  extent  and  lines  of  any  partic- 
ular lot  of  land  must  rest  upon  the  original  survey  made  for 
and  accepted  by  the  United  States;  and  for  the  purpose  of 
security  in  titles,  and  so  that  private  surveys  may  have  some- 
thing solid  to  rest  upon,  the  Government  of  the  United  States 
has  adopted  the  unvarying  rule,  that  a  survey  accepted  and 
approved  by  the  Government  of  the  United  States,  whether 


BUSINESS    CONTRACTS   AND   LEGAL   OBLIGATIONS.  473 

correct  or  incorrect,  is  final  and  conclusive,  fixed  and  un- 
changeable, and  neither  oral  evidence  nor  private  surveys  can 
be  admitted  to  contradict  it. 

Section  423.— FINDING  ORIGINAL  LOCATION  OF 
TOWNSHIP  LINE.— After  many  years,  it  frequently  hap- 
pens that  adjoining  land  owners  will  differ  as  to  the  place 
where  the  Government  surveyor  really  located  a  Township 
line,  and  to  ascertain  its  true  location  in  the  lapse  of  a 
quarter  of  a  century  or  more  may  be  a  matter  of  much  diffi- 
culty for  private  surveyors.  Mounds  of  stone  may  have  fallen 
down  and  become  scattered  so  as  to  lose  their  identity; 
corner  stakes  may  have  been  burned  away  or  pulled  up  and 
cast  aside;  witness  trees  may  have  disappeared,  by  fire  or 
the  ax,  or  by  natural  decay,  or  force  of  storms;  so  that  all 
or  nearly  all  of  the  monuments  marked  and  placed  upon  the 
line  by  the  Government  surveyor,  as  he  ran  and  established 
it,  may  have  become  obliterated  and  lost  in  the  course  of 
time.  But  the  law  has  established  certain  rules  and  regula- 
tions for  the  guidance  of  private  surveyors  under  such  cir- 
cumstances, which  rules  and  regulations  must  always  be 
followed  by  a  surveyor  seeking  to  locate  the  place  where 
the  line  was  originally  established,  if  he  expects  to  make  a 
survey  that  will  be  of  any  value  to  his  employer. 

Section  424.— FIELD  NOTES  AND  MAPS.— A  private 
surveyor,  seeking  to  find  the  true  location  of  the  Government 
lines,  should  have  with  him  the  field  notes  and  maps  of  the 
original  survey,  certified  copies  of  which  can  be  obtained  from 
the  office  of  the  United  States  Surveyor-General  through  the 
office  at  San  Francisco.  The  field  notes  are  always  to  be  con- 
sidered before  the  maps.  The  field  notes  made  by  the  Gov- 
ernment surveyor  afford  the  best  evidence  of  the  place  where 
the  line  was  located,  and  control  the  maps  or  plats.  The 
maps  are  made  from  the  field  notes,  therefore  the  field  notes 
are  entitled  to  first  consideration. 

Section  425.— MONUMENTS   ON  THE  GROUND.— 

The  private   surveyor,   employed   to   locate   the   Government 


474  BUSINESS   LAWS    FOR   BUSINESS    MEN. 

line,  must  find  the  monuments  on  the  ground,  called  for 
by  the  field  notes.  If  the  original  stakes,  and  mounds  of 
rock,  and  witness  trees,  marked  for  Section  corners  and 
quarter  Section  corners,  and  closing  corners  on  the  Town- 
ship line,  are  all  in  place,  where  the  Government  surveyor 
put  them,  and  as  called  for  by  the  field  notes,  the  work  of 
the  private  surveyor  will  be  easy.  But  in  controversies  which 
arise  over  boundaries  of  land,  it  nearly  always  happens  that 
most  of  the  artificial  monuments,  the  stakes,  and  mounds, 
have  disappeared,  and  that  some  of  the  witness  trees  cannot 
be  found.  It  is  the  duty  of  the  private  surveyor  to  try  to 
find  the  stakes  set  by  the  Government  surveyor,  of  course; 
but  if  he  finds  stakes,  with  the  right  marks  for  certain 
corners,  it  may  be  denied  that  they  are  the  original  stakes, 
or  it  may  be  claimed  that  they  have  been  moved  from  the 
place  where  the  original  surveyor  placed  them.  So  that  the 
natural  objects  called  for  by  the  field  notes,  objects  which 
never  change,  and  cannot  be  moved,  such  as  creeks,  rivers, 
bluflFs,  roads  or  trails,  ponds,  ridges,  or  other  permanent 
features  of  the  earth's  surface,  when  found  by  the  private 
surveyor  in  the  position  corresponding  to  the  calls  of  the 
field  notes,  are  really  the  most  certain  and  satisfactory  evi- 
dence that  he  is  on  the  right  line.  And  from  the  observa- 
tions above  made,  it  may  be  said,  that  the  rule  as  to  monu- 
ments which  must  govern  the  private  surveyor  in  his  work, 
and  which  will  always  be  safe  for  the  land  owner  for  whom 
the  work  is  being  done,  is  as  follows:  It  was  the  duty  of 
the  Government  surveyor  to  note  all  natural  objects  in  his 
field  notes,  and  in  trying  to  find  where  the  Township  line 
was  actually  run  and  established  by  the  Government  survey, 
the  private  surveyor  must  give  careful  consideration,  with 
reference  to  the  field  notes,  to  permanent  monuments  set, 
their  size,  kind,  and  location,  with  reference  to  the  corners 
which  they  are  intended  to  perpetuate ;  bearing  or  witness 
trees  marked  in  the  field;  all  nearest  known  original  corners, 
in  all  directions,  following  section  lines;  all  natural  objects 
called  for  by  the  field  notes,  such  as  creeks,  rivers,  bluffs, 


BUSINESS    CONTRACTS   AND   LEGAL   OBLIGATIONS.  475 

roads  or  trails,  ponds,  ridges,  or  other  unchanging  features 
of  the  earth's  surface. 

Section  426.— TOWNSHIPS.— The  public  lands  of  the 
United  States  are  primarily  surveyed  into  uniform  rectangular 
tracts,  six  miles  square,  called  Townships,  bounded  by  lines 
conforming  to  the  cardinal  points — North,  South,  East,  and 
West — and  containing,  as  nearly  as  may  be,  23,040  acres. 

Section  427.— SECTIONS.— The  Townships  are  sub- 
divided into  thirty-six  tracts,  one  mile  square,  called  Sections, 
containing  in  full  Sections  640  acres.  The  Sections  in  a 
Township  are  numbered  consecutively  from  1  to  36,  begin- 
ning at  the  Northeast  corner  of  the  Township  and  numbering 
West  with  the  North  tier  of  Sections,  thence  East  with  the 
second  tier.  West  with  the  third  tier,  and  so  on  to  Section  36 
in  the  Southeast  angle  of  the  Township. 

Section  428.— SUBDIVISIONS  OF  SECTIONS.— Sec- 
tions are  divided  into  four  equal  parts  of  160  acres  each, 
called  quarter  Sections,  and  each  quarter  Section  is  again 
divided  into  two  half-quarter  Sections  of  80  acres,  or  four 
quarter-quarters  containing  40  acres  each.  These  are  called 
Legal  Subdivisions,  and  are  the  only  divisions  recognized 
by  the  Government  in  disposing  of  the  public  lands,  except 
where  tracts  are  made  fractional  by  water  courses  or  other 
causes.  When  tracts  are  fractional,  the  smallest  legal  sub- 
division may  contain  less  than  40  acres  or  more  than  40 
acres,  and  they  are  then  designated  as  Lots,  to  distinguish 
them  from  the  legal  subdivisions  which  contain  exactly  40 
acres.  The  subdivisions  of  Sections  are  not  actually  surveyed 
and  marked  on  the  ground.  Quarter  section  or  half  mile 
posts  are  established  on  the  boundaries  of  the  Sections;  but 
the  interior  subdivisional  lines  of  Sections  are  made  only  on 
the  plats  of  Townships,  at  the  Surveyor-General's  office,  and 
when  the  boundaries  of  these  subdivisions  are  required  to 
be  established  on  the  ground,  it  must  be  done  by  a  private 
survey. 


476  BUSINESS   LAWS   FOR   BUSINESS   MEN. 

Section  429.— PRINCIPAL  MERIDIANS  AND  BASE 
LINES. — Two  principal  lines  are  established  prior  to  the 
survey  of  the  Townships — a  north  and  south  line  denominated 
a  Principal  Meridian,  and  an  east  and  west  line  styled  a  Base 
Line.  These  lines  constitute  the  basis  of  the  public  surveys, 
and  are  prerequisite  to  the  laying  out  of  the  Township. 

Section  430. — RANGES. — Any  number  or  series  of  Town- 
ships situated  in  a  tier  North  and  South  are  denominated  a 
Range,  and  the  Ranges  are  designated  by  Numbers  East  and 
West,  as  the  case  may  be,  from  the  governing  meridians.  The 
Townships  in  each  Range  are  also  numbered  North  or  South 
from  established  base  lines. 

Section  431.— STANDARD  CORNERS.— At  the  time 
the  parallels  and  base  line  are  run,  the  Township,  Section, 
and  quarter  Section  corners  are  established  thereon.  As 
the  Township  and  Section  lines  North  are  run  from  them, 
it  follows  that  these  corners  will  be  common  to  two  Town- 
ships, Sections,  or  quarter  Sections  North  of  the  parallel  or 
base  line,  and  these  are  called  Standard  Corners. 

Section  432.— CLOSING  CORNERS.— North  and  South 
lines  are  required  to  run  on  the  true  meridian.  Hence,  when 
the  Township  and  Section  lines  below  reach  the  parallels  or 
base  lines  North,  they  will  not  close  on  the  Standard  Corners 
if  the  field  of  operation  be  West  of  the  convergency  of  the 
meridians,  but  will  strike  the  line  at  a  distance  corresponding 
to  the  convergency;  East  of  the  Standard  Corners  if  the  field 
of  operation  be  West  of  the  governing  meridian,  and  West  of 
said  corners  if  the  surveys  be  East  of  the  principal  meridian. 
Another  set  of  Township  and  Section  corners  is  therefore 
established  at  the  point  of  intersection  with  the  standard  or 
base  line,  and  the  distances  of  said  corners  from  the  corres- 
ponding standard  corners  previously  set,  are  measured  and 
noted  in  the  field  book.  The  corners  so  established  are  called 
Closing  Corners,  and  will,  of  course,  be  common  to  two  Town- 
ships or  Sections  South  of  the  base  or  standard  line.  No 
closing  quarter  Section  corners  are  established. 


BUSINESS    CONTRACTS   AND    LEGAL   OBLIGATIONS.  477 

Section  433.— TOWNSHIP  CORNERS.— Township  cor- 
ners are  established  at  intervals  of  six  miles  each,  and  are 
perpetuated  by  the  following  modes:     (1)  The  post  is  placed 
first   in   order,    because    circumstances    render    its    use    most 
common  in  practice.     Corner  posts  are  required  to  be  four 
feet  in  length,  and  at  least  five  inches  in  diameter,  and  are 
to  be  planted  to  the  depth  of  two  feet,  the  part  projecting 
above  the  ground  being   squared  to   receive   the   marks   re- 
quired to  be  cut  upon  them.     When  the  corner  is  common 
to  four  Townships,  the  post  is  set  cornerwise  to  the  lines, 
presenting  the   angles   to   the  cardinal   points,   and   on   each 
flattened   side   must   be   marked   the   number   of   the   Town- 
ship, Range,  and  Section  which  it  faces.     Six  notches  will 
also  be  cut  on  each  of  the  four  edges.     If  the  post  is  on 
a   standard   parallel   or   base   line,    and   is   common    to   only 
two  Townships   on  the   North,   six   notches   will   be   cut   in 
the  East,   North,  and  West  edges,  and  the  letters  "S.   C." 
(Standard  Corner)  will  be  cut  on  the  flattened  surface,  but 
no  notches  will  be  cut  in  the   South  edge.     If  the  post  is 
common   to  two  Townships   South   of   the   parallel   or   base 
line,  six  notches  will  be  cut  in  the  East,  South,  and  West 
edges,  but  none  in  the  North  edge,  and  the  letters  "C.  C." 
(Closing   Corner)    must  be   cut  upon   the   flattened   surface. 
The  position  of  all  Township  corner  posts   must  be  wit- 
nessed by  four  bearing  trees,  one  in  each  of  the  adjoining 
Townships,  or  by  "pits,"  where  trees  cannot  be  found.     (2) 
Township  corner  stones  must  be  inserted  in  the  ground  not 
less  than  eight  inches,  with  their  sides  to  the  cardinal  points, 
and   small   mounds   of   stone   should   be   constructed   against 
the  sides  of  them.     The  notches  on  the  edges  are  the  only 
marks   required.      (3)    A   tree   in   place,   when   employed   to 
perpetuate  a  Township  corner,  must  be  marked  and  witnessed 
in  the  same  manner  as  Townships  posts.     (4)  The  post  and 
mound  is  a  common  method  of  marking  corners.     Mounds 
at  Township  corners  must  be  5  feet  in  diameter  at  their  base, 
and  23^    feet  in  perpendicular   height.     Posts   in   Township 
mounds,  therefore,   require  to  be  4^/2    feet  in  length,  so  as 
to  be  planted  12  inches  in  the  ground,  and  allow  12  inches 


478  BUSINESS   LAWS   FOR  BUSINESS   MEN. 

to  project  above  the  mound.  The  pit  for  a  Township  mound 
will  be  18  inches  wide,  2  feet  in  length,  and  at  least  12  inches 
deep,  located  6  feet  from  post,  and  on  opposite  sides.  At 
corners  common  to  four  Townships,  the  pits  will  be  placed 
on  the  line  and  lengthwise  to  them.  On  base  and  parallel 
lines,  where  the  corners  are  common  to  only  two  Townships, 
three  pits  only  will  be  dug — two  in  line  on  either  side  of  the 
post,  and  one  on  the  line  North  or  South  of  the  corner,  as 
the  case  may  be.  By  this  means  the  standard  and  closing 
corners  can  be  readily  distinguished  from  each  other.  Posts 
in  mounds  should  be  notched,  marked,  and  faced  precisely  as 
posts  without  the  mound. 

Section  434.— SECTION  CORNERS.— Section  corners 
are  established  at  intervals  of  1  mile  or  80  chains,  and  four 
modes  of  perpetuating  corners  are  employed  to  mark  them: 
(1)  Post  for  Section  corner  must  be  4  feet  in  length  and 
4  inches  in  diameter,  firmly  planted  or  driven  into  the  ground 
to  the  depth  of  2  feet,  the  part  projecting  being  squared  to 
receive  the  required  marks.  When  the  corner  is  common  to 
four  sections,  the  post  will  be  set  cornerwise  to  the  line,  and 
on  each  flattened  surface  will  be  marked  the  number  of  the 
Section  which  it  faces;  also,  on  the  Northeast  face,  the  num- 
ber of  the  Township  and  Range  will  be  cut.  All  mile  posts 
on  Township  lines  will  have  as  many  notches  on  the  two  corres- 
ponding edges  as  they  are  miles  distant  from  the  respective 
Township  corners.  Section  posts  in  the  interior  of  a  Town- 
ship will  have  as  many  notches  on  the  South  and  East  edges 
as  they  are  miles  from  the  South  and  East  boundaries  of  the 
Township,  but  no  notches  on  the  North  and  West  edges. 
By  this  plan  the  corner  can  be  identified  thereafter,  if  the  post 
be  found  lying  upon  the  ground.  All  Section  posts,  whether 
in  the  interior  of  a  Township  or  on  a  Township  line,  must 
be  witnessed  by  four  bearing  trees,  one  in  each  of  the  adjoin- 
ing Sections.  When  the  requisite  number  of  bearing  trees 
cannot  be  found,  the  deficiency  will  be  supplied  by  substitut- 
ing pits  18  inches  square,  and  not  less  than  12  inches  in 
depth.     (2)   Mounds  at  Section  corners  will  be  4^   feet  in 


BUSINESS    CONTRACTS    AND   LEGAL   OBLIGATIONS.  479 

diameter  at  their  base,  and  2  feet  in  perpendicular  height; 
the  post  being  4  feet  in  length  and  inserted  12  inches  in  the 
ground.  The  post  must  be  not  less  than  3  inches  square, 
and  marked  and  witnessed  the  same  as  the  post  without  the 
mound.  At  corners  common  to  four  Sections,  the  post  in 
mound  will  be  set  with  the  edge  to  the  cardinal  points;  at 
corners  common  to  only  two  Sections,  the  flattened  sides  of 
-the  post  will  face  the  cardinal  points.  (3)  When  stones  are 
used  for  Section  corners  on  Township  lines,  they  will  Be 
set  with  their  edges  in  the  direction  of  the  Hne;  but  when 
standing  for  interior  Section  corners,  they  will  be  planted 
facing  the  North,  and  should  be  notched  the  same  as  Section 
Posts  similarly  situated.  No  marks  except  the  notches  are 
required,  but  they  will  be  witnessed  by  trees  or  pits  as  re- 
quired where  posts  are  used.  A  tree  placed  at  a  Section 
corner  is  marked  the  same  as  a  Section  post. 

Section    435.— QUARTER     SECTION     CORNERS.— 

Quarter  Sections  corners  are  established  at  intervals  of  half 
a  mile,  or  40  chains,  except  in  the  North  and  West  tiers  of 
Sections  in  a  Township.-  Where  the  Section  lines  exceed 
or  fall  short  of  80,  chains,  in  subdividing  these  Sections,  the 
quarter  post  is  established  just  40  chains  from  the  interior 
Section  corner,  throwing  the  excess  or  deficiency  upon  the 
last  half  mile.  The  intervals  between  the  quarter  posts  and 
the  North  and  West  Township  boundaries  will  therefore  be 
irregular.  Quarter  Section  corners  are  not  required  to  be 
established  on  the  North  boundary  of  the  Northern  tier 
of  Sections  in  a  Township  South  of  and  bordering  on  a 
standard  parallel  or  base  line.  Quarter  Section  corners  are 
perpetuated  in  the  following  manner:  (1)  Posts  at  quarter 
Section  corners  must  be  4  feet  in  length  and.  4  inches  in 
diameter,  and  be  planted  or  driven  into  the  ground  2  feet; 
the  part  projecting  being  flattened  or  squared,  so  as  to  pre- 
sent a  smooth  surface  3  inches  in  width.  The  only  mark 
required  on  a  quarter  Section  post  is  the  character  "^S." 
The  corner  must  also  be  witnessed  by  two  bearing  trees. 
(2)   Mounds  at  quarter  Section  corners  will  be  4^   feet  in 


480  BUSINESS   LAWS   FOR   BUSINESS   MEN. 

diameter  at  their  base,  and  2  feet  in  perpendicular  height, 
the  post  being  4  feet  in  length  and  inserted  in  the  ground 
12  inches;  it  will  also  be  marked  and  witnessed  the  same  as 
the  post  without  the  mound.  (3)  Stones  used  for  quarter 
Section  corners  must  have  the  fraction  "^"  cut  upon  the 
West  side  of  North  and  South  lines,  and  on  the  North  side 
of  East  and  West  lines,  and  must  be  witnessed  by  two  bear- 
ing trees.  (4)  A  tree,  when  found  in  place,  should  be 
marked  and  witnessed  in  the  same  manner  as  the  post. 

Section  436.— MEANDER  CORNERS.— At  the  points 
where  Township  or  Section  lines  intersect  large  ponds,  lakes, 
bayous,  or  navigable  rivers,  posts  are  established  at  the  time 
of  running  the  lines,  which  are  called  Meander  Corners. 
Either  of  the  four  modes  described  for  perpetuating  corners 
may  be  employed  for  perpetuating  meander  corners.  (1)  No 
marking  is  required  on  meander  posts,  but  they  must  be 
witnessed  by  two  bearing  trees  or  pits.  They  should  also  be 
firmly  inserted  in  the  ground.  (2)  The  mound  and  post  at 
meander  corners  should  be  the  same  dimensions  as  those 
for  the  Section  and  quarter  Section  corners.  The  pit  should 
be  directly  on  the  line,  and  8  links  further  from  the  water 
than  the  mound.  When  the  pit  cannot  be  so  located,  its 
course  and  distance  from  the  corner  should  be  stated  in  the 
field  book.  (3)  Stones  or  trees  may  be  employed  to  per- 
petuate meander  corners,  and  when  so  used,  must  be  witnessed 
the  same  as  meander  posts. 

Section  437.— GOVERNMENT  LINES  AND  COR- 
NERS MUST  CONTROL.— As  has  been  said  before, 
where  the  corners  are  established  by  the  proper  officer  in 
pursuance  of  the  system  of  subdivision  authorized  by  law, 
they  must  be  regarded  as  the  true  corners  which  they  repre- 
sent, even  if  it  is  subsequently  found  that  any  post  or  corner 
is  out  of  line,  or  that  the  intervals  between  posts  are  un- 
equal or  incorrect;  for  no  party  has  a  right  to  correct  such 
errors  except  the  general  Government,  and  it  possesses  the 
power  only  while  the  title  to  the  lands  affected  by  the  change 


BUSINESS    CONTRACTS   AND   LEGAL   OBLIGATIONS.  481 

is  yet  in  the  United  States.  After  the  lands  have  passed 
into  the  hands  of  private  parties,  the  Government  Hnes  and 
corners,  as  marked  in  the  field,  must  control  in  determining 
the  boundaries  of  all  legal  subdivisions,  when  they  can  be 
found  and  identified;  and  when  they  are  missing,  recourse 
must  be  had  to  the  official  plats  and  field  notes  of  the  Govern- 
ment surveyor. 

Section  438.— RESTORING  LOST  CORNERS.— When 

extinct  lines  or  corners  of  the  public  lands  are  required  to  be 
re-established,  a  County  Surveyor  or  other  competent  per- 
son is  usually  employed  by  private  parties.  It  is  not  the 
province  of  the  General  Land  Office  to  direct  the  operations 
of  any  but  Government  surveyors  engaged  in  the  public 
service;  yet  obliterated  boundaries  must  be  restored  in  con- 
formity with  the  laws  and  regulations  under  which  they  were 
originally  established.  Extinct  lines  or  corners  must  be 
restored  to  the  exact  locality  they  originally  occupied,  if 
possible.  Resort  should  first  be  had  to  the  marks  in  the 
field.  The  surveyor  should  first  seek  to  identify  the  missing 
corner  on  the  ground,  by  the  aid  of  the  bearing  trees  or 
witness  mounds,  line  trees,  etc.,  described  in  the  original  field 
notes.  When  two  or  more  witness  trees  or  mounds  can  be 
found,  they  afford  the  best  means  for  restoring  a  missing 
corner  to  its  original  position  that  can  be  had.  If  the  corner 
cannot  be  identified  in  this  manner,  clear  and  unquestionable 
testimony  as  to  the  locality  it  originally  occupied  should  be 
taken,  if  such  testimony  be  obtainable.  This  testimony  must 
be  had  from  the  lips  of  old  settlers,  residents  of  the  neighbor- 
hood, who  may  be  able  to  point  out  from  their  personal  obser- 
vation and  recollection  the  position  of  a  stake  or  mound  set 
by  the  original  surveyor  at  the  time  the  line  was  run.  Ax- 
men,  ot  chainmen,  who  were  with  the  Government  surveyor, 
may  be  sworn  and  their  affidavits  taken  as  to  the  original 
location  of  missing  corners,  and  generally,  as  to  their  knowl- 
edge of  the  place  where  the  Government  surveyor  located  the 
line  which  the  private  surveyor  is  endeavoring  to  retrace. 
But  this  sort  of  evidence  is  always  more  or  less  unreliable, 


482  BUSINESS   LAWS   FOR   BUSINESS   MEN. 

and  subject  to  abuse;  and,  after  all,  the  monuments  placed 
on  the  ground  by  the  Creator,  which  neither  time  nor  man 
can  efface  or  change — mountains,  rivers,  the  ocean  bluff, 
ponds  and  lakes,  and  other  prominent  features  of  the  earth's 
surface — these,  when  they  correspond  with  the  field  notes  of 
the  original  survey,  form  the  best  evidence  of  the  true  loca- 
tion of  the  lines  and  corners  established  by  the  Government 
surveyor. 

Section  439.  — PERPETUATING     CORNERS.  — The 

Legislature  of  1905  passed  a  law  making  it  the  duty  of 
County  Surveyors  to  perpetuate  so  far  as  possible  the  corners 
established  by  the  Government  surveys.  The  law  provides 
that  when  any  County  Surveyor  shall  find  a  Government 
corner  marked  in  the  original  survey  by  placing  charcoal  in 
the  ground,  or  by  a  wooden  stake,  earth  mound,  or  other 
perishable  monument,  it  shall  be  his  duty  to  re-mark  said 
corner  by  placing  therein  a  monument  of  heavily  galvanized 
iron  pipe,  or  galvanized  iron  stake,  not  less  than  two  inches 
in  diameter  and  two  feet  long,  or  that  he  may  use  some  other 
material  not  less  in  size  and  equally  imperishable.  All  such 
monuments  located  in  public  highways  must  be  placed  with 
the  top  not  less  than  twelve  inches  below  the  surface  of  the 
ground,  but  when  not  located  in  public  highways  they  must 
be  placed  with  the  top  six  inches  above  the  surface  of  the 
ground.  If  the  top  of  the  monument  is  placed  above  the 
ground,  it  must  not  be  less  than  four  feet  long,  if  of  metal. 
The  surveyor  must  note  witness  objects  that  are  within  a 
reasonable  distance  of  any  corner,  and  state  distance  and 
course  from  the  corner,  and  record  his  notes  in  the  County 
Recorder's  office.  The  County  Recorder  is  required  to  keep 
a  book  for  the  purpose,  properly  indexed,  which  shall  be  a 
public  record.  Boards  of  Supervisors  are  required  to  furnish 
all  necessary  pipes  or  stakes  for  such  monuments,  on-demand, 
at  the  county's  expense.  (Act  of  the  Legislature,  approved 
March  18,  1905.) 

Section     440—  PROPORTIONATE      MEASURE- 
MENTS.— In  retracing  lines,  it  frequently  happens  that  the 


BUSINESS    CONTRACTS   AND   LEGAL   OBLIGATIONS.  483 

measurements  do  not  agree  with  those  stated  in  the  Gov- 
ernment field  notes.  This  discrepancy  generally  arises  from 
a  difference  in  the  length  of  the  respective  chains  used,  or 
a  want  of  proper  care  in  straightening  and  leveling  the  chain, 
or  in  sticking  the  pins,  on  the  part  of  one  set  of  chainmen 
or  the  other,  but  is  sometimes  owing  to  an  error  in  tallying 
committed  by  the  Government  chainman.  When  these  differ- 
ences in  measurement  occur,  the  County  Surveyor  must  in  all 
cases  establish  his  corners  at  intervals  proportionate  to  those 
given  in  the  Government  field  notes.  This  rule  must  be  ob- 
served even  if  the  original  interval  be  one  or  more  tallies 
too  many  or  too  few. 

Section  441.  — INSTRUCTIONS  FROM  THE  GEN- 
ERAL LAND  OFFICE.— The  Department  of  the  Interior, 
through  the  General  Land  Office,  has  from  time  to  time 
issued  circular  letters  of  instruction,  stating  the  rules  estab- 
lished by  law  which  must  be  followed  by  County  Surveyors 
and  others  in  retracing  the  lines  of  Government  surveys  and 
relocating  missing  corners.  From  these  letters  of  instruction 
the  following  rules  have  been  copied,  and  are  recommended 
to  the  careful  study  of  the  owners  of  land  the  boundaries  of 
which  are  in  controversy : 

(1)  All  corners  of  the  public  surveys  established  by  the 
Government  surveyors  must  stand  as  the  true  corners  they 
were  intended  to  represent,  and  the  length  of  lines  stated 
in  the  field  notes  of  the  original  survey  must  be  considered 
as  the  true  lengths  thereof. 

(2)  Missing  corners  should  be  restored  to  the  exact  posi- 
tion they  originally  occupied. 

(3)  All  lines  subdividing  a  Section  must  be  straight  lines 
running  through  the  Section  from  the  corner  in  one  bound- 
ary to  its  corresponding  corner  in  the  opposite  boundary  of 
said  Section. 

(4)  Section  and  quarter  Section  corners  as  established  by 
the  Government  survey,  must,  by  law  of  Congress,  stand  as 
the  true  corners. 


484  BUSINESS   LAWS   FOR   BUSINESS    MEN. 

(5)  Missing  corners  must  be  re-established  at  the  identical 
point  where  the  original  posts  were  planted  by  the  United 
States  Deputy  Surveyors. 

(6)  The  legal  presumption  is,  in  the  absence  of  any  evi- 
dence to  the  contrary,  that  lost  Section  and  quarter  Section 
posts  were  originally  established  at  the  distance  indicated  in 
the  field  notes. 

(7)  Half  quarter  Section  corners  must  be  estabUshed  equi- 
distant from  the  Section  and  quarter  Section  posts. 

(8)  To  divide  a  Section  into  quarters,  a  right  line  should 
be  run  from  the  quarter  Section  post  in  one  Section  line  to 
the  corresponding  quarter  Section  post  in  the  opposite  Sec- 
tion line,  even  though  one  or  more  of  these  posts  may  have 
been  established  nearer  to  one  Section  corner  than  the  other, 
thereby  giving  to  one  quarter  Section  more  than  160  acres, 
and  to  another  less  than  160  acres. 

(9)  It  is  the  duty  of  the  surveyor  to  re-establish  missing 
posts  in  the  exact  locality  where  they  were  originally  placed 
in  the  Government  survey.  The  proof  of  locality  first  sought 
to  be  obtained  should  be  the  witness  trees,  or  any  other  means 
of  identification  contained  in  the  field  notes,  and  next,  clear 
and  unquestionable  testimony  of  any  kind.  If  no  bearing 
trees,  or  other  evidence  in  the  field  notes  or  elsewhere,  exist, 
by  which  the  locality  of  the  missing  posts  can  be  identified 
or  determined  in  the  field,  then  the  legal  presumption  is  that 
the  missing  Section  or  quarter  Section  corners  were  origi- 
nally established  in  conformity  with  the  distances  expressed 
in  the  field  notes,  and  the  surveyor  should  so  re-establish 
them. 

(10)  Extinct  quarter  Section  corners,  except  on  fractional 
Section  lines,  when  they  cannot  be  identified,  should  be  re- 
established equidistant  between  the  Section  corners,  in  a 
right  line  between  the  nearest  noted  "line  trees"  each  side 
of  it,  if  there  are  any;  but  if  none  are  found,  then  in  a  right 
line  between  the  Section  corners.  Extinct  quarter  Section 
posts,  on  Section  lines  which  close  on  the  North  and 
West    boundaries    of    Townships,    should    be    re-established. 


BUSINESS    CONTRACTS   AND   LEGAL   OBLIGATIONS.  485 

according  to  the  original  measurement  thereof,  at  40  chains 
from  the  last  interior  Section  corner. 

(11)  Extinct  Section  corners  may  be  re-established  by 
running  a  right  line  between  the  nearest  noted  "line  tree" 
North  and  South  and  East  and  West  of  the  lost  corner,  if 
there  be  any  such  trees  within  the  distance  of  the  nearest 
quarter  Section  corners;  but  if  no  "line  tree"  be  found,  then 
between  the  nearest  quarter  Section  or  Section  corners,  and 
at  the  point  of  intersection  of  the  two  lines  thus  run,  estab- 
lish the  Section  corner,  with  new  bearings  to  the  nearest  and 
most  desirable  objects. 

(12)  The  quarter  mile  posts  are  not  established  in  Gov- 
ernment surveys,  but  are,  by  law,  understood  to  be  equi- 
distant from  the  Section  and  quarter  Section  corners,  and 
should  be  so  established  by  the  County  Surveyor. 

(13)  It  may  be  remarked,  that  where  the  measurement  of 
any  Section  line  by  the  County  Surveyor  does  not  corres- 
pond with  the  original  measurement  recorded  in  the  field 
notes,  lost  corners  should  be  re-established  at  proportionate 
distances  from  each  other  between  the  known  corners. 

Section  442—  WHERE  SURVEYOR  SHOULD 
START. — To  retrace  a  line,  a  surveyor  should  start  from 
some  known  corner  called  for  by  the  field  notes  of  the 
original  survey.  He  should  start  from  the  nearest  known 
corner.  When  he  has  found  such  a  corner,  and  has  identified 
it  by  descriptions  in  the  field  notes,  or  by  the  testimony  of 
old  residents  in  the  neighborhood,  it  will  make  no  difference 
whether  the  corner  is  on  the  Township  line,  or  in  a  Town- 
ship north  or  south  of  the  line;  for  if  it  is  a  corner  estab- 
lished by  the  original  surveyor,  when  locating  the  Township 
line,  or  subsequently  in  subdividing  a  Township,  and  is  the 
nearest  known  corner  to  the  point  which  the  private  surveyor 
is  endeavoring  to  retrace  or  relocate,  it  should  be  his  starting 
point  in  making  his  survey. 

Section  443.— MONUMENTS  CONTROL  COURSES 
AND    DISTANCES.— It  is  a  rule  of  surveying,  always  to 


486  BUSINESS   LAWS   FOR   BUSINESS    MEN. 

be  applied  to  the  retracing  of  Government  lines  and  the  re- 
locating of  Government  corners,  that  monuments,  natural  or 
artificial,  control  courses  and  distances.  Consequently,  whether 
the  courses  and  distances  correspond  with  the  field  notes  or 
not,  if  the  monuments  called  for  by  the  field  notes  are  found 
on  the  ground,  they  must  control.  It  is  only  where  no  monu- 
ments, natural  or  artificial,  can  be  found,  that  the  courses  and 
distances  will  control. 

Section  444.— COMPLETION  OF  UNITED  STATES 
SURVEY. — The  Government  survey  of  the  public  lands  is 
made  by  running  and  marking  the  lines  of  the  Township  and 
Sections,  and  by  marking  the  corners  of  the  Township,  Sec- 
tions, and  quarter  Sections.  It  is  not  necessary  that  a  whole 
Township  be  surveyed  at  one  time,  and  often  different  parts 
of  a  Township  are  surveyed  at  different  times.  But  no  sur- 
vey of  any  part  is  complete  until  the  lines  and  corners  about 
that  part  are  run  and  established  as  required  by  the  statute. 
Even  after  a  principal  meridian  and  base  line  have  been 
established,  and  the  exterior  lines  of  the  Township  have 
been  surveyed,  neither  the  Sections  nor  their  subdivisions  can 
be  said  to  have  any  existence  until  the  Township  is  sub- 
divided into  Sections  and  quarter  Sections  by  an  approved 
survey.  The  lines  are  not  ascertained  by  the  survey,  but 
they  are  created  by  it. 

Spaulding's  Table  for  Measurement  of  Logs. 

Section  445.— LEGAL  STANDARD  OF  LOG  MEAS- 
UREMENT.—The  State  has  by  law  adopted  the  table  known 
as  Spaulding's  Table  for  the  Measurement  of  Logs,  as  the 
legal  standard  of  measurement  in  Cahfornia.  The  law  passed 
by  the  Legislature  (Statutes  of  1878)  reads  as  follows: 
"There  shall  be  but  one  standard  for  the  measurement  of 
logs  throughout  the  State.  The  following  table,  known  as 
Spaulding's  Table  for  the  Measurement  of  Logs,  is  hereby 
made  the  standard  and  table  for  the  measurement  of  logs 
throughout  the  State.     For  the  measurement  of  logs  of  any 


BUSINESS    CONTRACTS   AND   LEGAL   OBLIGATIONS. 


487 


greater  length  than  indicated  in  the  table  set  forth  in  Section 
2  of  this  Act,  the  computation  shall  be  made  in  accordance 
with  table.  All  logs  shall  be  measured  at  the  small  end  and 
inside  the  bark,  and  the  contents  computed  according  to  table. 
Allowance  shall  be  made  for  rot,  shake,  or  other  defect  in 
logs  measured  by  this  scale  and  under  the  provisions  of  this 
Act,  so  as  to  make  the  survey  express  the  actual  quantity  of 
merchantable  lumber  in  each  log." 

The    Spaulding   Table    for   the    Measurement   of   Logs    is 
as  follows: 


Length 
in  feet. 

Diam. 
10 

Diam. 
11 

Diam. 
12 

Diam. 
13 

Diam. 
14 

Diam. 
15 

Diam. 
16 

Diam. 
17 

Diam. 
18 

Diam.  Diam. 
19    20 

12. .  .  . 

38 

47 

58 

71 

86 

103 

121 

141 

162 

184  207 

13. . . . 

41 

51 

62 

76 

93 

111 

131 

152 

175 

199  224 

14.... 

44 

55 

67 

82 

100 

120 

141 

164 

189 

214  241 

15. .  . . 

47 

59 

72 

88 

107 

128 

151 

176 

202 

230  258 

16. . .  . 

50 

63 

77 

94 

114 

137 

161 

188 

216 

245j  276 

17.... 

53 

67 

82 

100 

121 

145 

171 

199 

229 

2601  293 

18. . .  . 

57 

70 

87 

106 

129 

154 

181 

211 

243 

276  310 

19.... 

60 

74 

91 

112 

136 

163 

191 

223 

256 

291  327 

20. .  .  . 

63 

78 

96 

118 

143 

171 

201 

235 

270 

306  345 

21.... 

66 

82 

101 

124 

150 

180 

211 

246 

283 

322i  362 

22. .  .  . 

69 

86 

106 

130 

157 

188 

221 

258 

297 

337;  379 

23. .  . . 

72 

90 

111 

136 

164 

197 

231 

270 

310 

352;  396 

24. . . . 

76 

94 

116 

142 

172 

206 

242 

282 

324 

3681  414 

I^ength 
in  feet. 

Diam. 
21 

Diam. 
22 

Diam. 
23 

Diam. 
24 

Diam. 
25 

Diam. 
26 

Diam. 
27 

Diam. 
28 

Diam. 
29 

Diam. 
30 

Diam. 
31 

12. . . . 

231 

256 

282 

309 

337 

366 

396 

427 

459 

492 

526 

13.... 

250 

277 

305 

334 

365 

396 

429 

462 

497 

533 

569 

14.... 

269 

298 

329 

360 

393 

427 

462 

498 

535 

574 

613 

15.... 

288 

320 

352 

387 

421 

457 

495 

533 

573 

615 

657 

16. . . . 

308 

341 

376 

412 

449 

488 

528 

569 

612 

656 

701 

17.... 

327 

362 

399 

437 

477 

518 

561 

604 

650 

697 

745 

18.... 

346 

384 

423 

463 

505 

549 

594 

640 

688 

738  789 

19.... 

365 

405 

446 

489 

533 

579 

627 

676 

726 

779  832 

20. .  .  . 

385 

426 

470 

515 

561 

610 

660 

711 

765 

820  876 

21.... 

404 

448 

493 

540 

589 

640 

693 

747 

803 

861  020 

22. .  .  . 

423 

469 

517 

'')66 

617 

671 

726 

782 

841 

902j  964 

23. .  .  . 

442 

490 

540 

501 

645 

701 

759 

818 

879 

943  1008 

24. . .  . 

462 

512 

564 

618 

674 

i  732 

792 

854 

918 

984 

'1052 

488 


BUSINESS  LAWS  FOR  BUSINESS   MEN. 


Length 
in  feet. 


12.. 

13., 

14., 

15. 

16. 

17. 

18. 

19. 

20. 

21. 

22. 

23. 

24. 


Diam. 
32 


Diam. 
33 


597 

646 

696 

746 

796 

845 

895 

945 

995 

9811044 

1028  1094 

1075,1144:1215 

1122  11941 1268 


561 
607 
654' 
7011 
748 
794', 
841 
888 
935 


Diam. 
34 


Diam.  Diam. 
35         36 


634 

686| 

739 

792' 

845 

898 

951 

1003 

1056 

1109 

1162 


673' 
729' 

785! 
84l' 
8971 


713 
772 
831 
891 
950 


Diam.  Diam. 
37     :    38 


Diam.  Diam.  'Diam.  <Diam. 
39     I    40     i    41     I    42 


95311010 

1009il069 
106511128 


1121 
1177 
1233 
1289 


1188! 
1247! 
1307; 
1366 


1346  1426 


755,  798i  843 

817|  864  913 

880|  931!  983 

943!  9971053 

100610641124 

1069ill30;1194 

1132)11971264 

119512631334 

1258ll330ll405 

132lll397'l475 

13841146311545 

1447  152911615 

151015961686 


889  936 
9631014 
1037  1092 
11111170 
1185|1248 
12591326 
13331404 
14071482; 
1481  1560 
15551638! 
1629il716 
17031794, 
117781872' 


984 
1066 
1148 
1230 
1312 
1394 
1476 
1558 
1640 
1722 
1804 
1886 
1968 


J.  IDJ; 


Length 
in  feet. 


Diam.  iJiam.  Diam. 

43     i    44  45 


Diam. 
46 


Diam. 
47 


Diam. 'Diam. 
48    I     49 


Diam.  Diam 
50         51 


Diam. 
52 


Diam. 
53 


12.  .  . 

13. . . 
14... 
15... 
16... 
17... 
18. . . 
19... 
20... 
21... 
22... 
23... 
24... 


1033  1086 
11191176 
1205  1267 
1291 1357 
13771448 
14631538, 
15491629| 
1635!l719| 
17211810| 
1807  1900 
1893  1991 
19792081] 
2066  2172 


1134 
1228 
1323 


1186 

1284| 
1383, 


1417jl482 
151211581 
16061680 
1701|1779 
17951877 
18901976 
19842075 
207912174 
2173|2273 
22682372 


1239!  12931 
13421400 
1445  1508 
15481616 
16521724 
17551831 
18581939 
19612047 
20652155 
2168  2262 
22712370 
237412478 
24782586 


1348  1404U461: 
1460,15211582 
1572;  1638  1704 
168517551826 
179718721948 
1909  1989  2069 
2022:2106!2191 
2134  2223  2313 
22461 2340 '2435' 
2385' 2457:25561 
2470|  2574  2678 
2582  269128001 
26961 2808  2922! 


1519 
1645 

1772| 
1898 
2025; 
2151 
2278 
2405 
2531 
2657 
2784 
2911 
3038 


1578 
1709 
1841 
1972 
2104 
2235 
2367 
2498 
2630 
2761 
2893 
3024 
3156 


Length 
in  feet. 


Diam.  Diam. 
54    j    55 


Diam. 
56 


Diam.  Diam. 
57         58 


Diam. 
59 


Diam. 
60 


Diam.  .Diam. 
61         62 


Diam.  Diam. 
63         64 


12.. 
13.. 
14.-. 
15.. 
16.. 
17.. 
18.. 
19.. 
20.. 
21.. 
22.. 
23.. 
24.. 


16381700 
177418411 
191  ll  1983 
204712125 
21842266 
2320  2408 
2457  2550 
2593  2691 
2730  2833 
28662974 
3003'3116 
3139|3258 
32763400 


1763 
1909 
2056 
2203 
2350 
2497 
2644 
2791 
2938 
3085] 
3232 
3379 
3526 


18271893 
1979  2050 
2131  2208 
2283 


2436 
2588 
2740 
2892 
3045 
3197 
3349 
3501 


2366 
2524 
2681 
2839 
2997 
3155 
3312 
3470 
3628 


1960  2028 
21232197 
2286  2366 


2450 
2613 


2535 
2704 


3654  3786 


2776  2873 
29403042 
310313211 
3266  3380 
3429  3549 
3592I37I8 
3756|3887 
3920!4056! 


2098:2169 
2272  2349 
24472530 
2622  2711 
2797|2892 
2972:3072 
3147i3253: 
332113434 
3496,3615! 
36713795 
38463976' 
4021141571 
419643^' 


2241  2315 
2427  2507 
2614|2700 
280112893 
298813086 
3174'3279 


3361 
3548 
3735 
3921 
4108 
4295 
4482 


3472 
3665 
3858 
4051 
4244 
4437 
4630 


BUSINESS   CONTRACTS   AND    LEGAL   OBLIGATIONS. 


489 


Length 
in  feet. 


12.. 
13.. 
14.. 
15.. 
16.. 
17.. 
18.. 
19.. 
20.. 
21.. 
22.. 
23.. 
24.. 


Diam. 
65 


Diam. 
66 


2390 
2589, 
2789 
2987 
3186 
3385 
3585 
3784 
3983 
4182 
4381 
4580 
4780 


2467 
2672 
2878 
3083 
3289 
3494 
3700 
3906 
4111 
4316 
4522 
4728 
4934 


Diam. 
67 


2545 
2757 
2969 
3181 
3393 
3605 
3817 
4029 
4241 
4453 
4665 
4877 
5090 


Diam. 
68 


2625 
2843 
3062 
3281 
3500 
3718 
3937 
4156 
4375 
4593 
4812 
5031 
5250 


Diam. 
69 


2706 

2931 
3157 
3382 
3608 
3833 
4059 
4284 
4510 
4735 
4961 
5186 
5412 


Diam. 
70 


Diam. 
71 


2789 

3021 
3253 
3486 
3718 
3951 
4183 
4415 
4648 
4880 
5113 
5345 
5578 


2874 
3113 
3353 
3592 
3832 
4071 
4311 
4550 
4790 
5029 
5269 
5508 
5748 


Diam. 
72 


2960 

3206 
3453 
3700 
3946 
4193 
4440 
4686 
4933 
5180 
5426 
5673 
5920 


Diam. 
73 


3047 
3301 
3555 
3809 
4062 
4316 
4570 
4824 
5078 


Diam. 
74 


3135 

3396 
3657 
3919 
4180 
4441 
4702 
4964 
5225 


Diam. 
75 


3224 

3492 
3761 
4030 
4298 
4567 
4836 
5104 
5372 


Length 
in  feet. 


12.. 
13.. 
14.. 
15.. 
16.. 
17.. 
18.. 
19.. 
20.. 


Diam. 
76 


Diam. 
77 


3314  3405 
3590  3688 


3866 
4142 
4418 
4694 
4970 
5246 
5522 


3972 
4256 
4540 
4823 
5107 
5391 
5675 


Diam. 
78 


3497 
3788 
4080 
4371 
4663 
4954 
5245 
5537 
5829 


Diam. 
79 


3590 

3889 
4188 
4487 
4786 
5085 
5385 
5684 
5983 


Diam. 
80 


Diam. 
81 


Diam. 
82 


3684  3779 
3991  4094 
4298  4408 


4605 
k912 
|5219 
5526 
5833 
16140 


4723 
5038 
5353 
5668 
5983 
6298 


3874 
4196 
4519 
4842 
5165 
5488 
5811 


6456 


Diam. 
83 


3970 
4301 
4631 
4962 
5293 
5624 
5955 


6133  6282 


6616 


Diam. 
84 


4067 
4406 
4745 
5084 
5423 
5762 
6101 
6440 
6778 


Diam. 
85 


Diam 
86 


4165 
4512 

4859 
5206 
5553 
5900 
6247 
6594 
6941 


4264 
4619 
4974 
5330 
5685 
6040 
6396 
6751 
7106 


Length 

Diam. 

in  feet. 

87 

12 

4364 

13 

4727 

14 

5091 

15 

5455 

16 

5818 

17 

6182 

18 

6546 

19 

6909 

20 

7273 

Diam. 
88 


Diam. 
89 


4465 

4837 
5209 
5581 
5953 
6325 
6697 
7069 
7441, 


4566 
4946 
5327 
5707 


Diam. 
90 


4668 

5057 
5446 
5835 


6088:6224 
6468  6613 


6849 
7229 
7610 


7002 
7391 
7780 


Diam. 
91 


Diam.  Diam. 
92         93 


4771 

5168 
5566 
5964 
6361 
6759 
7156 
7554 
7951 


4875 
5281 
5687 
6094 
6500 
6906 
7312 
7791 
8125 


4980 
5395 
5810 
6225 
6640 
7055 
7470 
7885 


Diam. 
94 


5085 
5508 
5932 
6356 
6780 
7203 
7627 
8051 


Diam. 
95 


Diam. 
90 


8300'8475 


5192 
5624 
6057 
6490 
6922 
7355 
7788 
8220 
8653 


5300 
5741 
6183 
6625 
7066 
7508 
7950 
8391 
8833 


490  BUSINESS   LAWS   FOR  BUSINESS   MEN. 

Section  446.  —  EXPLANATION  OF  TABLE.  —  The 
length  of  any  log  in  feet  will  be  found  in  the  left-hand 
column  of  the  table,  and  the  diameter  at  the  top  of  the  page. 

To  find  the  number  of  feet  of  square-edged  boards  which 
a  log  will  produce  when  sawed:  Take  the  length  of  feet  in 
left-hand  column  of  the  table,  and  its  diameter  in  inches  at 
the  top  of  the  page;  trace  the  two  columns  of  figures  until 
they  meet,  and  you  have  the  required  amount. 

(A  log  which  is  18  feet  long  and  21  inches  in  diameter 
gives  at  the  right  of  the  length,  and  directly  under  the  diam- 
eter, 346  feet ;  and  one  23  feet  long  and  18  inches  in  diameter, 
gives  310  feet.) 

Logs  longer  than  are  given  in  this  table  can  be  easily 
measured  by  doubling  any  given  length ;  for  example,  to 
find  the  number  of  feet,  board  measure,  contained  in  a  log 
28  feet  long  by  19  inches  in  diameter,  double  the  amount 
contained  in  a  log  14  feet  long,  19  inches  in  diameter,  and 
you  have  the  answer — 428  feet.  For  a  log  42  feet  long,  19 
inches  diameter,  multiply  the  amount  contained  in  the  table 
in  a  log  14  feet  long  by  3,  and  you  have  the  amount;  and 
so  on  to  any  length  or  size. 

Each  size  log  has  been  scaled  so  as  to  make  all  that  can 
be  practically  sawed  out  of  it,  if  economically  sawed,  each 
log  to  be  measured  at  the  top  or  small  end,  inside  of  the 
bark,  and,  if  not  round,  to  be  measured  two  ways,  at  right 
angles,  and  the  difference  taken  for  the  diameter.  Where 
there  are  any  known  defects  the  amount  deducted  should  be 
agreed  upon  by  the  buyer  and  seller,  and  no  fraction  of  an 
inch  to  be  taken  into  the  measurement. 

Searchers  of  Records. 

Section  447.— ABSTRACTS  OF  TITLE.— An  abstract 
of  title  is  a  condensed  history  of  the  title  to  the  land,  con- 
sisting of  a  synopsis  or  summary  of  the  material  portions 
of  all  the  conveyances  of  record,  of  whatever  kind  or  nature, 
which  in  any  manner  aflfect  the  land,  or  any  estate  or  inter- 
est   in    the    land,    together    with    a    statement    of    all    liens. 


BUSINESS   CONTRACTS   AND   LEGAL  OBLIGATIONS.  491 

charges,  or  liabilities  to  which  the  property  may  be  subject, 
and  of  which  it  is  in  any  way  material  for  purchasers  to 
be  apprised.  The  object  of  the  abstract  is  to  enable  the 
purchaser,  or  his  attorney,  to  pass  more  readily  on  the 
sufficiency  of  the  title.  Therefore,  a  complete  abstract  should 
show  whatever  appears  of  record  which  concerns  the  sources 
of  the  title  and  its  present  condition.  The  descent  and  line 
of  the  title  should  be  clearly  traced  out,  and  all  encum- 
brances and  liens  of  every  sort,  and  all  adverse  claims,  and 
the  material  parts  of  all  patents,  deeds,  wills,  judicial  pro- 
ceedings, and  other  records  or  documents  which  touch 
the  title. 

Section  448.— SEARCHERS  OF  RECORD.— From  the 

necessity  of  having  an  abstract  of  record  of  the  title  to  land, 
and  the  volume  and  extent  of  the  records  themselves,  has 
grown  that  class  of  expert  searchers  known  as  abstracters, 
or  searchers  of  record,  whose  business  it  is  to  prepare  in  a 
condensed  and  convenient  form  the  data  from  which  it  can 
be  determined  whether  the  title  is  good  or  bad,  or  free 
from  encumbrance,  and  if  encumbered  at  all,  the  character 
of  the  encumbrance.  So  important  is  their  work,  and  so 
much  depends  upon  the  accuracy  and  fidelity  of  the  abstracts 
they  furnish,  that  it  is  to  be  expected  by  those  who  engage 
in  the  business  of  furnishing  abstracts  that  any  errors  or 
omissions  resulting  in  damages  will  incur  a  liability  on  their 
part  to  their  patrons. 

Section  449.— LIABILITY  OF  SEARCHERS  OF 
RECORD. — One  who  holds  himself  out  to  the  world  as 
an  examiner  of  titles,  and  who  undertakes  to  furnish  correct 
abstracts  of  title,  is  bound  to  exercise  skill  and  care  in  mak- 
ing the  examination,  and  in  preparing  the  abstract,  and  is 
liable  in  damages  for  a  failure  to  exercise  that  duty.  Per- 
sons engaged  in  the  business  of  making  abstracts  of  title 
occupy  a  relation  of  confidence  towards  those  employing 
them,  which  is  second  only  in  the  sacredness  of  its  nature 


492  BUSINESS   LAWS   FOR   BUSINESS   MEN. 

to  the  relation  which  a  lawyer  sustains  to  his  client.  Search- 
ers of  record  consult  the  evidences  of  ownership,  and  be- 
come familiar  with  the  chains  and  histories  of  title.  They 
handle  private  title  papers,  and  become  aware  of  whatever 
weaknesses  or  defects  may  exist  in  the  legal  proceedings 
through  which  the  ownership  of  real  property  is  secured. 
And  the  courts  have  said,  that  they  should  be  held  to  a 
strict  responsibility  in  the  exercise  of  the  trust  and  con- 
fidence which  are  necessarily  reposed  in  them. 

Section  450.— TO  WHOM  LIABLE.— The  liability  of  a 
searcher  of  records  for  want  of  skill  or  ordinary  care  and 
diligence  is  only  to  the  party  employing  him.  An  action  for 
damages  for  errors  or  omissions  in  an  abstract  of  title  can- 
not be  sustained  by  a  third  person  acting  upon  the  faith 
of  the  correctness  of  the  abstract,  as  there  is  no  contract  be- 
tween him  and  the  abstracter.  The  abstracter  knows  that  his 
records  are  to  be  seen,  and  titles  to  be  made  in  reliance  upon 
them,  but  he  is  not  bound  to  know  that  his  certificate  is  for 
the  use  or  reliance  of  any  but  the  person  who  receives  it, 
nor  can  it  be  assumed  that  he  gives  it  for  any  other  use. 
He  contracts  with  the  person  who  requests  and  pays  for  it, 
to  give  a  certificate  which  shall  state  the  facts;  but  he  enters 
into  no  relation  of  contract  or  duty  in  respect  to  it  with  any 
other  person;  and,  if  another  relies  upon  it  to  his  injury,  he 
cannot  recover  damages  against  the  abstracter,  because  the 
latter  assumed  no  duty  for  his  protection.  A  searcher  of 
records  is  liable  for  his  negligence  only  to  the  person  who 
requests  and  pays  for  the  certificate  of  search.  He  is  not 
liable  to  the  grantee  of  the  person  who  employed  him,  as 
there  was  no  contract  between  them.  A  searcher  of  records, 
employed  by  the  owner  to  prepare  an  abstract  of  title  for  the 
purpose  of  procuring  a  loan,  is  not  liable  in  damages  to  the 
lender,  for  a  loss  caused  by  mistake  in  the  abstract,  there 
being  no  contract  between  him  and  the  lender.  It  is  a 
general  rule  that  a  searcher  of  records  is  liable  for  damages, 
because  of  his  negligence  or  mistake,  only  to  his  immediate 


BUSINESS    CONTRACTS   AND   LEGAL   OBLIGATIONS.  493 

employer,  and  not  to  the  latter's  assigns,  vendees,  or  de- 
visees, nor  to  any  third  person  between  whom  and  himself 
there  is  no  contract  relation. 

Section    451.  — LIABILITY      FOR      MISTAKE.  — A 

searcher  of  records,  giving  a  certificate  of  title,  is  liable  to 
his  employer  for  any  mistake  arising  from  want  of  due  care 
or  diligence,  or  from  ignorance  of  his  business. 

Section  452.— LIABILITY  FOR  OMITTING  EN- 
CUMBRANCE.— If  a  searcher  of  records  undertakes  to 
furnish  a  purchaser  of  land  with  a  full  abstract  of  title,  he 
is  liable  in  damages  for  his  negligence  in  carelessly  omitting 
from  the  abstract  any  mention  of  a  particular  encumbrance, 
by  which  the  purchaser  is  put  to  additional  expense  to  per- 
fect his  title. 

Section  453.— MARGINAL  REFERENCE  IN  REC- 
ORD BOOK. — When  a  searcher  of  records  undertakes  to 
make  a  complete  abstract  of  title,  he  takes  the  obligation 
upon  himself  to  make  a  full  and  true  search  and  examina- 
tion of  all  the  records  relating  to  the  land,  and  to  note  in 
the  abstract  accurately  every  transfer,  conveyance,  or  other 
instrument  of  record  in  any  way  affecting  the  title.  He 
is  not  required  to  give  any  opinion  as  to  the  legal  effect 
of  any  of  the  instruments,  and  just  how  full  a  description 
of  them  he  shall  give  is,  to  a  certain  extent,  a  matter  for 
himself  to  decide;  but  in  so  far  as  he  assumes  to  describe 
the  recorded  instruments,  he  is  required  to  make  his  des- 
criptions accurate.  The  record,  and  not  a  marginal  reference 
to  it  by  the  Recorder,  nor  an  index  reference  to  the  instru- 
ment, is  what  determines  the  character  and  legal  effect  of 
the  instrument;  and  the  duty  of  the  searcher  of  records  is 
not  fulfilled  by  merely  assuming  the  accuracy  of  a  marginal 
reference,  without  examining  the  instrument  itself.  In  fail- 
ing to  examine  the  record  of  the  instrument  itself,  the 
searcher  is  guilty  of  negligence.  So,  in  a  case  where  a 
partial  release  of  a  mortgage  was  recorded,  and  a  register  of 
deeds,  in  his  reference  to  it  on  the  margin  of  the  record  of 


494  BUSINESS   LAWS   FOR  BUSINESS   MEN. 

the  mortgage  erroneously  made  the  entry  "Satisfied"  (with 
a  reference  to  the  book  and  page  where  the  release  was 
recorded),  when  in  fact  it  should  have  been  "Partially  satis- 
fied," and  the  searcher,  in  making  up  the  abstract,  relied 
upon  this  marginal  entry  entirely,  supposing  it  to  be  correct, 
and  did  not  examine  the  contents  of  the  instrument  of  release 
itself,  and  the  party  procuring  the  abstract  was  afterwards 
compelled  to  pay  the  mortgage;  it  was  held  by  the  court 
that  the  searcher  was  guilty  of  negligence,  and  was  liable 
for  whatever  the  party  had  been  compelled  to  pay. 

Section  454.— OMITTING  JUDGMENT  AND  SALE. 

— If  a  searcher  of  records,  employed  by  a  purchaser  to  make 
an  abstract,  omits  to  note  the  fact  of  a  judgment  and  sale 
of  the  land  for  taxes,  of  which  the  purchaser  is  ignorant 
until  the  time  for  redemption  has  expired,  whereby  he  is 
caused  to  pay  out  money  to  remove  the  cloud  from  his  title, 
the  abstracter  is  liable  in  damages  to  the  purchaser  for  the 
sum  paid  out  by  him. 

Section  455.— INCORRECT  REPORT  OF  QUAN- 
TITY OF  LAND  CONVEYED.— If  a  searcher  of  records 
incorrectly  reports  in  the  abstract  the  quantity  of  land  pre- 
viously conveyed,  he  is  liable  in  damages  to  the  person  who 
employed  him  and  relied  upon  the  information  in  purchasing 
the  land. 

Section  456.—  MEASURE     OF     DAMAGES.  — The 

damages  suffered  must  be  actual  damages.  The  law  will  not 
compel  a  searcher  of  records,  even  though  he  has  been  guilty 
of  inexcusable  negligence  or  ignorance,  in  preparing  the 
abstract,  to  pay  any  damages  by  way  of  punishment.  The 
person  who  employed  him  is  entitled  to  the  actual  money 
loss,  by  reason  of  the  negligent  act  or  omission,  and 
that  is  all. 

Section  457.— WHEN  SUIT  FOR  DAMAGES  MUST 
BE     COMMENCED. In    Cahfornia,    a    suit    against    a 


BUSINESS    CONTRACTS   AND   LEGAL   OBLIGATIONS.  495 

searcher  of  records  for  damages  must  be  commenced  within 
two  years  after  the  delivery  of  the  defective  abstract,  or  it 
is  barred  by  the  statute  of  hmitations. 

Section  458.  — SALE  OF  GOOD  WILL  OF  AB- 
STRACTING BUSINESS.— Section  1674  of  the  Civil 
Code  of  California,  providing  that  one  who  sells  the  good 
will  of  a  "business"  may  agree  with  the  buyer  to  refrain 
from  carrying  on  a  similar  "business,"  is  broad  enough  to 
include,  and  does  include,  the  business  of  abstracting. 

Notary  Public. 

Section  459.— DUTIES  OF  NOTARY.— The  duties  of 
a  Notary  Public  are  prescribed  by  law,  and  are  varied  and 
important.  In  business  affairs,  the  taking  of  acknowledg- 
ments to  deeds,  mortgages,  leases,  and  other  instruments, 
constitutes  the  greater  and  most  important  part  of  a  Notary's 
work.  His  duties,  however,  extend  to  a  number  of  other 
matters.  He  is  required,  when  requested,  to  demand  accep- 
.tance  and  payment  of  foreign,  domestic,  and  inland  bills 
of  exchange,  or  promissory  notes,  and  protest  the  same  for 
non-acceptance  and  non-payment ;  he  may  take  acknowledg- 
ment or  proof  of  powers  of  attorney,  mortgages,  deeds, 
grants,  transfers,  and  other  instruments  of  writing  executed 
by  any  person ;  he  may  take  depositions  and  affidavits,  and 
administer  oaths,  to  be  used  before  any  court,  judge,  officer, 
or  board  in  this  State.  He  is  required  to  keep  a  record  of 
all  official  acts  done  by  him ;  to  keep  a  record  of  the  parties 
to  every  instrument  acknowledged  or  proved  before  him.  with 
the  date  and  character  of  the  instrument ;  and  when  requested, 
and  upon  payment  of  his  fees,  he  must  make  and  give  a 
certified  copy  of  any  record  in  his  office. 

Section  460.— NUMBER  OF  NOTARIES.— The  gov- 
ernor may  appoint  and  commission  such  number  of  notaries 
public  for  the  several  counties  and  cities  and  counties  of  this 
State  as  he  shall  deem  necessary  for  the  public  convenience. 


496  BUSINESS   LAWS   FOR   BUSINESS   MEN. 

except  that  in  cities   and  counties  of  the  second  class  the 
number  shall  not  exceed  one  hundred. 

Act  of  the  Legislature,  approved  April  18,  1911. 

Section  461.— BOND  OF  NOTARY.— Every  Notary  in 
California  must  give  an  official  bond  in  the  sum  of  $5000, 
which  must  be  approved  by  the  Judge  of  the  Superior  Court, 
of  his  county,  and  recorded  as  other  official  bonds  of  county 
officers. 

Section  462.— LIABILITY    OF    NOTARY.— The   law 

provides   that    for   the    official    misconduct   or    neglect    of    a 
Notary  Public,  he  and  the  sureties  on  his  official  bond  are 
liable  to  the  parties  injured  for  all  the  damages  sustained. 
Political  Code,  Section  801. 

Section  463.— WHAT  ACTS  COVERED  BY  OF- 
FICIAL BOND.— The  condition  of  a  bond  of  a  Notary 
Public  being,  that  he  will  "well  and  truly  perform  and 
discharge  the  duties  of  a  Notary  Public  according  to  law," 
this  embraces  every  act  which  he  is  authorized  or  required 
by  law  to  do  in  virtue  of  his  office.  By  accepting  the  office, 
a  Notary  contracts  with  those  who  employ  him  that  he  will 
perform  the  duties  of  the  office  with  integrity,  diligence,  and 
skill.  He  gives  his  bond  to  indemnify  those  who  shall  suffer 
by  the  unfaithful  or  unskilful  performance  of  his  duty.  Be- 
fore a  Notary  and  his  bondsmen  can  be  held  liable  for 
damages,  it  is  necessary  to  determine  whether  the  act  done 
or  not  done  was  or  not  authorized  by  law,  was  or  not  incum- 
bent upon  him,  was  or  not  required  of  him,  whether  he 
was  directed  to  do  it,  whether  he  has  failed  to  discharge 
the  duty,  and  whether  injury  has  been  sustained.  Where  a 
Notary  does  a  thing  which  the  law  does  not  authorize  him 
to  do,  although  he  does  it  in  his  capacity  of  Notary  Public, 
his  bondsmen  are  not  responsible  for  his  act.  Notaries  and 
their  sureties  are  liable  only  to  the  persons  who  have  em- 
ployed the  Notary,  and  are  only  liable  to  those  who  suffer 
injury  on  account  of  the  Notary's  failure  to  perform  the 
duty  incumbent  upon  him  or  required  by  law. 


BUSINESS    CONTRACTS   AND   LEGAL   OBLIGATIONS.  497 

Section  464— LIABILITY  OF  SURETIES  ON  OF- 
FICIAL BOND.— The  surety  on  a  Notary's  official  bond 
is  only  bound  for  such  acts  of  his  as  the  law  authorizes  or 
requires  him  to  do  in  his  official  capacity.  By  signing  the 
bond,  the  surety  tells  all  who  may  need  the  services  of  a 
Notary:  "You  can  go  with  security  to  this  Notary;  I  assure 
you  that  he  is  a  competent  officer;  that  he  will  well  and 
faithfully  discharge  and  perform  all  the  duties  imposed  upon 
him  by  law;  and  if  he  fails  in  doing  so,  'I  will  be  responsible 
to  you  for  losses  sustained."  If,  therefore,  a  person  calls 
on  a  Notary  for  the  performance  of  a  duty  incumbent  upon 
him,  and  the  Notary  fails  or  neglects  his  duty,  and  injury  is 
suffered,  the  surety  is  liable  to  the  party  injured.  A  surety 
cannot  be  held  liable  because  the  Notary  has  done  acts  which 
the  law  did  not  authorize  or  compel  him  to  perform,  and 
which  were  therefore  not  incumbent  upon  him.  The  sureties 
upon  the  official  bond  of  a  Notary  Public  are  only  liable  for 
damages  occasioned  by  his  negligence  or  misconduct  in  the 
line  of  his  official  duty. 

Section  465.— PREMATURE  PROTEST  OF  PROM- 
ISSORY NOTE. — In  case  of  a  promissory  note  falling 
due,  according  to  its  face,  upon  Sunday,  a  Notary  cannot 
present  it  for  payment,  norjmake  protest,  on  the  preceding 
Saturday.  The  following  Monday  is  the  proper  date  for 
presentment  and  protest,  unless  that  is  also  a  legal  holi- 
day, when  the  next  would  be  the  proper  day.  Sunday,  not 
being  a  legal  day  for  exacting  payment,  cannot  be  computed, 
except  when  it  is  an  intermediate  day.  To  do  so  would 
make  another  contract  for  the  parties,  and  by  requiring  pay- 
ment on  Saturday  would  compel  the  obligation  to  be  met 
before  the  contract  time  for  its  performance  had  arrived. 
The  act  of  a  Notary  in  wrongfully  protesting  a  promissory 
note  before  it  is  due  gives  a  right  of  action  against  him  for 
damages,  and  against  his  bondsmen,  in  favor  of  the  injured 
party.  For  the  Notary  is  presumed  to  know  the  wrongful 
character  of  the  act,  and  that,  in  the  trading  community, 
the  protest  of  a  note  is  likely  to  impair  the  maker's  credit. 


498  BUSINESS   LAWS   FOR  BUSINESS   MEN. 

If  lawfully  protested,  the  maker  cannot  complain ;  but  he  can 
complain,  and  justly  so,  if  presentment  and  protest  are  made 
prematurely,  before  the  law  authorizes  the  acts. 

Section    466.—  FALSE     CERTIFICATE     TO     AC- 
KNOWLEDGMENT.— The  sureties  on  the  official  bond  of 
a  Notary  are  liable  for  the  full  amount  of  a  mortgage  pur- 
chased in  reliance  on  the  genuineness  of  the  Notary's  certi- 
ficate of  acknowledgment,  where  the  certificate  is  in  fact  false 
and  the  mortgage  a  forgery,  and  where  the  purported  maker 
was  solvent  and  able  to  pay  the  mortgage  debt.     When  a 
Notary  certifies  that  the  mortgagor  duly  acknowledged  the 
execution   of  a  mortgage,   which   in   fact   is   a   forgery,   the 
measure  of   damages,   in   a  suit  against   the   Notary   or  his 
sureties,  brought  by  one  who  has  parted  with  value  on  the 
face  of  such  certificate,  is  the  amount  which  would  be  the 
value  of  the  mortgage  if  genuine.    The  value  of  the  mortgage 
depends  not  merely  upon  the  value  of  the  mortgaged  prop- 
erty, but  also  on  the  solvency  of  the  mortgagor.     When  it 
appears,  in  such  a  suit  for  damages,  that  the  plaintiff,  had 
the  rnortgage  been  genuine,  would  have  been  able  to  collect 
the  whole  amount  named  therein,  he  is  entitled  to  recover 
that  amount  from  the  Notary  or  his  sureties,  without  regard 
to  the  value  of  the  mortgaged  property  or  the  interest  of  the 
mortgagor  in  the  property.    If  it  should  appear  that  the  mort- 
gage, if  valid,  could  not  be  collected  and  would  not  be  worth 
anything,  then  the  plaintiff  would  not  be  entitled  to  damages, 
because  it   would   not  be   shown   that   he   had   suffered   any 
injury.      But   whatever   value   was   shown,    if   the   mortgage 
were    valid,    could    be    recovered    against    the    Notary    and 
his  sureties. 

Section  467.  — NOTARY  CANNOT  AMEND  CER- 
TIFICATE.— When  an  acknowledgment  has  been  made, 
before  a  Notary,  the  party  making  it  has  done  all  that  the 
law  requires  to  make  the  instrument  his  act  and  deed.  The 
embodiment  of  the  fact  of  acknowledgment,  in  the  form  of 
the  certificate  prescribed  by  law,  devolves  upon  the  Notary, 
and   not   upon    the   party    making    it.      And    if   the    Notary 


BUSINESS    CONTRACTS   AND   LEGAL   OBLIGATIONS.  499 

blunders  in  certifying  to  an  acknowledgment  duly  made,  or 
if  he  makes  a  defective  or  false  certificate,  he  cannot  alter 
or  amend  it;  because,  after  taking  the  acknowledgment  and 
delivering  the  return,  his  functions  cease,  and  he  is  discharged 
from  all  further  authority.  The  Superior  Court,  and  not 
the  Notary,  has  power  to  correct  a  defective  certificate  of 
acknowledgment. 

Section  468.— NOTARY'S  KNOWLEDGE  OF  PARTY 
ACKNOWLEDGING  INSTRUMENT.  — A  Notary  is 
bound  to  know  the  person  acknowledging  an  instrument 
before  him,  or,  if  he  is  not  personally  acquainted  with  him, 
he  is  bound  to  have  the  person's  identity  established  by  com- 
petent proof.  If  he  knows  the  person,  he  may  so  state  in  his 
certificate  of  acknowledgment;  if  he  does  not  know  him  per- 
sonally, he  may  state  in  his  certificate  of  acknowledgment 
the  proof  presented  to  establish  his  identity.  When  a  Notary 
Public,  in  taking  and  certifying  an  acknowledgment  to  a 
mortgage,  neglected  to  state  in  his  certificate  that  the  party 
acknowledging  the  instrument  was  known  to  him,  or  was 
identified  by  the  testimony  of  a  witness  examined  by  him 
for  that  purpose,  the  Supreme  Court  of  California  held  that 
the  Notary  was  guilty  of  gross  negligence,  and  that  he  and 
his  bondsmen  were  responsible  to  the  party  injured  for  the 
damages  resulting  from  his  negligence.  The  Court  said: 
"Plaintiff  loaned  to  one  Dupuy  a  sum  of  money,  taking  as 
security  a  mortgage  on  a  lot  in  San  Francisco.  The  mort- 
gage was  acknowledged  by  Dupuy  before  defendant  Finlay, 
who  was  a  Notary  Public.  The  mortgage  used  was  an  ordi- 
nary printed  form,  having  a  certificate  of  acknowledgment  in 
blank,  in  which  was  inserted,  in  the  hand  of  one  Sanders,  who 
acted  in  the  transaction  as  attorney  for  both  mortgagor  and 
mortgagee,  the  name  of  the  mortgagor  and  the  date  of  the 
acknowledgment.  To  this  certificate  the  Notary  affixed  his 
signature  and  seal,  but  omitted  to  state  either  that  the  party 
acknowledging  was  known  to  him,  or  was  identified  by  the 
testimony  of  a  witness  examined  for  that  purpose.  In  con- 
sequence of  that  omission,  the  record  of  the  mortgage  was 


500  BUSINESS  LAWS  FOR  BUSINESS   MEN. 

held  not  to  impart  notice  to  subsequent  encumbrancers. 
Plaintiff's  lien  was  postponed  in  favor  of  a  later  mortgage, 
which  exhausted  the  entire  property,  and  Dupuy  being  in- 
solvent, the  debt  was  lost.  Plaintiff  now  seeks  to  recover, 
on  the  bond  of  the  Notary,  the  damages  suffered  by  the 
negligent  and  unskilful  performance  of  an  official  act.  The 
purpose  of  a  certificate  of  acknowledgment  is  to  entitle  the 
deed  to  be  recorded,  and  to  be  admitted  in  evidence  without 
further  proof.  The  certificate  furnished  was  utterly  worth- 
less for  either  purpose.  This  neglect  is  not  excused  by  the 
fact  that  the  certificate  had  been  partially  filled  by  the  attor- 
ney for  the  grantee.  The  certificate,  upon  its  face,  is  un- 
finished; the  date  and  the  name  of  the  grantor  had  been 
inserted,  leaving  it  for  the  Notary  to  insert  his  knowledge 
or  the  evidence  received  of  the  identity  of  the  party  making 
the  acknowledgment.  If  the  Notary  read  the  certificate  be- 
fore signing  it,  this  omission  must  have  been  known  to  him; 
if  he  did  not,  he  is  equally  guilty  of  negligence,  for  an  officer 
who  affixes  his  official  signature  and  seal  to  a  document, 
without  examining  it  to  find  whether  the  facts  certified  are 
true,  can  scarcely  be  said  to  faithfully  perform  his  duty 
according  to  law."  (Decided  by  the  Supreme  Court  of 
California  in  the  case  of  Fogarty  vs.  Finlay,  which  decision 
is  printed  in  Volume  10  of  the  California  Reports,  page  239.) 

Section  469.— PARTY  INTRODUCED  TO  NOTARY. 

— The  acknowledgment  of  an  instrument  must  not  be  taken, 
unless  the  Notary  taking  it  knows,  or  has  satisfactory  evi- 
dence, on  the  oath  or  affirmation  of  a  creditable  witness,  that 
the  person  making  such  acknowledgment  is  the  individual 
who  is  described  in  and  who  executed  the  instrument.  A 
Notary  has  no  right,  in  disregard  of  this  plain  provision  of 
the  law,  to  certify  that  he  knows  a  person  whom  he  does 
not  know,  on  the  mere  introduction  of  a  third  party;  and 
if  he  does  so,  and  a  loss  results,  he  renders  himself  and  his 
sureties  liable  to  make  good  the  loss. 
Civil  Code,  Section  1185. 


BUSINESS   CONTRACTS   AND   LEGAL   OBLIGATIONS.  501 

Section  470.— MISAPPROPRIATION  OF  MONEYS. 

— As  it  is  no  part  of  the  official  duty  of  a  Notary  to  receive 
money  from  or  for  anybody,  his  sureties  are  not  Hable  for 
money  fraudulently  obtained  and  retained  by  him.  So,  if 
a  Notary  Public,  who  is  also  a  real  estate  agent  and  engaged 
in  negotiating  loans,  by  false  representations  procures  money 
upon  forged  mortgages,  and  then  retains  the  money,  his 
sureties  are  not  liable.  The  sureties  upon  an  official  bond 
are  not  sureties  for  the  general  good  behavior  of  the  officer. 
They  are  responsible  only  for  his  official  misconduct  or  neg- 
lect. As  stated,  it  is  no  part  of  the  duty  of  a  Notary  Public 
to  receive  money  from  or  for  anybody.  It  is  misconduct, 
but  not  official  misconduct,  for  a  Notary  to  fraudulently 
obtain  money  in  the  manner  stated.  He  does  not  receive 
any  money  in  his  official  capacity.  The  sureties  on  his  official 
bond  are  not  liable  for  such  misconduct,  because  it  is  only 
against  his  official  misconduct  that  the  sureties  consent  to 
indemnify  persons  injured  by  him. 

Section  471.— TAKING  OATH  OVER  TELEPHONE. 

— The  general  rule  is  that  a  Notary  Public  cannot  act  as 
such  outside  of  the  county  for  which  he  is  appointed.  A 
Notary  of  one  county  of  California  is  not  authorized  to  ad- 
minister an  oath  outside  of  the  county  for  which  he  is  ap- 
pointed. 

A  party  taking  an  oath  before  a  Notary  should  appear  in 
person;  and  it  has  been  decided  that  an  affidavit  on  attach- 
ment sworn  to  over  the  telephone  before  a  Notary  Public 
for  Kern  County,  the  affiant  at  the  time  being  in  the  County 
of  Los  Angeles,  was  void,  and  an  attachment  issued  thereon 
must  be  released. 

(Decided  by  the  California  Court  of  Appeals,  in  the  case 
of  Fairbanks,  Morse  &  Co.  vs.  Getchell,  which  decision  is 
printed  in  Volume  X  of  Appellate  Decisions,  page  714.) 

Section  472.  — FEES  OF  NOTARY.  — The  fees  of 
Notaries  allowed  by  law  are  as  follows:  For  drawing  and 
copying  every  protest  for  non-payment  of  a  promissory  note. 


502  BUSINESS   LAWS   FOR   BUSINESS   MEN. 

or  for  the  non-payment  or  non-acceptance  of  a  bill  of  ex- 
change, draft,  or  check,  two  dollars ;  for  drawing  and  serving 
every  notice  of  non-payment  of  a  promissory  note,  or  of  the 
non-payment  or  non-acceptance  of  a  bill  of  exchange,  order, 
draft,  or  check,  one  dollar;  for  recording  every  protest,  one 
dollar;  for  drawing  an  affidavit,  deposition,  or  any  paper 
other  than  those  above  mentioned,  for  each  folio,  thirty  cents ; 
for  taking  an  acknowledgment  or  proof  of  a  deed  or  other 
instrument,  to  include  the  seal  and  the  writing  of  the  certi- 
ficate, for  the  first  two  signatures,  one  dollar  each,  and  for 
each  additional  signature,  fifty  cents;  for  administering  an 
oath  or  affirmation,  fifty  cents;  for  every  certificate,  to  in- 
clude writing  it,  and  the  seal,  one  dollar. 
Political  Code,  Section  798. 

Carriers  of  Freight. 

Section   473.—  FREIGHT     AND     FREIGHTAGE.— 

Property  carried  is  called  freight;  the  compensation  to  be 
paid  for  its  carriage  is  called  freightage;  the  person  who 
delivers  the  freight  to  the  carrier  is  called  the  consignor; 
and  the  person  to  whom  it  is  to  be  delivered  is  called  the 
consignee. 

Section  474.— CARE  AND  DILIGENCE  REQUIRED 
OF  CARRIERS. — A  carrier  of  property  for  compensation 
must  use  at  least  ordinary  care  and  diligence  in  the  per- 
formance of  all  his  duties. 

Section  475.— DIRECTIONS  TO  CARRIERS.— When 

the  directions  of  a  consignor  and  consignee  are  conflicting, 
the  carrier  must  comply  with  those  of  the  consignor  in 
respect  to  all  matters  except  the  delivery  of  the  freight,  as 
to  which  he  must  comply  with  the  directions  of  the  con- 
signee. But  the  consignor  may  give  special  directions  to 
the  carrier  to  receive  no  orders  of  any  kind  from  the  con- 
signee inconsistent  with  his  own. 
Civil  Code,  Section  2116. 


BUSINESS    CONTRACTS   AND   LEGAL   OBLIGATIONS.  503 

Section  476.— DELIVERY  OF  FREIGHT.— A  carrier 
of  freight  must  deliver  it  to  the  consignee,  at  the  place  to 
which  it  is  addressed,  in  the  manner  usual  at  that  place. 
If  there  is  no  usage  to  the  contrary  at  the  place  of  delivery, 
freight  must  be  delivered  as  follows:  (1)  If  carried  upon 
a  railway  owned  or  managed  by  the  carrier,  it  may  be  de- 
livered at  the  station  nearest  to  the  place  to  which  it  is 
addressed;  (2)  (If  carried  by  sea  from  a  foreign  country,  it 
may  be  delivered  at  the  wharf  where  the  ship  moors,  within 
a  reasonable  distance  from  the  place  of  address ;  or  if  there 
is  no  wharf,  on  board  a  lighter  alongside  the  ship;  or,  (3) 
In  other  cases,  it  must  be  delivered  to  the  consignee  or  his 
agent,  personally,  if  either  can,  with  reasonable  diligence, 
be  found. 

Civil  Code,  Section  2119. 

Section  477.— OBLIGATIONS  OF  CARRIER  WHEN 
FREIGHT  NOT  DELIVERED.— If,  for  any  reason,  a 
carrier  does  not  deliver  freight  to  the  consignee  or  his 
agent  personally,  he  must  give  notice  to  the  consignee  of 
its  arrival,  and  keep  the  freight  in  safety,  upon  his  responsi- 
bility as  a  warehouseman,  until  the  consignee  has  had  a 
reasonable  time  to  remove  it.  If  the  place  of  residence 
or  business  of  the  consignee  be  unknown  to  the  carrier, 
he  may  give  the  notice  by  letter  dropped  in  the  nearest 
post-office.  If  the  consignee  does  not  accept  and  remove 
freight  within  a  reasonable  time  after  the  carrier  has  ful- 
filled his  obligation  to  deliver,  or  duly  offered  to  fulfill  the 
same,  the  carrier  may  exonerate  himself  from  further  lia- 
bility by  placing  the  freight  in  a  suitable  warehouse,  on 
storage,  on  account  of  the  consignee,  and  giving  notice 
thereof  to  him. 

Civil  Code,  Sections  2120,  2121. 

Section  478.— BILL  OF  LADING.— A  bill  of  lading  is 
an  instrument  in  writing,  signed  by  a  carrier  or  his  agent, 
describing  the  freight  so  as  to  identify  it,  stating  the  name 
of  the  consignor,  the  terms  of  the  contract  for  carriage, 
and  agreeing  or  directing  that  the   freight   be   delivered  to 


504  BUSINESS  LAWS  FOR  BUSINESS   MEN. 

the  order  or  assigns  of  a  special  person  at  a  special  place. 
All  the  title  to  the  freight  which  the  first  holder  of  a  bill 
of  lading  had  when  he  received  it,  passes  to  every  subse- 
quent indorsee  in  good  faith  and  for  value,  in  the  ordinary 
course  of  business.  A  bill  of  lading  represents  the  prop- 
erty for  which  it  has  been  given,  and  by  its  indorsement 
or  by  delivery  without  indorsement  the  property  in  the 
goods  may  be  transferred,  when  such  is  the  intent  with 
which  the  indorsement  or  delivery  is  made.  By  the  rules 
of  commercial  law,  bills  of  lading  are  regarded  as  symbols 
of  the  property  therein  described,  and  the  delivery  of  such 
bill,  by  one  having  an  interest  in  or  a  right  to  control  the 
property,  is  equivalent  to  a  delivery  of  the  property  itself. 
A  consignor  may  effectuate  a  sale  or  pledge  of  the  prop- 
erty consigned  by  delivery  of  the  bill  of  lading  to  the  pur- 
chaser or  pledgee,  as  completely  as  if  the  property  were  in 
fact  delivered.  Bills  of  lading  are  choses  in  action,  and 
instruments  of  this  character  may  be  transferred  for  a 
valuable  consideration  by  delivery  only.  The  indorsee  for 
value  of  a  bill  of  lading  which  has  been  delivered  to  him 
may  bring  an  action  in  his  own  name  for  the  goods.  And 
generally  in  all  cases  where  the  shipper  having  the  right 
of  property  indorses  and  delivers  the  bill  of  lading,  the 
indorsee  may  maintain  an  action  for  the  goods  represented 
by  such  bill  of  lading  in  his  own  name.  A  person  pur- 
chasing a  draft  drawn  by  the  shipper  of  the  goods,  with  a 
bill  of  lading  accompanying  it,  has  a  special  property  in 
the  goods  covered  by  the  bill  of  lading;  and  usually  in 
the  case  of  a  time  draft  this  special  property  vests  in  the 
purchaser  of  the  draft  as  security  for  its  acceptance.  It 
may  be,  if  so  agreed  between  the  shipper  and  the  purchaser 
of  the  draft,  that  the  purchaser  will  have  a  right  to  retain 
the  bill  of  lading,  and  thus  retain  his  special  property  in 
the  goods  shipped,  not  only  for  the  acceptance  but  for  the 
payment  of  the  draft.  When  a  bill  of  lading  is  made  to 
the  "bearer,"  or  in  equivalent  terms,  a  simple  transfer,  by 
delivery,  conveys  the  same  title  as  an  indorsement. 
Civil  Code,  Sections  2126,  2127,  2128. 


BUSINESS    CONTRACTS    AND   LEGAL   OBLIGATIONS.  505 

Section  479.— NUMBER  OF  BILLS  OF  LADING.— 

A  carrier  must  subscribe  and  deliver  to  the  consignor,  on 
demand,  any  reasonable  number  of  bills  of  lading,  of  the 
same  tenor,  expressing  truly  the  original  contract  for  car- 
riage; and  if  he  refuses  to  do  so,  the  consignor  may  take 
the  freight  from  him,  and  recover  from  him,  besides,  all 
damages  he  sustains. 

Civil    Code,    Section    2130. 

Section  480.— CARRIER  EXONERATED  BY  DE- 
LIVERY.— A  carrier  is  exonerated  from  liability  for  freight 
by  delivering  it  in  good  faith,  to  any  holder  of  a  bill  of 
lading,  properly  indorsed,  or  made  in  favor  of  the  bearer. 
When  a  carrier  has  given  a  bill  of  lading,  he  may  require 
its  surrender,  or  a  reasonable  indemnity  against  claims 
thereon,  before  delivering  the  freight. 
Civil  Code,   Sections  2131,  2132. 

Section  481.— WHEN  FREIGHT  MUST  BE  PAID.— 

A  carrier  may  require  his  freightage  to  be  paid  upon  his 
receiving  the  freight;  but  if  he  does  not  demand  it  then, 
he  cannot  do  so  until  he  is  ready  to  deliver  the  freight  to 
the  consignee.  The  carrier  may  demand  payment  in  ad- 
vance, subject  to  a  liability  to  refund  it  if  not  earned. 
Civil   Code,   Section  2136. 

Section  482.— CARRIER'S  LIEN.— A  carrier  has  a 
lien  for  freightage  and  for  services  rendered  at  request  of 
shipper  or  consignee  in  and  about  the  transportation,  care 
and  preservation  of  the  property,  and  he  also  has  a  lien  for 
money  advanced  at  request  of  shipper  or  consignee  to  dis' 
charge   a   prior   lien. 

Act  of  the  Legislature,  approved  April  19,  1909. 

Section  483.— WHO  MUST  PAY  FREIGHT.— The 
consignor  of  freight  is  presumed  to  be  liable  for  the  freight- 
age; but  if  the  contract  between  him  and  the  carrier  pro- 
vides that  the  consignee  shall  pay  it,  and  the  carrier  allows 


506  BUSINESS   LAWS   FOR   BUSINESS   MEN. 

the  consignee  to  take  the  freight,  he  cannot  afterward  col- 
lect the  freightage  from  the  consignor.  The  consignee  of 
freight  is  liable  for  the  freightage,  if  he  accepts  the  freight 
with  notice  of  the  intention  of  the  consignor  that  he  should 
pay  it.  If  a  part  of  the  freight  is  accepted  by  a  consignee, 
without  a  specific  objection  that  the  remainder  is  not  de- 
livered, the  freightage  must  nevertheless  be  apportioned 
and  paid  as  to  that  part.  If  a  consignee  voluntarily  re- 
ceives freight  at  a  place  short  of  the  one  agreed  upon  for 
delivery,  the  carrier  is  entitled  to  a  just  proportion  of  the 
freightage,  according  to  the  distance.  If  the  carrier,  be- 
ing ready  and  willing,  oflFers  to  carry  the  freight  to  the 
destination  originally  intended,  he  is  entitled  to  the  full 
freightage. 

Civil  Code,  Sections  2137,  2138,  2139,  2141,  2142. 

Section      484.— FREIGHT      CARRIED      FARTHER 
THAN  AGREED.— If   freight   is   carried  beyond  the   des- 
tination   agreed    upon    by    the    parties,    the    carrier    is    not 
entitled  to  any  additional  compensation. 
Civil   Code,   Section  2143. 

Section  485.— OBLIGATION  TO  ACCEPT  FREIGHT. 

— »It  is  a  general  rule  that  a  common  carrier  must,  if  able 
to  do  so,  accept  and  carry  whatever  freight  is  offered.  The 
freight  must  be  offered  at  a  reasonable  time  and  place,  and 
be  of  a  kind  that  the  common  carrier  undertakes  or  is 
accustomed  to  carry.  For  if  the  freight  offered  is  not  of 
the  kind  which  the  carrier  has  undertaken  to  carry,  or  if 
it  be  a  dangerous  shipment,  another  rule  may  prevail.  A 
common  carrier  is  not  bound  to  receive  goods  which  are 
so  defectively  packed  that  their  condition  will  entail  upon 
the  company  extra  care  and  extra  risk;  nor  dangerous 
articles,  such  as  nitroglycerine,  dynamite,  gunpowder, 
aquafortis,  oil  of  vitriol,  matches,  etc.  It  is  optional  with 
the  carrier  to  accept  such  freight;  it  may  accept  or  reject 
it,  when  offered;  and  when  accepted  at  all,  the  carrier  may 
insist   upon    such   limitations    of   its    liability   as    it   sees    fit. 


BUSINESS    CONTRACTS    AND   LEGAL   OBLIGATIONS.  507 

A  common  carrier  may  not  relieve  itself  from  any  liability 
imposed  upon  it  by  law  under  the  dictates  of  public  policy; 
but,  on  the  pther  hand,  upon  any  question  of  private  right, 
or  the  right  of  private  property,  it  may  lessen  the  degree 
of  responsibility  which  attaches  to  it  as  an  insurer,  by  any 
contract  not  in  itself  unreasonable.  Thus,  the  shipping 
receipt  may  lawfully  exempt  the  carrier  from  liability  from 
loss  by  fire,  where  inflammable  or  combustible  articles  of 
freight  are  offered  for  carriage. 

Section  486.— AGREEMENTS  TO  LIMIT  LIABIL- 
ITY.— The  obligations  of  a  common  carrier  can  only  be 
limited  by  special  agreement.  General  notice  by  the  car- 
rier is  not  sufficient,  and  a  special  contract  with  each 
shipper  is  required  by  the  law.  But  a  common  carrier 
cannot  be  exonerated,  even  by  special  contract,  from  its 
liability  for  the  gross  negligence,  fraud,  or  wilful  wrongs 
of  itself  or  servants.  A  consignor  or  consignee,  by  accept- 
ing a  bill  of  lading,  or  written  contract  for  carriage,  with 
knowledge  of  its  terms,  assents  to  the  rate  of  hire,  and  the 
time,  place,  and  manner  of  delivery  therein  stated ;  and 
also  to  the  limitation  stated  therein  upon  the  amount  of 
the  carrier's  liability  in  case  property  carried  in  packages, 
trunks,  or  boxes  is  lost  or  injured,  when  the  value  of  the 
property  is  not  named;  and  also  to  the  limitation  stated 
therein  to  the  carrier's  liability  for  loss  or  injury  to  live 
animals  carried.  But  his  assent  to  any  other  modification 
of  the  carrier's  obligations  contained  in  such  instrument 
can  be  manifested  only  by  his  signature  to  the  same. 
Civil  Code,  Section  2176. 

Section  487.— GENERAL  LIABILITY  OF  COMMON 
CARRIERS  FOR  LOSS.— Unless  the  consignor  accom- 
panies the  freight  and  retains  exclusive  control  thereof, 
an  inland  common  carrier  of  property  is  liable  for  loss  or 
injury  of  the  property  from  any  cause  whatever,  except: 
(1)  An  inherent  defect,  vice,  or  weakness,  or  a  spontaneous 
action,    of   the    property    itself;    (2)    The    act    of    a    public 


508  BUSINESS   LAWS   FOR   BUSINESS   MEN. 

enemy  of  the  United  States,  or  of  this  State;  (3)  The  act  of 
the  law;  or  (4)  Any  irresistible  superhuman  cause.  The 
first  exception,  inherent  defects,  includes  decay  of  fruits, 
the  diminution,  leakage,  or  evaporation  of  liquids,  and  the 
spontaneous  combustion  of  goods.  In  all  these  cases, 
where  the  negligence  of  the  carrier  does  not  co-operate  in 
the  loss,  he  will  be  excused.  Live  animals  are  also  in- 
cluded in  this  exception,  to  whatever  extent  they  injure 
themselves  or  one  another,  impelled  by  their  inherent  vices 
and  propensities.  A  public  enemy,  the  second  exception, 
is  one  with  whom  the  Nation  or  State  is  at  open  war,  and 
pirates  on  the  high  seas,  who  are  universally  treated  as 
the  enemies  of  all  mankind.  By  the  act  of  the  law,  stated 
as  the  third  exception,  is  meant  the  contingency  of  goods 
attached,  or  taken  under  execution,  or  other  legal  process. 
By  the  fourth  exception,  an  irresistible  superhuman  cause, 
is  meant  some  act  of  God,  as  where  freight  is  destroyed 
by  lightning,  or  volcanic  eruption,  or  other  cause  over 
which  human  agency  could  have  no  control. 
Civil  Code,  Section  2194. 

Section  488.— LOSSES  NOT  WAIVED  BY  CON- 
TRACT.— A  common  carrier  cannot  limit  itself  from  liabil- 
ity in  case  of  gross  negligence,  fraud,  or  wilful  wrong.  The 
excusable  results  flowing  from  the  acts  of  God  are  those 
only  which  cannot  be  prevented  by  the  interposition  of 
human  agency.  In  a  suit  against  a  railroad  company  for 
the  freezing  of  potatoes  while  en  route,  this  was  held  not 
to  be  a  loss  for  which  the  company  could  claim  immunity, 
under  the  limitation  of  liability  clause  in  its  contract  with 
the  shipper.  Any  movable  object  can  be  kept  from  freezing, 
and  the  freezing  of  any  such  articles  cannot  be  excused  as 
being  an  act  of  God.  (Decided  by  the  California  District 
Court  of  Appeals  in  the  case  of  Wood,  Curtiss  &  Company 
vs.  the  Missouri  Pacific  Railway  Company,  which  decision 
is  printed  in  Volume  II  of  California  Appellate  Decisions, 
No.  88,  page  419.) 


BUSINESS   CONTRACTS  AND   LEGAL  OBLIGATIONS.  509 

Section  489.— LIABILITY  FOR  DELAY.— A  common 
carrier  is  liable  for  delay  only  when  it  is  caused  by  his  want 
of  ordinary  care  and  diligence. 
Civil  Code,  Section  2196. 

Section  490.— SHIPMENT  OF  GOLD,  PRECIOUS 
STONES,  STATUARY,  PICTURES,  GLASS  OR 
CHINAWARE. — A  common  carrier  of  gold,  silver,  platina, 
or  precious  stones,  or  of  imitations  thereof,  in  a  manu- 
factured or  unmanufactured  state;  of  timepieces  of  any 
description;  of  negotiable  paper  or  other  valuable  writings; 
of  pictures,  glass,  or  chinaware;  of  statuary,  silk,  or  laces; 
or  of  plated  ware  of  any  kind,  is  not  liable  for  more  than 
fifty  dollars  upon  the  loss  or  injury  of  any  one  package 
of  such  articles,  unless  he  has  notice,  upon  the  receipt 
thereof,  by  mark  upon  the  package  or  otherwise,  of  the 
nature  of  the  freight;  nor  is  such  carrier  liable  upon  any 
package  carried  for  more  than  the  value  of  the  articles  named 
in  the  receipt  or  the  bill  of  lading. 
Civil  Code,  Section  2200. 

Section  490a.— ACCEPTING  FREIGHT  FOR  PLACE 
BEYOND  USUAL  ROUTE.— If  a  common  carrier  ac- 
cepts freight  for  a  place  beyond  its  usual  route,  it  must, 
unless  otherwise  agreed,  deliver  the  freight  at  the  end  of  its 
route  in  that  direction  to  some  other  common  carrier  carry- 
ing to  the  place  of  address,  or  connected  with  those  who  thus 
carry;  and  its  liability  ceases  upon  making  such  delivery. 
If  freight  addressed  to  a  place  beyond  the  usual  route  of 
the  common  carrier  who  first  receives  it  is  lost  or  injured, 
the  carrier  must,  within  a  reasonable  time  after  demand, 
give  satisfactory  proof  to  the  consignor  that  the  loss  or 
injury  did  not  occur  while  the  freight  was  in  its  charge, 
or  it  will  be  liable  for  the  loss. 

Civil  Code,  Sections  2201,  2202. 

Section  491.— RAILROADS  MUST  FURNISH  CARS. 

— Whenever  cars  are  wanted,  the  shipper  may  apply  in  writ- 
ing to  the  superintendent  or  agent  of  a  railroad  company, 


510  BUSINESS   LAWS   FOR   BUSINESS   MEN. 

indicating  the  point  where  the  cars  are  to  be  sent,  and  how 
many  are  desired.  The  railroad  company  must  furnish  the 
cars,  if  the  application  be  for  10  cars  or  less,  in  5  days;  if 
the  application  be  for  10  and  less  than  50  cars,  they  must  be 
furnished  in  10  days;  if  the  application  be  for  50  cars  or 
more,  they  must  be  furnished  in  15  days.  If  the  application 
be  for  cars  to  carry  perishable  freight,  the  number  of  cars 
applied  for  must  be  furnished  within  48  hours.  The  time 
will  begin  to  run  from  the  hour  of  seven  o'clock  A,  M.  of  the 
next  day  following  the  day  when  the  application  for  cars  is 
received  by  the  railroad  company.  The  application  for  cars 
must  state  the  number  of  cars  desired,  the  kind  of  freight 
to  be  shipped,  the  point  of  destination,  and  the  time  and 
place  at  which  they  are  desired.  When  cars  are  applied  for, 
if  they  are  not  furnished,  the  railroad  company  becomes 
liable  and  immediately  indebted  to  the  party  who  applied, 
for  the  sum  of  five  dollars  per  day  for  each  car  failed  to  be 
furnished,  and  in  addition  all  actual  damages  the  applicant 
may  have  sustained.  When  a  person  applies  for  cars,  the 
railroad  company  has  the  right  to  demand  a  deposit  of  one- 
fourth  of  the  amount  of  the  freight  charge.  The  cars,  when 
furnished,  must  be  loaded  within  forty-eight  hours ;  and 
if  not  loaded  within  that  time,  six  dollars  per  day  must  be 
paid  the  company  for  each  car  not  used,  besides  the  actual 
damage  sustained  by  the  company.  The  consignee  must  un- 
load cars  within  forty-eight  hours  after  delivery  to  him,  and 
if  he  fails  to  do  so  he  will  be  liable  to  the  company  in  the 
sum  of  six  dollars  per  day.  The  liability  of  either  party 
is  excused  when  failure  to  furnish,  load,  or  unload  cars,  is 
caused  by  public  calamity,  strikes,  washouts,  acts  of  God, 
the  public  enemy,  mobs,  riots,  wrecks,  fires  or  accidents. 
Act  of  the  Legislature,  approved  April  20,  1909. 

Letters  of  Credit. 

Section  492.— WHAT  IS  A  LETTER  OF  CREDIT.— 

A    letter    of    credit    is    a    written    instrument,    addressed    by 


BUSINESS    CONTRACTS    AND    LEGAL   OBLIGATIONS.  511 

one  person  to  another,   requesting  the  latter  to  give  credit 
to  the  person  in  whose  favor  it  is  drawn. 

Section  493.— HOW    ADDRESSED.— A  letter  of  credit 
may  be  addressed  to  several  persons  in  succession. 

Section  494.— LETTERS  GENERAL  OR  SPECIAL— 

A  letter  of  credit  is  either  general  or  special.  When  the 
request  for  credit  in  a  letter  is  addressed  to  specified  per- 
sons, by  name  or  description,  the  letter  is  special.  All  other 
letters  of  credit  are  general.  A  letter  of  credit  addressed 
to  a  particular  person  is  limited  to  him,  for  the  writer  must 
be  deemed  to  have  granted  it  in  reliance  on  his  prudence 
and  discretion  in  acting  upon  it.  A  general  letter  of  credit 
gives  to  any  person  to  whom  it  may  be  shown,  authority  to 
comply  with  its  request,  and  by  so  doing,  it  becomes,  as  to 
him,  of  the  same  effect  as  though  addressed  to  him  by  name. 
Several  persons  may  successively  give  credit  upon  a  general 
letter. 

Section  495.— LIABILITY  OF  THE  WRITER.— The 

writer  of  a  letter  of  credit  is,  upon  the  default  of  the  debtor, 
liable  to  those  who  gave  credit  in  compliance  with  its  terms. 
By  giving  the  letter,  the  writer  obliges  himself  to  accept 
such  bills  or  orders  as  may  be  drawn  under  it  in  good  faith, 
and  within  the  limits  of  the  credit  specified  in  the  letter. 

Section  496.— LETTER  OF  CREDIT  MAY  BE  A 
CONTINUING  GUARANTY.— If  the  parties  to  a  letter 
of  credit  appear  by  its  terms  to  contemplate  a  course  of 
future  dealing  between  the  parties,  it  is  not  exhausted  by 
giving  a  credit,  even  to  the  amount  limited  by  the  letter, 
which  is  subsequently  reduced  or  satisfied  by  payments 
made  by  the  debtor,  but  it  is  to  be  deemed  a  continuing 
guaranty. 

Section  497.— WHEN  NOTICE  TO  THE  WRITER 
NECESSARY. — A  letter  of  credit  must  by  its  terms  ex- 
press or  imply  the  necessity  of  giving  notice,  or  no  notice 


512  BUSINESS   LAWS   FOR   BUSINESS   MEN. 

of  credit  obtained  upon  it  will  be  necessary.  The  writer 
of  a  letter  of  credit  is  liable  for  credit  given  upon  it  with- 
out notice  to  him,  unless  it  can  be  seen  from  the  letter  itself 
that  notice  to  the  writer  was  intended  by  the  parties.  Un- 
less there  is  something  in  the  nature  of  the  contract  or 
terms  of  the  letter  making  acceptance  or  notice  necessary 
as  a  condition  of  liability,  neither  is  necessary  to  bind  the 
writer. 

Section  498.— CREDIT  GIVEN  MUST  AGREE 
WITH  TERMS  OF  LETTER.— The  law  of  CaUfornia 
provides,  that  if  a  letter  of  credit  prescribes  the  persons  by 
whom  or  the  mode  in  which  the  credit  is  to  be  given,  or  the 
term  of  credit,  or  limits  the  amount,  the  writer  is  not  bound 
except  for  transactions,  which,  in  these  respects,  conform 
strictly  to  the  terms  of  the  letter. 

Civil   Code,    Sections   2858,   2859,   2861,   2862,   2864, 
2865. 

Section  499.— INTENTION  OF  PARTIES.— In  cases 
where  doubt  arises  as  to  the  real  meaning  of  a  letter  of 
credit,  the  rule  of  law  is  that  the  terms  of  the  letter  will 
be  liberally  and  reasonably  construed.  The  intention  of 
the  parties  is  the  essential  thing  to  be  ascertained.  But 
words  of  doubtful  meaning,  or  technical  terms,  or  local 
expressions,  used  in  a  letter  of  credit,  cannot  be  taken 
advantage  of,  to  defeat  the  liability  of  one  who  signs  and 
gives  such  a  letter.  True,  it  is  a  general  rule,  that  the 
surety  or  guarantor  should  not  be  held  beyond  the  precise 
stipulations  of  his  contract,  and  he  has  a  right  to  insist 
upon  the  exact  performance  of  any  condition  inserted  in 
the  letter.  But  when  the  question  is  as  to  the  meaning 
which  shall  be  given  to  the  terms  used  in  the  instrument, 
the  law  will  always  be  found  liberal  and  reasonable;  for 
letters  of  credit  are  commercial  instruments,  generally 
drawn  up  by  merchants  in  brief  language,  and  often  loose 
in  their  structure  and  aim;  and  to  give  the  words  of  a 
letter    of    credit    a    nice    and    technical    construction,    would 


BUSINESS   CONTRACTS   AND   LEGAL  OBLIGATIONS.  513 

not  only  defeat  the  intention  of  the  parties  in  many  in- 
stances, but  render  them  too  unsafe  a  basis  to  rely  on  for 
extensive  credits,  so  often  sought  in  the  present  active 
business  of  commerce  throughout  the  world.  Therefore, 
it  is  well  to  remember,  that  while  parties  will  be  held  by 
the  law  to  the  terms  of  their  contract,  yet  the  law  will  not 
allow  a  person  who  advances  money  on  the  faith  of  a  letter 
of  credit,  however  loosely  drawn,  to  suffer  loss  by  any 
strained  or  technical  construction  of  the  language  or  direc- 
tions contained  in  it. 

Bills  of  Exchange. 

Section  500.— NATURE  OF  BILLS  OF  EXCHANGE. 

■ — A  bill  of  exchange  is  an  instrument,  negotiable  in  form, 
by  which  one,  who  is  called  the  drawer,  requests  another, 
called  the  drawee,  to  pay  a  specified  sum  of  money.  A  bill 
of  exchange  may  give  the  name  of  any  person  in  addition 
to  the  drawee,  to  be  resorted  to  in  case  of  need. 

Section  501.— BILL  IN  PARTS  OF  A  SET.— A  bill  of 
exchange  may  be  drawn  in  any  number  of  parts,  each  part 
stating  the  existence  of  the  others,  and  all  forming  one 
set.  An  agreement  to  draw  a  bill  of  exchange  binds  the 
drawer  to  execute  it  in  three  parts,  if  the  other  party  to 
the  agreement  desires  it.  Presentment,  acceptance,  or  pay- 
ment, of  a  single  part  in  a  set  of  a  bill  of  exchange,  is  suffi- 
cient for  the  whole. 

Civil  Code,  Sections  3171,  3172,  3173,  3174,  3175. 

Section  502.— WHERE  BILL  OF  EXCHANGE  IS 
PAYABLE. — A  bill  of  exchange  is  payable:  (1)  At  the 
place  where,  by  its  terms,  it  is  made  payable;  or,  (2)  If  it 
specify  no  place  of  payment,  then  at  the  place  to  which  it 
is  addressed;  or,  (3)  If  it  be  not  addressed  to  any  place, 
then  at  the  place  of  residence  or  business  of  the  drawee, 
or  wherever  he  may  be  found.  If  the  drawee  has  no  place 
of  business,  or  if  his  place  of  business  or  residence  cannot 


514  BUSINESS   LAWS   FOR  BUSINESS   MEN. 

with  reasonable  diligence  be  ascertained,  presentment  for 
payment  is  excused,  and  the  bill  may  be  protested  for  non- 
payment. 

Civil  Code,  Section  3176. 

Section  503.— WHEN  BILL  OF  EXCHANGE  MAY 
BE  PRESENTED  FOR  ACCEPTANCE.— A  bill  of  ex- 
change may  be  presented  by  the  holder  to  the  drawee  for 
acceptance,  at  any  time  before  it  is  payable,  and  if  accept- 
ance is  refused,  the  bill  is  dishonored.  When  a  bill  of 
exchange  is  payable  at  a  specified  time  after  sight,  the 
drawer  and  indorsers  are  exonerated  if  it  is  not  presented 
for  acceptance  within  ten  days  after  the  time  which  would 
suffice,  with  ordinary  diligence,  to  forward  it  for  acceptance, 
unless  presentment  is  excused. 

Section  504.— HOW  PRESENTMENT  MUST  BE 
MADE. — Presentment  of  a  bill  of  exchange  for  acceptance 
must  be  made  in  the  following  manner,  as  nearly  as  by 
reasonable  diligence  is  practicable :  ( 1 )  The  bill  must  be 
presented  by  the  holder  or  his  agent;  (2)  It  must  be  pre- 
sented on  a  business  day,  and  within  reasonable  hours; 
(3)  It  must  be  presented  to  the  drawee,  or,  if  he  be  absent 
from  his  place  of  residence  or  business,  to  some  person 
having  charge  thereof,  or  employed  therein ;  and  the  drawee, 
on  such  presentment,  may  postpone  his  acceptance  or  re- 
fusal until  the  next  day.  If  the  drawee  have  no  place  of 
business,  or  if  his  place  of  business  or  residence  cannot, 
with  reasonable  diligence,  be  ascertained,  presentment  for 
acceptance  is  excused,  and  the  bill  may  be  protested  for 
non-acceptance.  Presentment  for  acceptance  to  one  of 
several  joint  drawers,  and  refusal  by  him,  dispenses  with 
presentment  to  the  others.  A  bill  of  exchange  which  speci- 
fies a  drawee  in  case  of  need  must  be  presented  to  him  for 
acceptance  or  payment,  as  the  case  may  be,  before  it  can 
be  treated  as  dishonored. 

Civil  Code,  Section  3186. 


BUSINESS    CONTRACTS   AND    LEGAL   OBLIGATIONS.  515 

Section  505.— ACCEPTANCE  MUST  BE  IN  WRIT- 
ING.— An  acceptance  of  a  bill  of  exchange  must  be  made 
in  writing,  by  the  drawee  or  by  an  acceptor  for  honor,  and 
may  be  made  by  the  acceptor  writing  his  name  across  the 
face  of  the  bill,  with  or  without  other  words.  The  holder 
of  a  bill  of  exchange,  if  entitled  to  an  acceptance,  may  treat 
the  bill  as  dishonored  if  the  drawee  refuses  to  write  across 
its  face  an  unqualified  acceptance. 

Section  506.— WHAT  MAY  BE  TREATED  AS  SUF- 
FICIENT ACCEPTANCE.— The  holder  of  a  bill  of  ex- 
change may,  without  prejudice  to  his  rights  against  prior 
parties,  receive  and  treat  as  a  sufficient  acceptance :  ( 1 )  An 
acceptance  written  upon  any  part  of  the  bill,  or  upon  a 
separate  paper;  (2)  An  acceptance  qualified  so  far  only  as 
to  make  the  bill  payable  at  a  particular  place  within  the 
city  or  town  in  which,  if  the  acceptance  was  unqualified, 
it  would  be  payable;  or,  (3)  A  refusal  by  the  drawee  to 
return  the  bill  to  the  holder  after  presentment,  in  which 
case  the  bill  is  payable  immediately,  without  regard  to  its 
terms.  The  acceptance  of  a  bill  of  exchange  by  a  separate 
instrument  binds  the  acceptor  to  one  who,  upon  the  faith 
thereof,  has  taken  it  for  value.  An  unconditional  promise, 
in  writing,  to  accept  a  bill  of  exchange,  is  a  sufficient  accept- 
ance, in  favor  of  every  person  who  upon  the  faith  thereof 
has  taken  the  bill  for  value  or  other  good  consideration. 
Civil  Code,  Sections  3195,  3197. 

Section  507.  —  WHEN  ACCEPTANCE  MAY  BE 
CANCELED. — The  acceptor  of  a  bill  of  exchange  may  can- 
cel his  acceptance  at  any  time  before  the  delivery  of  the  bill 
to  the  holder,  and  before  the  holder  has,  with  the  consent 
of  the  acceptor,  transferred  his  title  to  another  person  for 
value  upon  the  faith  of  such  acceptance. 
Civil  Code,  Section  3198. 

Section  508— WHAT  IS  ADMITTED  BY  ACCEPT- 
ANCE.— The  acceptance  of  a  bill  of  exchange  admits  the 


516  BUSINESS   LAWS   FOR  BUSINESS   MEN. 

signature  of  the  drawer,  but  does  not  admit  the  signature 
of  any  indorser  to  be  genuine. 

Section  509.— ACCEPTANCE   OR  PAYMENT   FOR 

HONOR. — On  the  dishonor  of  a  bill  of  exchange  by  the 
drawee,  or,  in  case  of  a  foreign  bill,  after  it  has  been  duly 
protested,  it  may  be  accepted  or  paid  by  any  person,  for 
the  honor  of  any  party  to  it.  The  holder  of  a  bill  of  ex- 
change is  not  bound  to  allow  it  to  be  accepted  for  honor, 
but  is  bound  to  accept  payment  for  honor.  The  person 
accepting  or  paying  for  honor  must  write  a  memorandum 
upon  the  bill,  stating  for  whose  honor  he  accepts  or  pays, 
and  must  give  notice  to  such  parties,  with  reasonable  dili- 
gence, of  the  fact  that  he  has  accepted  or  paid  the  bill. 
Having  done  so,  he  is  entitled  to  reimbursement  from  the 
parties  for  whom  he  pays,  and  from  all  parties  prior  to 
them.  A  bill  of  exchange  which  has  been  accepted  for 
honor  must  be  presented  at  its  maturity  to  the  drawee  for 
payment,  and  notice  of  its  dishonor  by  him  must  be  given 
to  the  acceptor  for  honor,  in  like  manner  as  to  an  indorser; 
after  which  the  acceptor  for  honor  must  pay  the  bill.  The 
acceptance  of  a  bill  of  exchange  for  honor  does  not  excuse 
the  holder  from  giving  notice  of  its  dishonor  by  the  drawee. 
Civil  Code,  Sections  3203,  3204,  3205,  3206,  3207. 

Section  510.— PRESENTMENT    FOR    PAYMENT.— 

If  a  bill  of  exchange  is  by  its  terms  payable  at  a  particular 
place,  and  is  not  accepted  on  presentment,  it  must  be  pre- 
sented at  the  same  place  for  payment.  A  bill  of  exchange, 
accepted  payable  at  a  particular  place,  must  be  presented 
at  that  place  for  payment,  when  presentment  for  payment 
is  necessary,  and  need  not  be  presented  elsewhere.  If  a 
bill  of  exchange,  payable  at  sight  or  on  demand,  without 
interest,  is  not  duly  presented  for  payment  within  ten  days 
after  the  time  in  which  it  could,  with  reasonable  diligence, 
be  transmitted  to  the  proper  place  for  such  presentment, 
the  drawer  and  indorsers  are  exonerated,  unless  such  pre- 
sentment is  excused.     The  circumstances  which  will  excuse 


BUSINESS    CONTRACTS   AND   LEGAL   OBLIGATIONS.  517 

delay  are  such  as  occur  through  floods,  or  storms,  or  war. 
or  pestilence,  or  famine,  rendering  travel  or  communication 
impossible.  Mere  delay  in  presenting  a  bill  of  exchange 
payable  with  interest,  at  sight  or  on  demand,  does  not 
exonerate  any  party  to  it.  There  are  certain  other  things 
which  will  also  excuse  both  presentment  and  notice.  The 
presentment  of  a  bill  of  exchange  for  acceptance  is  ex- 
cused if  the  drawee  has  not  capacity  to  accept  it;  if,  for 
instance,  the  drawee,  at  the  time  when  presentment  should 
be  made,  is  insane,  his  capacity  to  make  any  contract  is 
gone,  and  the  law  will  not  require  presentment  to  him 
under  such  circumstances.  Presentment  of  a  bill  of  ex- 
change for  acceptance  or  payment,  and  also  notice  of  its 
dishonor,  are  excused  as  to  the  drawer,  if  he  forbids  the 
drawee  to  accept  or  the  acceptor  to  pay  the  bill;  or  if,  at 
the  time  of  drawing,  he  had  no  reason  to  believe  that  the 
drawee  would  accept  or  pay  it. 

Civil    Code,    Sections   3211,    3212,   3213,    3214,    3218, 
3220. 

Section  511.— FOREIGN  BILLS.— A  bill  of  exchange 
drawn  and  payable  within  the  State  is  an  inland  bill.  All 
others  are  called  foreign  bills  of  exchange. 

Section    512.— PROTEST    OF    FOREIGN    BILL    OF 

EXCHANGE.— Notice  of  the  dishonor  of  a  foreign  bill 
of  exchange  can  be  given  only  by  notice  of  its  protest. 
Protest  must  be  made  by  a  Notary  Public,  if  with  reason- 
able diligence  one  can  be  obtained;  and  if  not,  then  by  an), 
reputable  person,  in  the  presence  of  two  witnesses. 

Protest  must  be  made  by  an  instrument  in  writing,  giv- 
ing a  literal  copy  of  the  bill  of  exchange,  with  all  that  is 
written  thereon,  or  annexing  the  original;  stating  the  pre- 
sentment, and  the  manner  in  which  it  was  made ; .  the  pres- 
ence or  absence  of  the  drawee  or  acceptor,  as  the  case  may 
be;  the  refusal  to  accept  or  to  pay,  or  the  inability  of  the 
drawee  to  give  a  binding  acceptance;  and  in  case  of  refusal, 
the  reason  assigned,  if  any;  and,  finally,  protesting  against 
all  the  parties  to  be  charged. 


518  BUSINESS   LAWS   FOR   BUSINESS    MEN. 

A  protest  for  non-acceptance  must  be  made  in  the  city 
or  town  in  which  the  bill  is  presented  for  acceptance,  and 
a  protest  for  non-payment  in  the  city  or  town  in  which  it 
is  presented  for  payment. 

A  protest  must  be  noted  on  the  day  of  presentment,  or 
on  the  next  business  day;  but  it  may  be  written  out  at 
any  time  thereafter. 

The  want  of  a  protest  of  a  foreign  bill  of  exchange,  or 
delay  in  making  the  same,  is  excused  in  like  cases  with 
the  want  or  delay  of  presentment. 

Notice  of  protest  may  be  given  by  the  Notary  who  makes 
the  protest,  and  served  as  follows:  (1)  By  delivering  it  to 
the  party  to  be  charged,  personally,  at  any  place;  or,  (2) 
By  delivering  it  to  some  person  of  discretion  at  the  place 
of  residence  or  business  of  such  party,  apparently  acting 
for  him;  or  (3)  By  properly  folding  the  notice,  directing 
it  to  the  party  to  be  charged,  at  his  place  of  residence, 
according  to  the  best  information  that  the  person  giving 
the  notice  can  obtain,  depositing  it  in  the  post-office  most 
conveniently  accessible  from  the  place  where  the  present- 
ment was  made,  and  paying  the  postage  thereon. 

If  a  foreign  bill  of  exchange  on  its  face  waives  protest, 
notice  of  dishonor  may  be  given  to  any  party  to  it,  in  like 
manner  as  of  an  inland  bill ;  but  if  any  indorser  expressly 
requires  protest  to  be  made,  by  a  direction  written  on  the 
bill  at  or  before  his  indorsement,  protest  must  be  made, 
and  notice  of  protest  must  be  given  to  him  and  to  all  sub- 
sequent indorsers. 

One  who  pays  a  foreign  bill  of  exchange  for  honor  must 
declare,  before  payment,  in  the  presence  of  a  person  author- 
ized to  make  protest,  for  whose  honor  he  pays  the  same, 
in  order  to  entitle  him  to  reimbursement. 

Civil  Code,  Sections  3227,  3228,  3229,  3230,  3233. 

Section  513.— DAMAGES  ALLOWED  ON  DIS- 
HONOR OF  BILL  OF  EXCHANGE.— Damages  are  al- 
lowed, as  a  full  compensation,  for  interest  accrued  before 
notice    of    dishonor,    re-exchange,    expenses,    and    all    other 


BUSINESS    CONTRACTS    AND   LEGAL   OBLIGATIONS.  519 

damages,  in  favor  of  holders  for  value  only,  upon  bills  of 
exchange  drawn  or  negotiated  within  this  State,  and  pro- 
tested for  non-acceptance  or  non-payment.  The  rate  of 
damages  allowed  by  the  law  of  California,  on  dishonor  of 
a  foreign  bill  of  exchange,  is  as  follows:  (1)  If  drawn  upon 
any  person  in  this  State,  two  dollars  upon  each  one  hundred 
dollars  of  the  principal  sum  specified  in  the  bill;  (2)  If 
drawn  upon  any  person  out  of  this  State,  but  in  any  of 
the  other  States  west  of  the  Rocky  Mountains,  five  dollars 
upon  each  hundred  dollars  of  the  principal  sum  specified 
in  the  bill;  (3)  If  drawn  upon  any  person  in  any  of  the 
United  States  east  of  the  Rocky  Mountains,  ten  dollars 
upon  each  hundred  dollars  of  the  principal  sum  specified 
in  the  bill ;  (4)  If  drawn  upon  any  person  in  any  place  in 
a  foreign  country,  fifteen  dollars  upon  each  hundred  dollars 
of  the  principal  sum  specified  in  the  bill. 

From  the  time  of  notice  of  dishonor  and  demand  of 
payment,  lawful  interest  is  allowed  upon  the  aggregate 
amount  of  the  principal  sum  specified  in  the  bill,  and  the 
damages  mentioned  in  the  preceding  paragraph. 

If  the  amount  of  a  protested  bill  of  exchange  is  expressed 
in  money  of  the  United  States,  damages  are  estimated  upon 
such  amount  without  regard  to  the  rate  of  exchange. 

If  the  amount  of  a  protested  bill  of  exchange  is  expressed 
in  foreign  money,  damages  are  estimated  upon  the  value 
of  a  similar  bill  at  the  time  of  protest,  in  the  place  nearest 
to  the  place  where  the  bill  was  negotiated,  and  where  such 
bills  are  currently  sold. 

Bank  Checks. 

Section  514.— NATURE  OF  BANK  CHECKS.— In  its 

essential  features  a  bank  check  has  been  sometimes  likened 
to  a  bill  of  exchange,  but  it  is  evident  that  there  are  very 
material  differences  between  them.  A  bill  of  exchange  must 
be  presented  for  acceptance,  and  again  for  payment.  A 
check  is  an  order  to  pay  the  holder  a  sum  of  money  at  a 
bank,  on  the  presentation  of  the  check  and  demand  of  the 


520  BUSINESS   LAWS  FOR  BUSINESS   MEN. 

money;  and  no  further  notice  is  necessary,  no  acceptance  is 
required  or  expected.  It  is  well  said  that  one  radical  dif- 
ference between  a  check  and  a  bill  of  exchange  is,  that  the 
former  need  not  be  accepted,  while  the  latter  must  be,  in 
order  to  fix  the  liability  on  the  drawee.  It  is  requisite  to  a 
check  that  it  be  drawn  on  a  bank  or  banker,  and  that  it  be 
payable  on  demand. 

Section  515.— DELIVERY  OF  CHECK.— It  is  neces- 
sary that  there  should  be  delivery  of  a  check  before  the 
payee  can  acquire  any  rights  in  it.  The  same  rule  applies 
to  a  check  which  applies  to  a  note  or  to  a  bill  of  exchange. 
It  is  not  valid  unless  it  has  been  delivered  to  the  payee. 

Section  516.— NEGOTIABILITY.— A  check  is  a  nego- 
tiable instrument,  when  payable  to  "bearer,"  or  to  the 
"order"  of  a  person. 

Section  517.— POSSESSION  OF  CHECK.— The  mere 
possession  of  a  check  will  not  justify  a  bank  in  making  pay- 
ment to  the  person  in  possession,  without  some  identifica- 
tion, or  some  evidence  of  genuineness  of  the  indorsement,  if 
an  indorsement  is  in  question. 

Section  518.— DRAWING  ON  ANTICIPATED 
FUNDS. — A  depositor  in  a  bank  has  a  right  to  draw  his 
check  in  the  reasonable  expectation  that  he  will  have  suffi- 
cient funds,  at  the  time  of  presentment,  to  meet  it.  Hence, 
insufficiency  of  funds,  at  the  time  the  check  is  drawn,  does 
not  affect  the  holder's  right  to  payment,  if  there  are  suffi- 
cient funds  on  hand  when  the  check  is  presented. 

Section  519.— CERTIFIED  CHECK.— The  certification 
of  a  check,  when  made  before  delivery,  operates  in  favor  of 
third  parties  simply  as  an  assurance  that  it  is  genuine,  and 
will  be  paid.  The  bank  certifying  it  becomes  bound.  Be- 
yond this,  nothing  is  added  to  the  legal  force  or  effect  of 


BUSINESS   CONTRACTS   AND   LEGAL  OBLIGATIONS.  521 

the  check.  A  bank,  by  certification  of  a  check,  becomes  en- 
titled to  charge  the  amount  thereof  to  the  account  of  the 
drawer  at  the  time  of  certification,  thus  appropriating  to 
the  payment  of  the  check  the  necessary  amount  of  money 
from  the  funds  on  deposit  to  the  credit  of  the  drawer.  By 
certification  of  a  check  the  bank  enters  into  an  absolute 
undertaking  to  pay  it  when  presented,  within  the  period  of 
limitation   of  actions. 

Section  520.— PRESENTMENT  AND  DEMAND 
FOR  PAYMENT. — A  person  who  takes  a  check  does  so 
with  the  legal  obligation  to  present  it  at  the  bank  for  pay- 
ment, within  a  reasonable  time.  A  check  is  not  designed  for 
circulation,  but  for  immediate  presentment  for  payment,  and 
if  not  thus  presented  within  a  reasonable  time  according  to 
the  circumstances,  the  indorsers  will  be  released  from  liabil- 
ity on  it.  A  check  must  be  presented  for  payment  with  all 
the  dispatch  and  diligence  consistent  with  the  transactions  of 
commercial   concerns. 

Section  521.— STOPPING  PAYMENT.— The  drawer 
of  a  check  may  stop  payment,  by  notifying  the  bank  on 
which  it  is  drawn  that  payment  is  stopped  and  giving  in- 
struction not  to  pay  it.  In  such  case,  it  is  the  duty  of  the 
bank  to  refuse  payment,  and  give  its  reasons  for  so  doing, 
leaving  the  drawer  and  the  holder  to  settle  the  difficulty 
between  them.  But  where  the  check  has  been  certified,  it 
cannot  be  countermanded  by  the  drawer,  because  it  has 
passed  beyond  his  control.  A  check  cannot  be  counter- 
manded by  the  drawer  after  it  has  been  presented  at  the 
bank  for  payment  and  has  been  accepted. 

Section  522.— PAYMENT  OF  CHECK  BY  MIS- 
TAKE.— A  bank  is  bound  to  know  the  state  of  its  deposi- 
tor's account;  and  if  it  makes  a  mistake  in  this  respect  it 
must  abide  the  consequences.  Banks  are  required,  and  for 
their  own  safety  are  compelled,  to  know  at  all  times  the 
balance  to  the  credit  of  each  individual  depositor,  and  they 


522  BUSINESS    LAWS   FOR   BUSINESS   MEN. 

take  and  pay  checks  at  their  own  risk  and  peril.  If,  from 
negligence  or  inattention  to  its  own  affairs,  a  bank  improvi- 
dently  pays  when  the  account  of  a  customer  is  not  in  con- 
dition to  warrant  it,  or  if,  by  mistake,  a  check  is  paid 
when  the  drawer  has  no  funds  in  bank,  it  must  look  to  the 
customer  for  rectification  or  repayment,  and  not  to  the 
party  to  whom  the  check  was  paid. 

Section  523.— RIGHTS  AND  LIABILITIES  OF  IN- 
DORSERS. — The  rights  and  liabilities  of  indorsers  are  the 
same  as  to  all  negotiable  instruments.  Checks,  bills  of  ex- 
change, and  promissory  notes,  with  respect  to  indorsers,  are 
considered  according  to  the  same  rule.  For  the  law  as  to 
indorsers,  their  rights  and  liabilities,  see  the  subject  of 
"Promissory  Notes,"  where  the  subject  is  fully  treated. 

Section  524.— REFUSAL  TO  PAY.— A  check  being 
payable  immediately  and  on  demand,  the  holder  can  only 
present  it  for  payment,  and  the  bank  can  fulfill  its  duty  to 
the  depositor  only  by  paying  the  amount  demanded.  The 
holder  has  no  right  to  demand  from  the  bank  anything  but 
payment  of  the  check,  and  the  bank  has  no  right  as  against 
the  drawer,  to  do  anything  but  pay  it.  If  the  bank  refuses 
to  pay  the  check,  when  there  are  funds  sufficient  on  deposit, 
the  holder  has  recourse  against  the  maker  and  the  indorsers, 
and  the  maker,  in  turn,  has  a  right  to  sue  the  bank. 

Section  525.— LIABILITY  OF  BANK  TO  DEPOSI- 
TOR   FOR    REFUSAL    TO    PAY    CHECKS.— Where 

there  is  money  on  deposit  in  a  bank,  sufficient  to  pay  checks 
drawn  by  the  depositor,  and  the  bank  refuses  to  pay  the 
checks,  the  liability  of  the  bank  is  only  for  the  money 
deposited  and  interest  from  the  date  of  refusal  to  pay.  The 
bank  is  not  liable  in  damages  for  loss  of  credit,  or  sacrifice  of 
goods,  or  expenses  of  litigation,  or  other  injuries  sustained. 
Smith's  Cash  Store,  of  San  Francisco,  sued  the  First  Na- 
tional Bank  of  San  Francisco  for  $100,CXX)  damages,  the 
plaintiff  alleging  that  it  deposited  with  the  bank  on  a  certain 
date  the  sum  of  $4,000,  and  drew  checks  against  this  deposit 


BUSINESS    CONTRACTS    AND   LEGAL   OBLIGATIONS.  523 

aggregating  $3,679.55,  which  the  bank  failed  and  refused  to 
pay;    and    that    plaintiff    was    injured    and    damaged    in    its 
credit,   was   compelled   to   sell   goods   at   a   sacrifice,   had   to 
make  an  assignment  of  property,  and  was  compelled  to  pay 
out   large   sums   in   litigation ;   all   by   reason   of   the   bank's 
refusal   to   pay   the   checks.        The    Supreme    Court   decided 
against  the  plaintiff,  on  the  ground  that  it  was  not  entitled 
to  damages  at  all,  and  that  it  could  only  recover  the  money 
deposited.      The    decision    says:      "It    is    well    settled    here 
that    the    relation    between    a    general    depositor    and    the 
bank  in  which  his  deposit  is  made  is  simply  that  of  debtor 
and   creditor.      The    moneys    deposited    immediately    become 
the  property  of  the  bank,  and  the  latter  becomes  the  debtor 
of  the  depositor  for  the  amount  of  the  deposit.     The  origi- 
nal   and    every    subsequent    deposit    by    the    customer    is    in 
strict  legal  effect  a  loan  by  the  customer  to  the  bank,  and 
every  payment  by  the  bank  to  or  on  account   of  the   cus- 
tomer is  a  repayment  of  the  loans  to  that  extent.     Where- 
fore it  follows  that  the  customer  can  never  hold  or  charge 
the  bank  as  a  trustee,  quasi  trustee,  factor,  or  agent.     The 
money  placed  in  the  custody  of  a  banker  is,  to  all  intents 
and  purposes,  the  money  of  the  banker,  to  do  with  it  as  he 
pleases;  he  is  guilty  of  no  breach  of  trust  in  employing  it; 
he  is  not  answerable  to  the  principal  if  he  puts  it  into  jeop- 
ardy, if  he  engages   in  a  hazardous   speculation ;   he   is   not 
bound  to  keep   it,   or   deal   with   it  as   the   property   of   his 
principal;  but  he  is,  of  course,  answerable  for  the  amount, 
because  he  has  contracted,   having  received  that  money,   to 
repay  to  the  principal,  when  demanded,  a  sum  equivalent  to 
that  paid  into  his  hands."     The  defendant  in  this  case  was 
not  liable  in  damages  for  a  conversion  of  plaintiff's  money 
to  its  own  use;  for  the  money  deposited  by  plaintiff  became, 
by   such  deposit,  the  property  of   defendant,   and   the   latter 
could   not   convert   its   own   money.      (Decided   by   the    Su- 
preme   Court    of    the    State    of    California,    in    the    case    of 
Smiths'  Cash  Store  vs.   First  National  Bank  of   San  Fran- 
cisco, which  decision  is  printed  in  Volume  31  of  California 
Decisions,  No.   1686,  page  307.) 


524  BUSINESS   LAWS   FOR  BUSINESS   MEN. 

Section  526.— FORGED  CHECKS.— If  a  bank  pays  a 
forged  check,  whether  the  forgery  be  in  the  amount  of  the 
check,  or  in  the  signature,  it  cannot  deduct  the  amount  so 
paid  from  the  depositor's  account.  A  bank  is  bound  to 
know  the  handwriting  and  the  signature  of  its  depositors, 
and  it  takes  all  the  risk  of  paying  a  check  which  is  a  forgery. 
If  it  does  pay  a  forged  check  it  will  have  to  stand  the  loss. 

It  is  the  duty  of  the  depositor  to  promptly  notify  the 
bank  of  the  discovery  of  a  forged  check,  and  negligence  on 
the  part  of  the  depositor  in  this  respect  may  be  used  by 
the  bank  as  a  defense,  if  sued  for  money  which  it  has  paid 
out  on  forged  checks.  Where  a  bank  balances  a  depositor's 
pass  book,  containing  a  debit  against  him  for  a  payment 
made  on  a  forged  check,  and  returns  the  book  to  him  at  the 
same  time,  this  constitutes  a  statement  of  his  account,  mak- 
ing it  his  duty  to  examine  it  within  a  reasonable  time,  and 
to  return  it  to  the  bank  without  unreasonable  delay,  with 
notice  of  his  objections  to  it.  Where,  in  any  case,  the  de- 
positor gives  notice  to  the  bank  of  the  forgery  as  soon  as 
possible  after  detecting  it,  and  without  unreasonable  delay 
in  the  examination  of  his  accounts,  the  forgery  of  his  check 
is  wholly  inoperative,  and  gives  no  rights  to  the  bank  which 
pays  it;  on  the  contrary,  the  depositor,  if  the  bank  insists 
on  debiting  his  account  with  the  amount  paid  out  on  a 
forged  check,  can  sue  the  bank  and  recover  the  money  from 
it. 

Section      527.— FORGED      INDORSEMENTS.  — The 

drawer  of  a  check  is  not  presumed  to  know  the  signature  of 
the  payee.  The  bank  must  at  its  peril  determine  the  genu- 
ineness of  the  signature  of  indorsers.  When,  therefore,  a 
bank  returns  to  its  depositor  a  check,  as  evidence  of  a  pay- 
ment made  by  his  direction,  he  has  the  right  to  assume  that 
the  bank  has  ascertained  the  indorsement  upon  it  to  be 
genuine.  A  bank  is  bound  to  satisfy  itself  of  the  genuine- 
ness of  indorsements  on  a  check  made  payable  to  a  certain 
person  or  order,  and  must  alone  bear  the  responsibility  of 
determining  that  question. 


BUSINESS    CONTRACTS   AND   LEGAL   OBLIGATIONS.  525 

Section  528.— GARNISHMENT  OF  MONEY  ON 
DEPOSIT. — A  check  is  not  an  assignment  of  the  funds 
upon  which  it  is  drawn,  and  there  is  no  obligation  of  a 
bank  to  the  holder  of  a  check  of  a  depositor  until  the  check 
is  presented  for  payment.  The  delivery  of  a  check  does  not 
operate  as  an  assignment  of  the  funds  drawn  upon;  and 
where  the  funds  are  garnished  as  those  of  the  drawer, 
before  the  check  is  presented  for  payment,  the  garnishment 
will  hold.  An  ordinary  uncertified  check  upon  a  general 
bank  account  is  neither  a  legal  nor  an  equitable  assignment 
of  any  part  of  the  sum  standing  to  the  credit  of  the  deposi- 
tor, and  confers  no  right  upon  the  payee  which  he  can 
enforce  against  the  bank.  A  check  is  simply  an  order  which 
may  be  countermanded  and  payment  forbidden  by  the 
drawer  at  any  time  before  it  is  actually  cashed.  Therefore, 
any  attaching  creditor  of  the  depositor  will  hold  the  funds, 
by  serving  a  garnishment  upon  the  bank  before  a  check 
given  another  for  the  money  deposited  has  been  presented 
for  payment  at  the  bank.  (Decided  by  the  Supreme  Court 
in  the  case  of  Donohoe-Kelly  Banking  Company  vs.  South- 
ern Pacific  Company,  which  decision  is  printed  in  Volume 
25,  No.  1350,  CaHfornia  Decisions,  page  60.) 

Section  529.— LOST  CHECK.— The  rule  that  the 
holder  of  a  check  upon  a  bank  has  no  recourse  upon  the 
drawer  thereof,  until  he  has  presented  it  to  the  bank  upon 
which  it  was  drawn  and  had  payment  refused,  has  no  appli- 
cation to  a  lost  check.  No  rule  of  law  would  require  a 
bank  without  the  consent  of  the  depositor,  to  pay  out  the 
money  of  its  depositor,  upon  an  alleged  lost  check,  and  a 
demand  that  it  do  so  would  be  fruitless.  Its  obligation  is 
to  pay  the  depositor's  money  to  holders  of  checks  issued 
by  him,  and  its  protection,  and  the  protection  of  all  deposi- 
tors, requires  that  the  checks  be  produced  and  surrendered 
before  payment  is  made.  Until  the  check  is  presented,  no 
liability  attaches  to  the  bank.  No  hardship  results  to  the 
drawer  of  a  check  in  such  a  case.  If  it  be  non-negotiable, 
he  can,  upon  notice  of  the  loss,   fully  protect  his   interests 


526  BUSINESS   LAWS   FOR  BUSINESS    MEN. 

by  countermanding  the  order  and  stopping  payment.  If  it 
be  negotiable,  and  likely  to  reach  the  hands  of  a  bona  fide 
holder,  he  may  insist  upon  an  indemnity  bond  before  giving 
a  new  check,  or  otherwise  paying  the  debt  intended  to  be 
discharged  by  it.  (Decided  by  the  District  Court  of  Ap- 
peals, in  the  case  of  California  National  Bank  vs.  Weldon, 
which  decision  is  printed  in  Vol.  11,  California  Appellate 
Decisions,  page  649.) 

Section  530.— LIABILITY  OF  BANK  FOR  PAY- 
MENT OF  CHECK  AFTER  DEATH  OF  DRAWER. 

— The  delivery  of  a  check,  with  instructions  not  to  present  it 
for  payment  until  after  the  death  of  the  drawer,  does  not 
operate  as  an  assignment  of  the  funds  drawn  upon,  and  is 
not  valid  as  a  gift;  and  where  the  bank  pays  the  check  after 
the  drawer's  death,  an  action  will  lie  against  the  bank  to 
recover  the  money  for  the  estate  of  the  decedent.  (Decided 
by  the  Supreme  Court  in  the  case  of  Pullen  vs.  Placer 
County  Bank,  which  decision  is  printed  in  Volume  25,  No. 
1349,   California   Decisions,  page   51.) 

Section  531.— DRAWING  CHECK  WITH  INTENT 
TO  DEFRAUD. — Every  person  who,  wilfully,  with  intent 
to  defraud,  draws  or  delivers  to  another  person  any  check 
or  draft,  on  a  bank,  knowing  at  the  time  that  he  has  not 
sufficient  funds  in  or  credit  with  the  bank  to  meet  such 
draft  or  check  in  full  upon  its  presentation,  is  guilty  of  a 
felony.  The  punishment  is  fixed  at  not  less  than  one  nor 
more  than  fourteen  years  in  the  State  Prison. 

Act  of  the  Legislature,  approved  March  19,  1907. 

Assignment  for  Benefit  of  Creditors. 

Section  532.— ASSIGNMENT  BY  INSOLVENT 
DEBTOR. — An  insolvent  debtor  may  in  good  faith  execute 
an  assignment  of  his  property  in  trust  for  the  benefit  of 
his  creditors  and  the  satisfaction  of  their  claims.  Every 
assignment  must  be  in  writing,  and  must  contain  a  list  of 


BUSINESS    CONTRACTS   AND   LEGAL   OBLIGATIONS.  527 

the  names  of  the  creditors  of  the  assignor,  and  their  places 
of  residence  and  amounts  of  their  respective  demands,  and 
the  amounts  and  nature  of  any  security  therefor,  and  must 
be  made  to  the  Sheriff  of  the  county,  or  city  and  county, 
wherein  the  assignor  resides,  if  the  assignor  resides  within 
this  State;  or  in  case  the  assignor  resides  out  of  this  State, 
then  to  the  Sheriff  of  the  county,  or  city  and  county, 
wherein  the  property  assigned,  or  some  of  it,  is  situated; 
but  when  the  assignor  resides  out  of  the  State,  an  assign- 
ment may,  by  its  terms,  transfer  any  property  of  the  as- 
signor in  this  State.  The  Sheriff  must  take  possession  of 
all  the  property  so  assigned  to  him.  When  the  assignment 
has  been  made,  the  Sheriff  must  immediately,  by  mail  notify 
the  creditors  named  in  the  assignment,  at  their  places  of 
business  or  residence  as  given  therein,  to  meet  at  his  office 
on  a  day  and  hour  to  be  appointed  by  him,  of  not  less  than 
eight  or  more  than  ten  days  from  the  date  of  the  delivery 
of  the  assignment  to  him,  for  the  purpose  of  electing  one 
or  more  assignees,  as  they  may  determine,  in  the  place  and 
stead  of  the  Sheriff,  and  must  also  publish  a  notice  of  such 
meeting,  and  the  purpose  thereof,  at  least  once  before  such 
meeting,  in  some  newspaper  published  in  his  county,  or 
city  and  county.  The  notice  so  to  be  mailed  must  also 
contain  a  statement  of  the  amount  of  the  demand  of  the 
creditor,  and  the  amount  and  nature  of  any  security  there- 
for, as  set  forth  in  the  assignment;  and  if  any  creditor  shall 
not  find  the  amount  of  his  claim  to  be  correctly  so  stated, 
he  may  file  with  the  Sheriff,  at  or  before  such  meeting, 
a  statement,  under  oath,  of  his  demand,  and  such  state- 
ment shall,  for  the  purpose  of  voting,  be  accepted  by  the 
Sheriff  as  correct;  and  when  no  such  statement  is  filed, 
the  statement  of  amount  as  set  forth  in  the  assignment 
must  be  accepted  by  the  Sheriff  as  correct.  No  creditor 
having  a  mortgage  or  pledge  of  real  or  personal  property 
of  the  debtor,  or  lien  thereon,  for  securing  the  payment 
of  a  debt  owing  to  him  from  the  debtor,  shall  be  allowed 
to  vote  any  part  of  his  claim  at  such  meeting  of  creditors 
unless   he   shall   have   first   conveyed,   released,    or   delivered 


528  BUSINESS   LAWS   FOR  BUSINESS   MEN. 

up  his  security  to  the  Sheriff,  for  the  benefit  of  all  creditors 
of  the  assignor.  At  such  meeting,  the  Sheriff  must  preside, 
and  a  majority  in  amount  of  demands  present  or  repre- 
sented by  proxy  must  control  all  questions  and  decisions. 
The  creditors  may  adjourn  the  meeting  from  time  to  time, 
and  may  vote  on  all  questions,  either  in  person,  or  by 
proxy  signed  and  acknowledged  before  any  officer  author- 
ized to  take  acknowledgments,  and  filed  with  the  Sheriff. 
At  the  meeting,  the  creditors  may  elect  one  or  more  as- 
signees from  their  own  number,  in  the  place  and  stead  of 
the  Sheriff,  and  the  person  or  persons  so  elected  shall  after- 
ward be  the  assignee  or  assignees ;  and  the  Sheriff,  by 
transfer  in  writing,  must  at  once  assign  to  such  elected  as- 
signee or  assignees  all  the  property  so  assigned  to  him, 
and  deHver  possession  thereof.  The  Sheriff,  before  the 
delivery  of  the  assignment,  must  be  paid  the  expenses  in- 
curred by  him,  and  fees  in  such  amount  as  would  by  law  be 
collectible  if  the  property  assigned  had  been  levied  upon 
and  safely  kept  under  attachment.  Thereupon  such  elected 
assignee  or  assignees  shall  take,  and  hold,  and  dispose  of 
all  such  property  and  its  proceeds,  for  the  benefit  of  the 
creditors  of  the  debtor. 

Civil   Code,   Section   3449. 

Section  533~-WHAT  IS  INSOLVENCY.— A  debtor  is 
insolvent,  within  the  meaning  of  the  law,  when  he  is  unable 
to  pay  his  debts  from  his  own  means,  as  they  become  due. 
But  a  person,  although  insolvent,  is  not  prevented  by  the 
law  from  transferring,  and  may  lawfully  transfer  property 
in  this  State  to  a  particular  creditor  or  creditors,  for  the 
purpose  of  paying  or  securing  a  debt  due,  provided  the 
transfer  is  made  in  good  faith. 

Section  534.— VOID  ASSIGNMENT.— An  assignment 
for  the  benefit  of  creditors  is  void  against  any  creditor  of 
the  assignor  not  assenting  thereto,  in  the  following  cases: 
(1)  If  it  give  a  preference  of  one  debt  or  class  of  debts 
over  another;  (2)  If  it  tend  to  coerce  any  creditor  to  re- 
lease or  compromise  his  demand;  (3)   If  it  provide  for  the 


BUSINESS    CONTRACTS   AND   LEGAL   OBLIGATIONS.  529- 

payment  of  any  claim  known  to  the  assignor  to  be  false* 
or  fraudulent,  or  for  the  payment  of  more  upon  any  claim 
than  is  known  to  be  justly  due  from  the  assignor;  (4)  If 
it  reserve  any  interest  in  the  assigned  property,  or  in  any 
part  thereof,  to  the  assignor,  or  for  his  benefit,  before  all 
his  existing  debts  are  paid;  (5)  If  it  confer  upon  the  as- 
signee any  power  which,  if  exercised,  might  prevent  or 
delay  the  immediate  conversion  of  the  assigned  property  to 
the  purposes  of  the  trust;  (6)  If  it  exempt  him  from  lia- 
bility for  neglect  of  duty  or  misconduct. 
Civil   Code,   Section  3457. 

Section  535.— INVENTORY  TO  BE  MADE  BY 
DEBTOR. — Within  twenty  days  after  making  an  assign- 
ment for  the  benefit  of  his  creditors,  the  debtor  must  make 
and  file,  in  the  ofiice  of  the  County  Recorder  of  the  county 
in  which  he  resided  at  the  date  of  the  assignment,  a  full 
and  true  inventory  showing:  (1)  All  the  creditors  of  the 
assignor;  (2)  The  place  of  residence  of  each  creditor,  if 
known  to  the  assignor;  or,  if  not  known,  that  fact  must 
be  stated;  (3)  The  sum  owing  to  each  creditor,  and  the 
nature  of  each  debt  or  liability,  whether  arising  on  written 
security,  account,  or  otherwise;  (4)  The  true  consideration 
of  the  liability  in  each  case,  and  the  place  where  it  arose; 

(5)  Every  existing  judgment,  mortgage,  or  other  security 
for  the  payment  of  any   debt  or   liability   of   the   assignor; 

(6)  All  property  of  the  assignor  at  the  date  of  the  assign- 
ment, which  is  exempt  by  law  from  execution;  and,  (7)  All 
of  the  assignor's  property  at  the  date  of  the  assignment, 
both  real  and  personal,  of  every  kind,  not  so  exempt,  and 
the  encumbrances  existing  thereon,  and  all  vouchers  and 
securities  thereto,  and  the  value  of  such  property  accord- 
ing to  the  best  knowledge  of  the  assignor. 

The  inventory  must  be  sworn  to  by  the  assignor. 
Civil  Code,  Section  3461. 

Section  536.— FAILURE  TO   FILE  INVENTORY.— 

A   failure   on   the  part   of  a    debtor  to   make   and   file   the 


530  BUSINESS   LAWS   FOR   BUSINESS   MEN. 

•inventory  mentioned  in  the  last  Section  does  not  render 
the  assignment  void.  The  law  provides  that  if  the  debtor 
fails  in  his  duty  to  file  the  inventory,  the  assignees  may 
make  and  file  for  record  a  verified  inventory  of  all  assets 
received  by  them;  and  the  court,  on  petition  of  the  assignee, 
will  compel  the  debtor  to  appear  and  be  examined  relative 
to  all  matters  embraced  in  the  assignment,  and  will  also 
compel  him  to  bring  with  him  into  court  all  his  books, 
vouchers,  and  papers  relating  to  the  assigned  property. 
The  court  will  then  have  power  to  order  the  surrender  of 
the  books,  papers,  and  vouchers  to  the  assignee,  to  be  re- 
tained by  him  until  his  trust  is  fully  completed  and  performed. 

Section  537.— EFFECT  OF  FAILURE  TO  RECORD 
ASSIGNMENT. — An  assignment  for  the  benefit  of  credit- 
ors is  void  against  creditors  of  the  assignor,  and  against 
purchasers  and  encumbrancers  in  good  faith  and  for  value, 
unless  it  is  recorded,  and  unless  either  the  inventory  re- 
quired of  the  assignor,  or  the  inventory  required  of  the 
assignee  or  assignees,  is  filed  in  the  manner  provided  by  law. 
Givil  Code,  Section  3465. 

Section  538.— BOND  OF  ASSIGNEE.— No  bond  is 
given  by  the  Sheriff,  but  he  is  liable  on  his  official  bond 
for  the  care  and  custody  of  the  property  while  in  his  pos- 
session. Within  forty  days  after  the  date  of  the  transfer  by 
the  Sheriff,  the  assignee  must  enter  into  a  bond,  in  such 
amount  as  may  be  fixed  by  a  judge  of  the  Superior  Court 
of  the  county,  or  city  and  county,  in  which  an  inventory 
is  filed,  with  sufficient  sureties  to  be  approved  by  such 
judge,  and  conditioned  for  the  faithful  discharge  of  the 
trust  and  the  due  accounting  for  all  moneys  received  by 
the  assignee,  which  bond  must  be  filed  in  the  same  office 
with  the  inventory;  and  any  assignee  failing  to  give  such 
bond  may  be  removed  by  the  Superior  Court  on  petition 
of  the  assignor  or  any  creditor,  and  his  successor  may  be 
appointed  by  the  court. 

Civil  Code,  Section  3467. 


BUSINESS   CONTRACTS   AND  LEGAL  OBLIGATIONS.  531 

Section      539.— ACCOUNTING      BY      ASSIGNEE.— 

After  six  months  from  the  date  of  an  assignment  for  the 
benefit  of  creditors,  the  assignee  may  be  required,  on  the 
petition  of  any  creditor,  to  account  before  the  Superior 
Court  of  the  county  where  the  inventory  was  filed.  The 
assignee's  account,  when  rendered,  must  make  a  full  and 
true  showing  of  all  his  acts  with  relation  to  the  property 
assigned  to  him. 

Section  540.— PROPERTY  EXEMPT  FROM  AS- 
SIGNMENT.— Property  exempt  from  execution,  and  in- 
surance upon  the  life  of  the  assignor,  do  not  pass  to  the 
assignee  by  a  general  assignment  for  the  benefit  of  creditors, 
unless  the  instrument  specially  mentions  them,  and  declares 
an  intention  that  they  shall  pass  thereby. 
Civil  Code,  Section  3470. 

Section    541.— COMPENSATION    OF    ASSIGNEE.— 

The  assignee  is  entitled  to  a  reasonable  compensation  for 
his  services,  and  also  to  all  necessary  expenses  incurred 
by  him  in  the  management  of  his  trust. 

Section  542.— ASSIGNEE  PROTECTED  FOR  ACTS 
DONE  IN  GOOD  FAITH.— The  assignee  is  protected  for 
acts  done  in  good  faith,  and  will  not  be  held  liable  for  such 
acts  if  the  assignment  is  afterward  declared  by  a  court  to 
be  void. 

Section  543.— ASSIGNMENT  NOT  REVOCABLE.— 

An  assignment  for  the  benefit  of  creditors,  which  has  been 
executed  and  recorded  so  as  to  transfer  the  property  to 
the  Sheriflf,  or  a  transfer  by  the  Sheriflf  to  the  elected  as- 
signee or  assignees  which  has  been  executed  and  recorded, 
cannot  afterward  be  modified  or  canceled  by  the  parties 
without  the  consent  of  the  assignor  and  of  every  creditor. 
Civil  Code,  Section  3473. 

Section  544.— CREDITORS'  CLAIMS.— Notice  to  the 
creditors  must  be  published  by  the  assignee,  and  a  copy 
mailed    by    him    to    each    creditor,    and    the    creditors    must 


532  BUSINESS   LAWS   FOR  BUSINESS   MEN. 

prove  their  claims;  and  after  the  expiration  of  thirty  days 
from  the  first  publication  of  the  notice,  the  assignee  may, 
in  his  discretion,  declare  and  pay  dividends  to  the  creditors 
whose  claims  have  been  presented  and  allowed.  No  divi- 
dend already  declared  shall  be  disturbed  by  reason  of 
claims  being  subsequently  presented  and  allowed;  but  the 
creditor  presenting  such  claim  shall  be  entitled  to  a  dividend 
equal  to  the  per  cent  already  declared  and  paid  before  any 
further  dividend  is  made;  provided,  however,  that  there  be 
assets  sufficient  for  that  purpose;  and  provided,  that  the 
failure  to  present  such  claim  shall  not  have  resulted  from 
his  own  neglect;  and  the  creditor  shall  attach  to  such  claim 
a  statement,  under  his  oath,  showing  fully  why  it  was  not 
before  presented. 

Section  545.— CREDITOR  HOLDING  MORTGAGE 
OR  PLEDGE. — When  a  creditor  has  a  mortgage,  -or  a 
pledge  of  personal  property  of  the  debtor,  or  a  lien  thereon 
as  security  for  the  payment  of  a  debt  due  him  from  the 
debtor,  and  shall  not  have  conveyed,  released,  or  delivered 
up  such  security  to  the  Sheriff,  he  shall  be  admitted  as  a 
creditor  only  for  the  balance  of  the  debt,  after  deducting 
the  value  of  such  mortgage,  pledge,  or  lien,  to  be  ascer- 
tained by  agreement  between  him  and  the  assignee,  or  by 
a  sale  thereof,  to  be  made  in  such  manner  as  the  Superior 
Court  of  the  county  in  which  the  assignment  is  made  shall 
direct;  or  the  creditor  may  release  or  convey  his  claim 
to  the  assignee  upon  such  property,  and  be  admitted  to 
prove  his  whole  debt.  If  the  value  of  the  property  ex- 
ceeds the  sum  for  which  it  is  so  held  as  security,  the 
assignee  may  release  to  the  creditor  the  debtor's  right  of 
redemption  on  receiving  such  excess ;  or  he  may  sell  the 
property,  subject  to  the  claim  of  the  creditor,  and  in  either 
case  the  assignee  and  creditor,  respectively,  shall  execute 
all  deeds  and  writings  necessary  or  proper  to  consummate 
the  transaction.  If  the  property  is  not  sold  or  released, 
and  delivered  up,  the  creditor  will  not  be  allowed  to  prove 
any  part  of  his  debt. 


PART   II. 

COLLECTION    OF    BILLS 
AND    ACCOUNTS. 

Section  546.— METHODS  OF  MAKING  COLLEC- 
TIONS.— Custom  will  control  to  a  great  extent  the  meth- 
ods of  making  collections  in  force  in  different  localities, 
but  whether  collections  be  made  monthly,  quarterly,  semi- 
annually, or  annually,  there  are  certain  provisions  of  the 
law  of  the  State  which  apply  to  all  methods,  and  which 
must  constantly  be  kept  in  mind.  Whether  a  creditor  col- 
lects his  bills  monthly,  or  at  longer  intervals  of  time,  the 
law  leaves  to  his  own  choice.  The  parties  may  contract  for 
payment  at  any  time  or  place,  and  the  law  will  enforce  the 
contract.  •     i 

Section  547.— PRESENTMENT  OF  BILLS  OR 
STATEMENTS  OF  ACCOUNT.— The  debtor  is  entitled 
to  have  a  bill  or  statement  of  account,  showing  the  claim 
of  his  creditor.  This  is  usual  in  every  business,  and  it  is 
more  necessary  in  commercial  affairs  than  in  any  other,  for 
the  book  accounts  of  sales  of  merchandise,  and  other  similar 
commercial  transactions,  are  usually  kept  by  the  creditor 
alone. 

Section    548.— ITEMIZED    ACCOUNT.— When    a    bill 

has  been  presented  which  is  not  itemized,  the  debtor  has 
a  right  to  demand  of  the  creditor  an  itemized  account,  show- 
ing in  detail  all  the  items  of  the  claim  presented  to  him. 

Section  549.— OPEN  AND  CURRENT  ACCOUNT.— 

An  open  account  is  an  account  where  no  balance  has  been 
struck.     Until  a  balance  is  struck,  even  though  there  have 

(533) 


584  BUSINESS   LAWS   FOR  BUSINESS   MEN. 

been   mutual   dealings    between   the   parties,   the    account    is 
open  and  current. 

Section  550.— WHEN  OPEN  ACCOUNT  OUT- 
LAWS.— An  open  account  will  outlaw  in  four  years.  That 
is,  if  there  is  a  claim,  for  goods  purchased,  for  instance,  upon 
an  open  account,  all  items  dating  back  more  than  four  years 
will  be  outlawed,  and  in  a  suit  for  the  amount  of  the  bill 
the  plaintiff  cannot  recover  for  any  item  more  than  four 
years  old.  So,  in  a  suit  for  work  or  labor  performed  by  the 
day  or  month,  where  there  has  not  been  a  mutual  account, 
no  part  can  be  collected  except  for  the  work  done  within 
four  years. 

Code  of  Civil  Procedure,  Section  337  (as  amended  by 
Legislature  March  19,  1907.) 

Section  551.— MUTUAL  ACCOUNT.— To  constitute  a 
mutual  account  there  must  be  reciprocal  demands.  An 
account  is  mutual  when  each  party  makes  charges  against 
the  other  in  his  books  for  property  sold,  service  performed, 
or  money  loaned  or  advanced.  A  payment  on  account  will 
not  make  the  account  mutual.  Mutual  accounts  are  only 
where  each  party  has  a  demand  or  right  of  action  against 
the  other.  Thus,  where  a  merchant  sells  a  farmer  goods, 
and  the  latter  sells  and  delivers  to  the  merchant,  hay,  grain, 
or  a  horse,  or  any  other  article  of  personal  property,  in  the 
ordinary  course  of  business,  he  has  a  demand  against  the 
merchant,  and  the  merchant  has  a  demand  against  him, 
and  thus  the  account  between  them  is  a  mutual  account. 
In  the  course  of  mutual  dealings  between  parties,  the  bal- 
ance due  may  sometimes  be  on  the  one  side  and  sometimes 
on  the  other,  and  in  the  ascertainment  of  the  state  of  ac- 
count, each  may  use  his  own  demands  as  set  off  against 
that  of  the  other  until  the  less  is  exhausted  by  the  greater. 
Where  it  appears,  first,  that  the  account  between  the  parties 
consists  of  reciprocal  demands;  second,  that  the  account  is 
open;  and  third,  that  the  account  consists  of  different  items 


COLLECTION   OF   BILLS   AND   ACCOUNTS.  535 

of  different  dates ;  it  is  then  said  to  be  a  mutual,  open,  and 
current  account. 

Section  552.— WHEN  MUTUAL  ACCOUNT  OUT- 
LAWS.— A  suit  may  be  brought  on  a  mutual  account  at 
any  time  within  four  years  from  the  date  of  the  last  item 
proved  in  the  account  on  either  side.  When  any  item  of 
a  mutual  account  is  within  the  four  years,  none  of  the  ac- 
count is  outlawed,  though  some  of  the  items  may  be  more 
than  four  years  old. 

Code  of  Civil   Procedure,    Section  337    (as   amended 
by   Legislature   March    19,   1907.) 

Section  553.— STATED  ACCOUNT.— An  account 
stated  is  where  an  account  is  balanced  and  rendered,  and  the 
person  to  whom  it  is  rendered  assents  to  it  as  being  a  cor- 
rect statement  of  the  balance  due,  and  agrees  to  pay  it. 
The  stated  account  is  usually  in  writing,  but  under  cer- 
tain circumstances  it  may  be  verbal.  Where  there  is  an 
open  account,  and  the  parties  meet  and  agree  orally  before 
any  portion  of  the  account  is  outlawed  upon  the  balance 
that  is  due,  and  there  is  an  agreement  to  pay  such  balance, 
this  will  be  good  as  an  account  stated.  The  assent  to  an 
account  stated  by  the  person  to  whom  it  is  rendered  may 
be  expressly  and  directly  given,  or  such  assent  may  be  in- 
ferred from  circumstances.  If  the  person  receiving  the 
statement  makes  no  objection  to  it,  and  holds  it  for  a  long 
time  apparently  satisfied  with  it,  his  assent  to  it  will  be 
inferred. 

Section  554.— WHEN  STATED  ACCOUNT  OUT- 
LAWS.— When  the  parties  have  stated  and  adjusted  their 
accounts,  and  thus  ascertained  the  balance,  what  was  be- 
fore an  implied  promise  to  pay  what  was  reasonable,  by 
such  adjusting  and  stating  of  accounts,  at  once  becomes 
an  expressed  promise  to  pay  a  sum  certain.  Therefore,  in 
a  suit  to  recover  the  amount  due,  the  items  of  the  original 
account  are  no   longer  referred  to.     The  account  is   at   an 


536  BUSINESS   LAWS   FOR   BUSINESS   MEN. 

end,  in  fact.  The  parties  have  agreed  upon  a  balance  due, 
which  one  has  promised  to  pay  the  other.  The  right  to 
commence  a  suit  for  the  amount  due,  upon  a  stated  account, 
runs  four  years  after  the  time  when  the  account  was  stated, 
and  if  suit  is  not  commenced  within  four  years,  the  debt 
will  be  outlawed. 

Code  of  Civil   Procedure,   Section  337    (as   amended 
by  Legislature  March  19,   1907.) 

Section  555.— INTEREST  ON  A  STATED  AC- 
COUNT.— The  uniform  custom  of  a  merchant  or  manu- 
facturer is  presumed  to  be  known  to  those  who  are  in  the 
habit  of  dealing  with  him,  and  in  their  dealings  they  are  sup- 
posed to  act  with  reference  to  that  custom.  When  it  is  the 
universal  custom  of  a  merchant  to  charge  interest  after 
thirty  days  upon  monthly  balances  due  upon  open  accounts, 
and  where  such  an  account  showing  the  interest  charged  up 
regularly  is  received  by  the  debtor  and  fully  understood 
by  him,  and  where  such  account  becomes  stated,  either  by 
the  prolonged  failure  of  the  debtor  to  object  or  by  a  set- 
tlement between  the  parties,  the  debtor  is  bound  to  pay 
the  balance  found  due,  including  the  interest  charged. 

Section  556.— ASSIGNMENT  FOR  COLLECTION.— 

An  open  account,  a  mutual  account,  or  an  account  stated," 
may  be  assigned  to  a  third  person  for  collection.  No  money 
need  be  paid  for  the  assignment.  The  consideration  will 
be  sufficient  to  sustain  the  assignment,  if  the  person  to 
whom  the  account  is  assigned  undertakes  on  his  part  to 
make  collection.  If  the  assignee  brings  suit  on  the  account, 
and  the  debtor  makes  the  defense  that  there  was  no  con- 
sideration for  the  assignment,  it  will  be  a  sufficient  answer 
to  that  defense  to  show  that  the  account  was  assigned  for 
collection. 

Section  557.— ASSIGNEE  MAY  SUE  IN  HIS  OWN 
NAME. — The  assignee  for  collection  may  bring  the  suit  in 
his  own  name.     The  law  of  California  provides  that  every 


COLLECTION    OF   BILLS   AND   ACCOUNTS.  637 

suit  must  be  brought  in  the  name  of  the  real  party  in  inter- 
est; but  the  assignee  for  collection  must  contribute  his  labor 
and  services,  and  his  presumed  undertaking  and  promise  to 
do  so  is  a  sufficient  consideration  for  the  assignment  to 
enable  him  to  sue  in  his  own  name. 

Section  558.— ASSIGNMENT  MAY  BE  VERBAL 
OR  WRITTEN. — The  assignment  of  an  account,  open, 
mutual,  or  stated,  may  be  made  verbally  or  in  writing.  It 
is  usual  to  make  such  assignments  in  writing,  because  this 
of  itself  affords  documentary  proof  of  the  assignment;  but  a 
verbal  assignment  will  be  sufficient,  where  the  proof  is 
conclusive. 

Section  559.— ASSIGNMENT  BY  ONE  PARTNER 
OF  PARTNERSHIP  ACCOUNT.— One  partner  may 
make  an  assignment  of  a  partnership  account,  in  the  name 
of  the  firm,  and  the  assignment  will  be  good.  It  is  of  no 
consequence  to  the  debtor,  as  it  in  no  respect  affects  his  lia- 
bility, whether  the  assignment  was  made  at  one  time  or 
another,  or  with  or  without  consideration,  or  by  one  or 
by  all  the  members  of  the  firm.  One  member  of  a  firm 
may  even  assign  a  partnership  claim,  in  the  name  of  the 
firm,  to  himself  individually,  and  this  will  be  sufficient  to 
enable  him  to  sue  on  it,  if  the  other  partners  do  not  object. 
The  other  partners  making  no  objections,  the  debtor  will 
not  be  allowed  to  do  so. 

Section  560.  —  COLLECTION  OF  ACCOUNTS 
WHEN  BOOKS  ARE  LOST.— Though  the  books  in 
which  the  accounts  were  kept  are  lost,  from  whatever  cause, 
by  fire,  or  theft,  or  by  being  mislaid,  yet  the  accounts  can 
be  collected,  if  they  can  be  proved  in  some  other  way. 
First,  the  loss  of  the  books  of  original  entry  must  be  shown, 
and  diligent  search  to  find  them;  then,  the  accounts  may  be 
proved  by  producing  other  books  into  which  they  were 
copied  from  the  original  entry  book,  or,  if  none  such  exist, 


538  BUSINESS   LAWS    FOR   BUSINESS   MEN. 

by  the  verbal  testimony  of  bookkeepers,  agents,  clerks,  pro- 
prietors, or  any  one  who  may  know  what  the  accounts 
consisted  of. 

Section  561.— WHAT  DEBTOR  MAY  SET  OFF 
AGAINST  ASSIGNED  ACCOUNT.— When  the  assignee 
of  an  account  sues  to  recover  the  amount  due,  the  debtor 
may  set  off  against  the  claim  any  claim  which  he  had 
against  the  creditor  himself  at  the  time  of  the  assignment, 
or  before  notice  to  him  of  the  assignment.  But  his  claim 
must  be  one  upon  which  he  could  have  maintained  an  in- 
dependent action,  and  be  one  of  contract ;  for  he  could  not, 
in  a  suit  against  him  upon  an  account,  brought  by  either 
the  creditor  or  his  assignee,  defend  by  setting  up  a  demand 
•for  damages  for  a  wrong  suffered  by  him. 
Code  of  Civil  Procedure,  Section  368. 

Section  562.— AUTHORITY  OF  AGENT  IN  MAK- 
ING COLLECTIONS.— The  authority  of  agents  in  making 
collections  will  be  equal  to  the  power  actually  or  ostensibly 
delegated  to  them  by  the  principal.  If  the  debtor  is  in- 
formed by  the  creditor  that  a  certain  person  or  a  bank  is 
his  agent  to  make  collections,  there  can  seldom  be  any 
danger  in  inferring  full  and  extensive  authority  on  the  part 
of  the  agent  to  do  everything  necessary  in  and  about  the 
collection.  But  it  often  happens  that  the  authority  of  the 
agent,  and  the  extent  of  his  powers,  must  be  ascertained, 
not  by  any  direct  communication  from  the  creditor,  but 
from  a  long-continued  course  of  dealing  or  custom  of  trade. 
If  an  agent  for  collection  has  been  in  the  habit  of  collect- 
ing in  a  certain  manner,  or  of  making  discounts  upon  cer- 
tain accounts,  or  has  collected  regularly  for  the  same  firm 
or  person  at  a  particular  place  for  a  long  time,  these  facts 
being  known,  it  will  be  presumed  that  he  has  authority 
from  his  principal  coextensive  with  his  acts. 

Section  563.— RATIFICATION  OF  AGENT'S  ACTS. 
— Even  though  one  who  represents  himself  as  an  agent  to 


COLLECTION   OF  BILLS   AND  ACCOUNTS.  539 

make  collections  really  has  no  such  authority,  the  creditor 
for  whom  the  collection  is  made  may  so  conduct  himself 
as  to  create  a  ratification  of  the  agent's  acts.  Thus,  if  he 
receives  the  proceeds  from  the  agent,  or  knows  of  the  man- 
tier  of  collection  and  makes  no  objection,  or  in  any  way 
leads  the  debtor  to  believe  that  he  is  satisfied  with  the 
agent's  conduct,  he  will  be  deemed  to  have  ratified  the  acts 
of  the  agent,  and  thus  bind  himself. 

Section      564.— AGENT'S      COMMISSIONS      UPON 

COLLECTIONS. — The  law  leaves  the  agent's  commissions 
upon  collections  made  by  him  to  be  regulated  by  the  agree- 
ment of  the  parties.  But  if  a  creditor  sends  a  bill  or  ac- 
count to  an  agent,  with  instructions  to  collect  the  same 
from  the  debtor,  and  the  agent  proceeds  to  make  the  col- 
lection, and  nothing  is  said  about  the  agent's  compensation, 
there  will  be  an  implied  obligation  on  the  part  of  the  cred- 
itor to  pay  the  agent  a  reasonable  commission.  What  is 
a  reasonable  commission  will  depend  upon  circumstances, 
taking  into  consideration  the  nature  of  the  collection,  the 
amount  of  labor  and  skill  employed,  and  the  amount  usually 
paid,  if  there  is  any  custom,  for  such  collections  in  the 
particular  locality  or  business. 

Section  565.— COLLECTION  OF  BILLS  AND  AC- 
COUNTS WHEN  DEBTOR  IS  DEAD.— When  the 
debtor  is  dead,  a  claim  upon  the  account  must  be  presented 
to  his  Administrator  or  Executor,  within  four  months  from 
the  first  publication  of  notice  to  creditors,  if  the  estate  is 
appraised  at  less  than  $10,000,  or  within  ten  months  from 
the  first  publication  of  notice  to  creditors,  if  the  estate  is 
appraised  at  $10,000  or  over.  The  claim  must  be  allowed 
and  approved  by  the  Administrator  or  Executor  and  the 
Judge  of  the  Superior  Court.  If  the  claim  is  not  allowed, 
the  creditor  can  then  sue  the  Administrator  or  Executor, 
as  the  case  may  be. 


540  BUSINESS   LAWS   FOR   BUSINESS   MEN. 

Section  566.— SUIT  IN  JUSTICE  COURT  ON 
BILLS  AND  ACCOUNTS.— A  suit  to  collect  the  amount 
of  a  bill  or  account  must  be  brought  in  the  Justice  Court, 
when  the  amount  is  less  than  $300,  exclusive  of  interest.  In 
actions  for  the  recovery  of  wages  for  labor  performed,  the 
Court  must  add,  as  part  of  the  costs,  an  attorney's  fee  not 
exceeding  twenty  per  cent  of  the  amount  recovered.  This 
also  applies  to  suits  in  the  Superior  Court. 

Act  of  the  Legislature,  in  effect  April  28,   1907. 

Section  567.— IN  WHAT  TOWNSHIP  SUIT  MUST 
BE  BROUGHT.— If  the  money  is  to  be  paid  at  a  certain 
place,  then  the  suit  may  be  brought  in  the  township  and 
county  where  the  place  of  payment  is  situated.  But  if 
goods  are  sold  in  San  Francisco  to  a  person  in  Ukiah,  and 
the  bill  is  to  be  paid  at  Ukiah,  then  the  creditor  must  sue 
in  the  Justice  Court  in  Ukiah  Township.  If  the  bill  is  to 
be  paid  at  San  Francisco,  the  suit  may  be  brought  in  the 
Justice  Court  there.  If  there  is  no  agreement  as  to  where 
the  obligation  to  pay  is  to  be  performed,  then  the  suit  must 
be  brought  in  the  township  and  county  where  the  debtor 
resides. 

Section  568.— SUIT  IN  SUPERIOR  COURT  ON 
BILLS  AND  ACCOUNTS.— If  the  bill  amounts  to  $300 
or  more,  exclusive  of  interest,  a  suit  to  collect  the  amount 
due  must  be  commenced  in  the  Superior  Court.  However, 
the  creditor  may  waive  all  the  excess  of  his  claim,  and  sue 
in  the  Justice  Court  for  a  sum  less  than  $300,  exclusive  of 
interest,  thus  remitting  to  the  debtor  all  of  the  account 
exceeding  the  amount  sued  for. 

Section  569.— IN  WHAT  COUNTY  SUIT  IN  SU- 
PERIOR COURT  MUST  BE  BROUGHT.— The  same 
rule  applies  to  suits  in  the  Superior  Court  as  obtains  in  the 
matter  of  Justice  Court  suits.  That  is,  where  there  is  no 
place  agreed  upon  for  the  performance  of  the  debtor's  obli- 
gation to  pay,  the  debtor  ha^  a  right  to  have  the  suit  tried 


COLLECTION   OF   BILLS    AND   ACCOUNTS.  541 

in  the  Superior  Court  of  the  county  where  he  resides;  but 
if  the  bill  is  to  be  paid  where  the  creditor  resides,  or  at 
some  other  place,  the  suit  may  be  tried  there.  The  creditor 
may  bring  his  suit  in  the  Superior  Court  of  the  county 
where  he  lives  or  has  his  place  of  business,  in  any  event, 
and  the  suit  will  be  tried  there,  unless  the  debtor  appears 
and  moves  for  the  transfer  of  the  case  to  the  Superior 
Court  of  the  county  of  his  own  residence. 

Section  570.— ATTACHMENT  OF  DEBTOR'S 
PROPERTY   IN   SUIT   TO   COLLECT   ACCOUNT.— 

What  property  of  the  debtor  is  the  subject  of  attachment,  to 
secure  the  collection  of  an  account,  in  a  suit  by  the  creditor 
or  his  assignee,  and  what  property  is  exempt  from  attach- 
ment and  execution,  will  be  found  fully  stated  under  the 
head  of  "Attachments  and  Executions." 

Section  571.— MEANS  FOR  COLLECTION  TO  BE 
EMPLOYED  BY  AGENT.— Authority  of  an  agent  to  col- 
lect implies  and  includes  the  right  on  his  part  to  use  all  the 
ordinary  means  for  collection,  and  among  these  are  the 
employment   of   attorneys   and   the   commencement   of    suits. 

Section  572.— PAYMENT  TO  WIFE  OF  CRED- 
ITOR.— Where  a  man's  wife  is  in  the  habit  of  transacting 
business  for  him,  receiving  and  paying  out  money  for  him 
with  his  consent,  payment  to  her  of  a  debt  due  him  in  his 
presence,  without  objection  from  him,  is  a  payment  to  him. 

Section  573.— PAYMENT  OF  NOTE  TO  SUPPOSED 
AGENT. — A  party  who  in  good  faith  makes  payments  upon 
a  promissory  note  to  one  whom  he  has  reason  to  believe  is 
the  authorized  agent  of  the  holder  thereof,  and  whose  acts 
in  receiving  such  payments  have  come  to  the  knowledge 
of  the  holder,  and  have  not  been  repudiated  by  him,  can- 
not be  held  for  the  money  so  paid  to  the  agent. 


542  BUSINESS  LAWS  FOB  BUSINESS  MEN. 

Section  574.— TAKING  GOODS  FOR  CREDITORS' 
CLAIMS. — Where  creditors,  after  receiving  an  offer  of  a 
bill  of  sale  from  their  debtor,  assign  their  claims  to  a 
collecting  agent  for  the  purpose  of  conducting  the  transac- 
tion, with  authority  "to  take  the  goods  in  full  of  the 
creditor's  claims,"  the  agent  has  authority  to  agree  with  the 
debtor  that  the  sale  shall  be  conditional,  and  that  the  goods 
will  be  surrendered  to  him,  when  enough  is  realized  from 
the  sales  to  satisfy  the  claim. 

Section    575.— ACCEPTING    PROMISSORY    NOTE. 

— Under  authority  to  settle  with  the  debtor,  and  take  any- 
thing he  can  get,  an  agent  has  power  to  accept  a  promissory 
note. 

Section  576.— COLLECTION  OF  NOTES  BY 
AGENT. — Authority  given  an  agent  to  collect  money,  due 
on  a  note  and  mortgage,  is  not  authority  to  the  agent  to 
accept  a  conveyance  of  the  mortgaged  premises  in  payment. 

One  who  holds  a  note  for  collection  cannot,  without 
authority  from  the  payee,  agree  to  discharge  one  of  the 
joint  makers  upon  payment  by  him  of  a  part  of  the  sum 
due. 

Although  a  mortgagee  has  authorized  an  agent  to  col- 
lect interest  and  to  receive  payment  of  the  principal  when 
due,  the  agency  does  not  extend  to  receiving  payment  of 
principal  before  maturity. 

The  existence  of  an  agent's  authority  to  receive  payment 
of  notes  may  be  inferred  from  the  mutual  conduct  and  rela- 
tions of  the  parties,  or  from  the  general  nature  of  the  trans- 
actions in  which  they  are  concerned  and  the  circumstances 
surrounding  them. 

Section  577.— APPLICATION  OF  PAYMENTS  ON 
ACCOUNT. — Where  a  payment  is  made  upon  general  ac- 
count, with  no  direction  as  to  its  application,  the  law  applies 
it  to  the  oldest  items;   that   is,   the   first   debits   are   to   be 


COLLECTION    OF   BILLS    AND   ACCOUNTS,  543 

charged  against  the  first  credits,  and  the  debt  paid  accord- 
ing to  priority  of  time.  In  the  case  of  a  running  account 
between  parties,  where  there  are  various  items  of  debit  on 
one  side  and  of  credit  on  the  other,  occurring  at  different 
times,  and  no  special  appropriation  of  payments  constitut- 
ing the  credits  has  been  made  by  either  party,  the  successive 
payments  and  credits  are  to  be  appHed  in  discharge  of  the 
items  of  debit  antecedently  due,  in  the  order  of  time  in 
which  they  stand  in  the  accounts.  In  other  words,  each 
item  of  payment  or  credit  is  applied  in  extinguishment  of 
the  earHest  items  of  debt,  until  it  is  exhausted. 

Section  578.— COLLECTION  OF  ACCOUNTS  FOR 
LIQUORS  SOLD.— The  law  of  California  prohibiting  the 
collection  of  accounts  for  liquors  sold  at  retail  for  any 
greater  amount  than  $5.00  applies  both  to  sales  "at  retail" 
and  sales  "by  the  drink."  The  word  "retail"  as  used  in 
the  law  refers  to  sales  in  quantities  less  than  one  quart.  A 
dealer  selling  liquors  in  quantities  less  than  one  quart  is  a 
retailer,  and  cannot  collect,  on  account  of  such  sales,  a  sum 
greater  than  $5.00.  A  merchant  selling  wines  and  whiskies 
in  amounts  of  gallons  and  half  gallons  can  collect  the 
whole  amount  of  his  bill. 

(Decided  by  the  Supreme  Court  of  California,  in  the 
case  of  Bettencourt  vs.  Sheehy,  which  decision  is  printed  in 
Vol.  XXXIX  of  California  Decisions,  page  447.) 

Section  579.— FORM  OF  ASSIGNMENT  OF  AN 
ACCOUNT. — The  following  is  a  form  of  assignment  of  an 
account : 

Know  all  men  by  these  presents,  that  I, 

of ,  State  of  California,  in  consideration  of 

dollars  to  be  paid  by of ,   State  of 

California,  the  receipt  whereof  is  hereby  acknowledged,   do 

hereby  sell,  assign,  and  transfer  to  said all 

and  whatsoever  sum  or  sums  of  money  now  due  and  becom- 
ing due  to  me  from of 

State  of  California;    to  have  and  to  hold  the  same  to  the 
said ,  with  power  to  collect  the  same  in  my 


544  nisiNESS  laws  for  business  men. 

name  and  as  my  attorney  hereunto  duly  authorized,  to  his 
own  use. 

It    is    expressly    understood,    however,    that    I,    the    said 

,  am  forever  to  be  kept  and  saved  harmless 

by  the  said from  all  cost  or  charge  here- 
after, in  any  way  or  manner,  for  and  from  the  expense  of 
the  collection  of  the  sum  and  sums  hereby  sold  and  assigned. 

In  witness  whereof  I  have  hereunto  set  my  hand  and  seal 

this ...day  of ,  191.. 

(Seal.) 


PART  III. 
NOTES    AND    MORTGAGES. 

Promissory  Notes. 

Section  580.~WHAT  IS  A  PROMISSORY  NOTE.— 

The  statute  law  of  California  defines  a  promissory  note  to 
be  "an  instrument  negotiable  in  form,  whereby  the  signer 
promises  to  pay  a  specified  sum  of  money."  But,  while  it 
is  defined  as  an  instrument  "negotiable  in  form,"  it  may 
be  not  negotiable,  and  still  be  a  promissory  note.  And  the 
law  of  the  State,  as  well  as  the  rules  of  commercial  busi- 
ness, recognizes  two  classes  of  promissory  notes,  negotiable 
and  non-negotiable.  The  difference  between  these  two 
classes, — what  constitutes  a  negotiable  note,  and  what  is 
meant  by  a  non-negotiable  note, — will  be  found  stated  fur- 
ther on,  in  other  Sections. 

Civil  Code,  Section  3244. 

Section  581.— WHO  MAY  BE  PARTIES.— All  per- 
sons capable  of  entering  into  a  contract  may  be  parties  to 
a  promissory  note,  and  be  bound  by  it.  And  all  persons 
in  California  are  capable  of  contracting  except  minors,  per- 
sons of  unsound  mind,  and  persons  deprived  of  civil  rights. 
A  minor  in  California  is  a  male  under  the  age  of  21  years, 
or  a  female  under  the  age  of  18  years.  A  minor  under  the 
age  of  18  cannot  make  a  contract  relating  to  real  property, 
or  relating  to  any  personal  property  not  in  his  immediate 
possession  or  control;  but  he  may  make  any  other  contract 
in  the  same  manner  as  an  adult,  subject  to  certain  condi- 
tions, stated  in  the  next  Section.  A  person  of  unsound 
mind,  entirely  without  understanding,  as  an  idiot  or  luna- 
tic, has  no  power  to  make  a  contract  of  any  kind;  but  a 

(545) 


546  BUSINESS   LAWS   FOR   BUSINESS    MEN. 

contract  may  be  made  by  a  person  of  unsound  mind  who 
is  not  entirely  without  understanding,  such  a  contract,  how- 
ever, being  subject  to  be  set  aside  in  court.  A  person 
deprived  of  civil  rights  is  not  capable  of  making  a  con- 
tract while  in  that  condition.  A  person  is  deprived  of  civil 
rights  when  he  is  sentenced  to  imprisonment  in  the  State 
Prison  for  life,  and  his  civil  rights  are  suspended  during 
the  term  when  he  is  sentenced  for  a  term  less  than  life. 
A  convict  may,  however,  make  and  acknowledge  a  sale  and 
conveyance  of  property. 

Civil    Code,    Sections    33,    34,    38,    39,    1556;    Penal 
Code,  Sections  673,  674,  675. 

Section  582.— NOTE  MADE  BY  MINOR.— A  minor 
may  make  a  promissory  note  at  any  time  before  he  comes 
of  age.  But,  if  he  does  make  a  promissory  note  while  under 
the  age  of  18  years,  he  may  disown  and  repudiate  it,  either 
before  he  comes  of  age  or  within  a  reasonable  time  after- 
wards, by  giving  notice  that  he  disaffirms  it.  If  he  dies 
before  coming  of  age,  his  heirs  or  executors  have  a  right 
to  disown  and  repudiate  the  note.  No  part  of  a  note  made 
by  a  minor  under  the  age  of  18  years  can  be  collected,  if 
he  repudiates  and  disaffirms  it  before  he  reaches  his  major- 
ity, or  within  a  reasonable  time  afterwards.  If  a  minor 
over  18  years  of  age  makes  a  note,  he  may  likewise  repu- 
diate and  disaffirm  it,  before  becoming  of  age  or  within 
a  reasonable  time  afterwards,  but  he  must  restore  the  con- 
sideration to  the  party  from  whom  it  was  received.  Thus, 
if  a  young  man,  over  the  age  of  18  and  under  21  years  of 
age,  borrows  a  sum  of  money,  and  makes  his  note  as  secur- 
ity, he  may  disown  and  repudiate  the  contract  in  the  manner 
before  stated,  but  he  must  return  to  the  lender  the  money 
he  actually  received.  The  reason  of  the  distinction  between 
the  contracts  of  minors  under  the  age  of  18  and  the  con- 
tracts of  minors  over  18  years  is  this,  that  a  minor  under 
the  age  of  18  is  presumed  not  to  have  arrived  at  an  age 
of  judgment  and  discretion  sufficient  to  protect  him  from 
the    schemes    of    those    who    might    take    advantage    of    his 


NOTES   AND   MORTGAGES.  547 

infancy  to  defraud  him;  and  all  persons  who  enter  into 
a  contract  with  a  minor  under  the  age  of  18  must  do  so 
at  the  peril  of  having-  such  a  contract  absolutely  disowned 
and   disaffirmed. 

Civil  Code,   Section  35. 

Section  583.— NOTE  MADE  TO  MINOR.— A  prom- 
issory note  may  be  made  to  a  minor,  and  he  takes  it  sub- 
ject to  the  same  right  to  disaffirm  the  contract  as  he  pos- 
sesses with  relation  to  a  note  made  by  him.  'If  he  takes 
a  note  made  to  himself,  and  does  not  give  notice  of  disaf- 
firmance to  the  maker,  before  he  attains  his  majority  or 
within  a  reasonable  time  afterwards,  the  maker  will  be 
bound,  and  the  note  can  be  collected.  Also,  a  minor  who 
takes  a  note  made  to  himself  may  transfer  it  by  indorse- 
ment to  another,  and  the  person  to  whom  he  indorses  the 
note  can  collect  it,  unless  after  indorsement  the  minor  gives 
notice  to  the  maker  that  he  disaffirms  and  repudiates  the 
note.  In  other  words,  the  person  to  whom  a  minor  in- 
dorses a  note  will  take  it  subject  to  the  right  of  the  minor 
to   disaffirm   it. 

Section  584.— NOTE  MADE  BY  MARRIED  WO- 
MAN.— Under  the  laws  of  California,  married  women  have 
many  rights  which  they  never  had  in  other  countries.  In 
this  State  a  married  woman  may  enter  into  any  contract  with 
any  person,  respecting  property,  which  she  might  do  if 
unmarried.  She  may  buy  or  sell,  lease  or  mortgage,  lend 
or  borrow,  in  her  own  name  and  on  her  own  account.  It 
follows,  as  a  matter  of  course,  that  a  note  made  by  a 
married  woman  is  a  valid  and  binding  obligation,  for  she 
has  the  right  to  make  it.  But  a  note  made  by  a  married 
woman,  and  signed  by  her  alone,  can  only  be  collected  out 
of  her  separate  property.  The  community  property  be- 
longing to  the  husband  and  wife  is  not  liable  for  the  con- 
tracts of  the  wife  made  before  marriage.  The  separate 
property  of  the  wife,  out  of  which  alone  a  note  made  by 
her  can  be  collected,  includes  all  property  which  she  owned 


548  BUSINESS   LAWS   FOR  BUSINESS   MEN. 

before  marriage,  and  all  property  which  she  acquires  after 
marriage  by  gift,  or  by  will,  or  by  descent  to  her  as  heir, 
and  the  rents  and  profits  of  such  property.  If  a  note  made 
by  a  married  woman  is  sued  on,  the  judgment  can  only 
be  enforced  against  her  separate  property.  A  married 
woman  may  contract  with  her  husband  as  well  as  with 
others,  and  a  valid  note  may  be  made  by  her  to  him. 
Civil  Code,  Sections  158,  162. 

Section  585.—  NOTE  MADE  TO  MARRIED 
WOMAN. — A  promissory  note  may  be  made  to  a  married 
woman,  and  she  may  collect  it  alone,  without  reference  to 
her  husband,  if  it  relates  to  her  separate  property.  She  may 
legally  take  a  promissory  note  from  her  husband,  as  well 
as  from  others.  She  may  sue  in  her  own  name  to  collect 
a  note  made  to  her,  if  it  concerns  her  separate  property, 
and  her  husband  need  not  be  a  party  to  the  suit. 
Code  of  Civil  Procedure,  Section  370. 

Section  586.— NOTE  MADE  BY  CORPORATION.— 

A  promissory  note  may  be  made  by  a  corporation,  as  well 
as  by  a  natural  person.  But  there  are  certain  necessary 
requisites  to  the  validity  of  a  note  made  by  a  corporation 
which  do  not  exist  in  the  case  of  a  natural  person.  While 
a  man  may  act  as  his  own  individual  will  shall  dictate,  a 
corporation,  being  a  creature  without  a  soul,  can  only  act 
by  means  of  agents.  These  agents  may  have  general 
powers  delegated  to  them,  which  serve  for  all  occasions, 
or  they  may  have  special  powers  given  them,  for  a  certain 
prescribed  purpose.  In  either  case,  many  important  ques- 
tions frequently  arise  as  to  the  power  of  its  agents  to  bind 
a  corporation.  A  corporation  must  be  managed  and  con- 
trolled by  a  Board  of  Directors,  having  under  them,  and 
subject  to  their  directions,  certain  officers  or  other  agents. 
In  California,  the  Board  of  Directors  of  a  corporation  may 
consist  of  a  number,  not  less  than  three,  or  any  larger 
number,  selected  from  among  the  members  or  stockholders. 
A  majority  of  the  Board  constitutes  a  quorum.     Unless  a 


NOTES    AND    MORTGAGES.  549 

quorum  of  the  Board  of  Directors  is  present  and  acting,  no 
business  performed  is  valid  as  against  the  corporation.     The 
Directors    are    agents    of    the    corporation    only    when    they 
act  as  a  Board.     Therefore,  if  a  corporation  makes  a  note, 
such  action  must  be  authorized  by  its   Board  of   Directors, 
a  majority  of  the  Board  being  present.     A  corporation  must 
have  a  seal.     It  can  only  do  the  business  for  which  it  was 
organized.      A   corporation   organized    for   one   purpose    can 
not  carry  on  business  for  another  purpose.       In  the  course 
of  its  legitimate  business,  a  corporation  may  borrow  money, 
or  secure  a  creditor,  and  make  its  note  therefor.       This  is 
done  by  the  vote   of   the   Directors,   at   a   regular   meeting, 
a  majority  being  present.       A  record  of  the  votes  must  be 
kept,    the    ayes    and   noes    being   recorded.      A    majority    of 
the  Board  must  vote  in  favor  of  the  proposition.       The  exe- 
cution of  the  note  being  thus  authorized,  the  President  may 
sign  the  name  of  the  corporation,  affix  the  seal  of  the  cor- 
poration,   and    deliver   the    note    for   the    corporation.        No 
Director    must    be    financially    interested    in    the    transaction 
in  which  the  note  is  authorized  to  be  executed,  in  any  way 
which   conflicts   with   the   interests   of  the   corporation.        If 
any   Director   is   so   interested,   and   it   requires   his   vote   to 
make  a  majority  in  favor  of  the  proposition,  the  action  of 
the    Board    will    not   be    legal,    and   the    note    will   be    void. 
The  note  must  be   made   in  the   legitimate  business   of  the 
corporation,  otherwise  it  will  be  void.     For  instance,  if  the 
Directors   of   a   banking   corporation    should   borrow    money 
to  build  a  railroad,  the  building  of  railroads  not  being  one 
of  its  purposes,  the  act  of  the  Directors  is  outside  of  their 
power,   and   the   note   is   invalid.        Every   person   taking    a 
note  from  a  corporation  is  presumed  to  know  the  purposes 
of  its  organization,  and  is  presumed  to  know  whether  the 
execution   of   the   note    was   authorized    as   the    law    directs. 
Therefore  the  person  to  whom  the  note  is  made   is  bound 
to  inform  himself  of  the  facts;  for,  if  the  note  has  not  been 
made   by   legal    authorization   of   the   Directors,   or   if   it   is 
outside   the   power   of   the   corporation,    and   not    within    its 
legitimate  business,   in  a   suit  on   the   note,   the   corporation 


550  BUSINESS  LAWS  FOR  BUSINESS   MEN. 

can  make  that  defense  and  defeat  the  collection  of  the  note. 
If  a  note  has  been  made,  in  the  manner  and  for  a  purpose 
authorized  by  law,  the  corporation  is  legally  bound  to  pay  it. 
And,  further,  each  stockholder  in  the  corporation  becomes 
bound  for  the  payment  of  the  note.  Each  stockholder 
is  individually  and  personally  liable  for  such  proportion  of 
the  note  of  the  corporation  as  the  amount  of  stock  or  shares 
owned  by  him  bears  to  the  whole  of  the  subscribed  capital 
stock  or  shares  of  the  corporation.  The  liability  of  each 
stockholder  is  determined  by  the  amount  of  stocks  or  shares 
owned  by  him  at  the  time  the  note  was  made.  In  corpora- 
tions having  no  capital  stock,  each  member  is  individually 
and  personally  liable  for  his  proportion  of  the  amount  due 
on  the  note.  It  sometimes  happens,  too,  that,  after  the 
President  or  other  agent  of  the  corporation  has  made  a  note 
for  it,  without  authority  first  given,  but  for  the  legitimate 
uses  and  purposes  of  the  corporation,  the  Directors  after- 
ward ratify  the  act  of  the  agent.  This  ratification  may  be 
by  a  resolution  passed  at  a  meeting  of  the  Board,  or  it  may 
occur  where  the  corporation  enjoys,  in  its  proper  business, 
the  fruits  of  the  transaction.  In  either  case,  the  corporation 
and  its  stockholders  or  members  are  equally  bound  as  when 
the  note  is  made  by  previous  authority.  Where  the  trans- 
action concerning  the  execution  of  a  promissory  note  by  a 
corporation  is  fully  entered  in  the  books  of  the  corporation, 
and  notice  thus  imparted  to  it,  and  after  such  notice  the 
corporation  retains  the  consideration  of  the  transaction,  and 
thus  accepts  the  benefits,  it  must  be  held  to  have  ratified 
the  transaction.  (Decided  by  the  Supreme  Court  of  Cali- 
fornia, in  the  case  of  Curtin  vs.  Salmon  River  Hydraulic 
Gold  Mining  and  Ditch  Company,  which  decision  is  printed 
in  Volume  26,  California  Decisions,  page  949.) 
Civil  Code,  Sections  290,  305,  308,  322. 

Section  587.— NOTE  MADE  TO  CORPORATION.— 

A  note  may  be  made  to  a  corporation,  as  well  as  by  it. 
The  note  should  be  made  to  the  corporation  by  its  cor- 
porate name,  but  a  mistake  in  the  name  will  not  invalidate 


NOTES   AND   MORTGAGES.  .551 

the  note.  If  there  is  a  mistake  in  the  name  of  the  cor- 
poration, in  the  note,  that  will  make  no  difference,  if  it 
can  be  reasonably  ascertained  from  the  note  what  corpora- 
tion is  intended.  Having  taken  and  received  the  note,  the 
corporation  has  the  same  rights,  with  reference  to  its  col- 
lection, as  an  individual  would  have. 
Civil  Code,  Section  357. 

Section    588.— NOTE    MUST    BE    IN    WRITING.— 

There   is   no   such   thing   as   a   verbal   promissory   note.     A 
promissory  note  must  be  in  writing. 

Section  589.— NOTE  MAY  BE  IN  PENCIL.— While 
a  promissory  note  must  be  in  writing,  such  writing  need 
not  be  in  ink ;  it  may  be  in  pencil ;  and  it  need  not  be  all 
in  the  handwriting  of  the  maker;  for  it  may  be  printed,  or 
it  may  be  typewritten,  yet  if  the  name  of  the  maker  is 
signed  to  it,  the  note  will  be  valid. 

Section  590.— MUST  BE  FOR  THE  PAYMENT  OF 
MONEY. — A  promissory  note  must  be  for  the  payment 
of  money,  and  for  the  payment  of  money  only.  So,  a  writ- 
ten promise  to  pay  money  and  goods,  or  to  pay  goods 
alone,  is  not  a  legal  promissory  note.  No  written  promise 
to  pay  is  a  valid  promissory  note,  unless  it  be  for  the 
payment  of  money,  and  of  money  only.  But  it  may  be 
made  payable  in  the  money  or  currency  of  any  other  coun- 
try, as  well  as  in  the  money  of  the  United  States.  It  may 
be  made  payable  in  the  money  of  England,  or  France, 
or  Spain,  or  Holland,  or  Italy,  or  of  any  other  country, 
and  will  be  just  as  binding  as  though  made  payable  in 
the  coin  of  the  United  States.  It  may  be  made  payable 
in  coins,  such  as  guineas,  ducats,  doubloons,  crowns,  or 
in  dollars,  or  in  pounds  sterling.  In  the  ordinary  business 
transactions  of  this  country  a  note  is  usually  made  payable 
in  dollars,  gold  coin  of  the  United  States. 
Civil  Code,  Section  3244. 


552  BUSINESS  LAWS  FOR  BUSINESS  MEN. 

Section  591.— MUST  BE  FOR  A  CERTAIN  SPECI- 
FIED AMOUNT. — Not  only  must  the  note  be  for  the  pay- 
ment of  money,  but  it  must  also  be  for  a  certain  specified 
amount.  The  amount  stated  in  the  note  must  be  fixed 
and  certain.  Therefore,  if  the  promise  be,  to  pay  a  speci- 
fied sum  of  money,  with  all  other  sums  that  may  be  due; 
or,  to  pay  a  specified  sum  of  money,  and  the  demands  of 
another  person;  or,  to  pay  a  specified  sum  of  money,  after 
deducting  allowances  and  expenses;  in  all  such  cases  the 
instrument  is  void  as  a  promissory  note,  because  the  amount 
to  be  paid  is  not  fixed  with  certainty  on  the  face  of  the 
note.  The  amount  to  be  paid,  however,  if  it  be  a  fixed  sum, 
need  not  be  written  in  words,  but  may  be  expressed  in 
figures. 

Civil  Code,  Section  3244. 

Section  592.— MUST  NOT  BE  SUBJECT  TO  ANY 
CONDITION  OR  CONTINGENCY.— The  note,  to  be 
valid,  must  not  be  subject  to  any  condition  or  contingency 
which  might  defeat  the  promise  to  pay.  The  money  must 
be  payable  absolutely,  and  must  not  depend  upon  the  hap- 
pening or  not  happening  of  some  event.  Consequently,  if 
a  note  is  made  payable  provided  a  thing  is  done,  or  pro- 
vided a  thing  is  not  done,  or  which  makes  the  payment 
depend  upon  any  contingency  or  uncertainty,  it  is  not  a 
valid  promissory  note. 

Section  593.— FORM  OF  NOTE.— A  promissory  note 
need  not  be  in  any  particular  form,  so  long  as  it  is  cer- 
tainly to  be  seen  on  the  face  of  it  who  is  the  maker,  to 
whom  it  is  payable,  the  sum  to  be  paid,  and  an  absolute 
promise  to  pay  it.  The  most  common  form  of  negotiable 
promissory  note  in  use  in  California,  and  one  which  an- 
swers every  purpose,  is  as  follows: 

,  Cal., ,  191.. 

after  date,  for  value  received,  I  promise 

to  pay ,  or  order,  at , 

California,   the  sum   of Dollars, 


NOTES    AND    MORTGAGES.  553 

Gold  Coin  of  the  United  States,  with  interest  thereon  in  like 

Gold  Coin  at  the  rate  of per  cent  per  annum  from 

date  until  paid.  Interest  payable  semi-annually,  and  if  not 
so  paid  to  be  added  to  the  principal  and  bear  interest  at 
the  same  rate  until  paid. 


Or  the  note  may  be  made  as  follows : — 

,  Cal., ..,  191.. 

One  day  after  date,  for  value  received,  I  promise  to  pay 

,  or  order,  at , 

California,  the  sum  of ,  Dollars,  Gold 

Coin    of    the    United    States,    with    interest    thereon    in    like 

Gold  Coin  at  the  rate  of per  cent  per  annum  from 

date  until  paid.  Interest  payable  semi-annually,  and  if  not 
so  paid  to  be  added  to  the  principal  and  bear  interest  at  the 
same  rate  until  paid. 


Or  the  note  may  be  made  as  follows : — 

....,  Cal., ,  191.. 

For  value  received,  I  promise  to  pay 

or   bearer   the   sum   of Dollars,    Gold 

Coin    of   the    United    States,    with    interest    thereon    in    like 

Gold  Coin  at  the  rate  of per  cent  per  annum  from 

date  until  paid.  Interest  payable  semi-annually,  and  if  not 
so  paid  to  be  added  to  the  principal  and  bear  interest  at 
the  same  rate  until  paid. 


Section  594.— TIME  OF  PAYMENT.— It  is  not  abso-. 
lutely  necessary  that  a  note  should  state  the  time  of  pay- 
ment. If  it  does  state  the  time  of  payment,  it  is  due  on 
the  day  stated,  or,  when  that  day  is  a  holiday,  the  next 
business  day.  If  it  does  not  specify  the  time  of  payment, 
but  merely  "For  value  received  I  promise  to  pay,"  it  is 
payable  immediately.  If  the  day  of  payment  falls  on 
Sunday,  or  Fourth  of  July,  or  Christmas,  or  Thanksgiving, 
or  any  other  legal  holiday,  the  note  is  due  on  the  next  day. 
Civil  Code,  Sections  3099,  3132. 


554  BUSINESS   LAWS   FOR   BUSINESS   MEN. 

Section  595.— PLACE  OF  PAYMENT.— A  note  is  valid 
which  does  not  specify  any  place  of  payment.  If  the  note 
specifies  a  place  of  payment,  as,  "At  San  Francisco,"  it 
must  be  paid  at  the  place  specified.  If  the  note  does  not 
specify  any  place  of  payment  at  all,  it  is  payable  at  the 
residence  or  place  of  business  of  the  maker,  or  wherever 
he  may  be  found.  The  holder  of  the  note,  when  no  place 
of  payment  is  specified,  may  present  it  for  payment  at 
either  the  maker's  residence,  his  place  of  business,  or  where- 
ever  he  is  found,  at  his  option. 
Civil  Code,  Section  3100. 

Section  596.— DATE  OF  NOTE.— The  date  of  a  note 
need  not  necessarily  be  at  the  beginning.  The  date  may 
be  placed  upon  any  part  of  the  paper,  at  the  top,  or  at  the 
bottom,  or  anywhere  else  on  its  face,  and  it  will  be  suffi- 
cient. It  is  not  necessary  to  insert  the  true  date  of  its 
signing.  Any  date  may  legally  be  inserted  by  the  maker, 
wliether  past,  present,  or  future,  and  the  note  will  still  be 
valid  and  binding.  In  any  dispute  in  court  the  holder  or 
the  maker  will  be  allowed  to  show  the  actual  time  when 
the  note  was  executed  or  delivered,  or  when  it  was  intended 
by  the  parties  to  take  effect. 

Civil  Code,  Section  3094. 

Section   597.— NOTE   NOT    DATED   IS   VALID.— A 

note  is  valid  although  not  dated  at  all.  If  it  bears  no  date, 
it  will  be  considered .  as  dated  at  the  time  it  was  executed. 
And  if  the  holder  of  a  note  which  bears  no  date  at  all  sues 
to  collect  it,  he  will  be  allowed  to  show  by  verbal  testi- 
mony when  the  note  was  actually  signed,  or  when  it  was 
intended  by  the  parties  to  take  effect. 
Civil  Code,  Section  3091. 

Section  598.— HOW  MUST  BE  SIGNED  BY 
MAKER. — The  name  of  the  maker  may  be  affixed  to  any 
portion  of  the  note,  and  it  will  be  good.  It  may  be  at  the 
beginning,  or  in  the  middle,  or  signed  at  the  end.  For  in- 
stance, if  a  note  begins,  "I,  John  Smith,  promise  to  pay," 


NOTES   AND   MORTGAGES.  555 

etc.,  and  is  not  otherwise  subscribed  at  all,  it  will  be  a  valid 
note,  because  the  intention  to  bind  the  maker  is  apparent. 
The  maker's  name  may  be  signed  in  pencil.  If  the  maker 
cannot  write,  his  signature  may  be  by  an  X,  or  mark,  his 
name  being  written  near  the  mark  by  another  person,  who 
writes  his  own  name  as  a  witness. 
Civil  Code,  Section  14. 

Section    599.— FORM    OF    NOTE    SIGNED    WITH 

AN  X. — The  following  is  a  good  form  for  a  note  signed 
with  an  X,  or  mark  by  a  person  who  cannot  write: — 

,  Cal., ,  191.. 

after  date,  for  value  received,  I  promise 

to  pay ,  or  order,  at 

California,  the   sum  of Dollars,   Gold 

Coin    of   the    United    States,    with    interest    thereon    in    like 

Gold  Coin  at  the  rate  of per  cent  per  annum  from 

date  until  paid.  Interest  payable  semi-annually,  and  if  not 
so  paid  to  be  added  to  the  principal  and  bear  interest  at 
the  same  rate  until  paid. 

his 
SAMUEL    X     GREEN, 
mark. 
GEORGE  JONES, 

Witness  to  signature  of  Samuel   Green. 

Section  600.-— MAKER'S  NAME  SPELLED  WRONG. 

— It  will  make  no  difference  in  the  validity  of  a  note  that 
the  name  of  the  maker  is  misspelled  in  his  signature.  The 
note  is  good  if  it  can  be  determined,  by  the  face  of  the 
note,  or  the  indorsement  on  its  back,  who  the  maker  is. 

Section  601.— NAME  OF  PERSON  TO  WHOM 
NOTE  IS  PAYABLE.— The  payee  need  not  be  named  in 
person,  if  some  one  be  indicated.  Therefore  it  is  sufficient  if 
the  note  is  made  payable  "to  John  Smith,  or  bearer,"  or  "to 
the  holder,"  or  "to  order,"  for  this  must  be  intended  to 
mean  whoever  comes  into  lawful  possession  of  it. 


556  BUSINESS   LAWS   FOR  BUSINESS    MEN. 

Section  602.— NOTE  PAYABLE  ON  OR  BEFORE 
A  CERTAIN  DATE.— A  note  may  be  made  payable  on 
or  before  a  certain  date,  and  this  will  give  the  maker  the 
right  to  pay  the  note  at  any  time  before  the  date  named, 
at  his  option.  But  the  holder  cannot  compel  the  maker 
to  pay  the  note  until  the  date  named  in  it.  Thus,  if  a  note 
is  made  payable  "on  or  before  one  year  after  date,"  the 
maker  has  a  right,  if  he  chooses,  to  pay  the  note  at  any 
time  during  the  year;  but  the  holder  cannot  compel  him 
to  pay  until  the  year's  time  has  expired. 

Section  603.— FORM  OF  NOTE  PAYABLE  ON  OR 
BEFORE  A  CERTAIN  DATE.— A  good  form  of  note, 
giving  the  maker  the  option  of  paying  at  any  time  before 
the  date  named,  is  as  follows: 

,  Cal., ,  191.. 

On  or  before  one  year  after  date,   for  value  received,   I 

promise  to  pay ,  or  order,  at , 

California,   the    sum    of Dollars,    Gold 

Coin  of  the  United  States,  with  interest  thereon  in  like  Gold 

Coin  at  the  rate  of per  cent  per  annum   from  date 

until  paid.  Interest  payable  semi-annually,  and  if  not  so 
paid  to  be  added  to  the  principal  and  bear  interest  at  the 
same  rate  until  paid. 


Section    604.— NOTE    WITH    PAYEE    BLANK.— A 

note  may  be  made  with  the  payee  blank,  that  is,  with  a 
blank  space  for  the  payee's  name  to  be  inserted,  and  it  will 
be  payable  to  bearer.  It  passes  by  delivery,  and  any  bona 
fide  holder  for  value  may  fill  it  up  with  his  own  name  and 
sue  upon  it. 

Section  605.— NOTE  PAYABLE  TO  ORDER  OF 
MAKER. — A  note  may  be  made  payable  to  the  order  of 
the  maker.  For  instance,  the  note  may  call  for  payment 
"to  the  order  of  myself,"  and  be  indorsed  by  the  maker  to 
another  person.  The  holder  will  take  a  valid  note  by  such 
indorsement,  and  the  maker  will  be  bound. 


NOTES   AND    MORTGAGES.  557 

Section    606.— WHEN    NOTE    IS    NEGOTIABLE.— 

In  order  for  a  note  to  be  negotiable,  it  must  be  made  pay- 
able to  "order,"  or  to  "bearer."  Without  these  words,  the 
note  is  not  negotiable.  By  a  negotiable  note  is  meant  an 
instrument  which  passes  from  one  person  to  another  by 
indorsement  and  delivery,  and  which,  if  transferred  before 
it  is  due,  entitles  the  holder  to  collect  the  full  amount  which 
its  face  calls  for.  But  there  must  be  something  on  the  face 
of  the  note  to  indicate  the  intention  of  the  parties  that  it 
shall  be  transferable  by  indorsement,  negotiable ;  and  com- 
mercial custom  and  the  law  of  California  provides  that  such 
intention  must  be  made  manifest  on  the  face  of  the  note,  by 
the  use  of  the  word  "order"  or  "bearer." 
Civil  Code,  Section  3087. 

Section  607.— WHEN  NOTE  IS  NOT  NEGOTI- 
ABLE.— A  note  which  is  merely  made  payable  to  a  certain 
person,  and  not  to  "order,"  or  not  to  "bearer,"  is  not  nego- 
tiable. But,  besides  the  omission  of  these  words  of  nego- 
tiability, there  are  other  things  which  destroy  the  negotiable 
character  of  a  note.  Thus,  if  a  note  is  made  payable  out  of 
a  certain  specified  fund,  it  is  not  negotiable. 

Section  608.— DIFFERENCE  BETWEEN  NEGOTI- 
ABLE   NOTE    AND    NOTE    NOT    NEGOTIABLE.— 

In  the  law  of  California,  as  applied  to  common  business 
affairs,  the  essential  difference  between  the  two  kinds  of 
notes,  a  note  which  is  negotiable  and  a  note  which  is  not 
negotiable,  will  be  found  to  be  this :  A  negotiable  note 
passes  from  one  to  another  by  delivery  and  indorsement, 
and  may  pass  through  an  indefinite  number  of  hands,  and 
so  long  as  it  is  indorsed  for  value,  before  becoming  due,  the 
holder  acquires  an  absolute  claim  against  the  maker.  The 
note,  by  being  made  payable  to  order,  or  to  bearer,  being  ne- 
gotiable, is  a  circulating  credit,  and  it  makes  no  difference  to 
the  holder  that  the  maker  of  the  note  and  the  payee  named 
in  it  may  have  had  other  dealings  between  themselves,   on 


558  BUSINESS   LAWS   FOR  BUSINESS   MEN. 

account  of  which  the  payee  may  have  become  indebted  to 
the  maker;  and  in  a  suit  upon  a  negotiable  note,  which 
has  been  indorsed  for  vakie  to  a  third  person,  the  maker 
cannot  set  up  against  the  note  anything  which  the  payee 
owes  him.  The  maker  of  a  negotiable  note,  indorsed  by 
the  payee  for  value  to  another,  must  pay  the  whole  note. 
But  a  note  which  is  not  negotiable  stands  upon  a  different 
footing.  It  may  pass  from  the  payee  to  whom  it  was  made, 
for  it  may  be  assigned  by  the  original  holder  to  another. 
But  the  assignee  of  a  non-negotiable  note  takes  it  subject 
to  all  set  offs  which  the  maker  may  have  against  the  original 
holder.  Let  us  suppose  that  Jones  makes  his  note  to  Smith 
for  $500,  and  the  note  is  not  negotiable,  and  Smith  assigns  it 
to  Green,  but  at  that  time  Smith  has  become  indebted  to 
Jones  upon  another  contract,  in  the  amount  of  $250;  when 
Green  sues  to  collect  the  note,  Jones  can  set  off  against 
the  $500  note  the  $250  which  Smith  owed  him.  It  will  make 
no  difference  that  Green  paid  Smith  the  full  $500  called  for 
by  the  note;  the  note  was  not  negotiable,  and  he  was  bound 
to  take  it,  if  he  chose  to  take  it  at  all,  subject  to  any  defense 
which  the  maker  might  have  acquired  against  his  assignor. 
Civil  Code,  Section  1459. 

Section  609.— JOINT  NOTE.— Two  or  more  persons 
may  make  a  note,  and  become  jointly  liable  to  pay  it.  That 
is,  the  intention  may  be  expressed  by  two  or  more  makers 
of  a  note  that  they  will  take  upon  themselves  the  mutual 
and  joint  obligation  of  paying  the  sum  of  money  specified 
in  it. 

Civil  Code,  Section  1430. 

Section  610.— FORM  OF  JOINT  NOTE.— A  joint  note 
may  be  made  in  the  following  form: — 

,  Cal., ,  191.. 

after  date,  for  value  received,  we  prom- 
ise to  pay  to ,  or  order,  the  sum  of 

Dollars,  Gold  Coin  of  the  United 

States,  with  interest  thercOn  in  like  Gold  Coin  at  the  rate 


NOTES  AND   MORTGAGES.  559 

of... per  cent  per  annum  from  date  until  paid.  Inter- 
est payable  semi-annually,  and  if  not  so  paid  to  be  added 
to  the  principal  and  bear  interest  at  the  same  rate  until 
paid. 


Section  611.— LIABILITY  ON  JOINT  NOTE.— The 
makers  of  a  joint  note  are  all  liable  together,  each  for  his 
proportionate  share,  and  must  all  be  sued  together.  But 
one  of  the  makers  of  a  joint  note,  who  satisfies  more  than 
his  share  of  the  claim  against  all,  may  compel  all  the  parties 
joined  with  him  to  contribute  their  proportion  of  the  amount 
so  paid  by  him. 

Civil  Code,  Section  1432. 

Section  612.— JOINT  AND  SEVERAL  NOTE.— Sev- 
eral persons  may  make  a  note  so  as  to  become  jointly  and 
severally  liable  to  pay  it;  such  a  note  expressing  the  inten- 
tion, that  the  holder  may  have  the  right  to  call  upon  all  or 
any  one  or  more  of  the  makers  for  payment  of  the  note,  at 
his  option. 

Civil  Code,  Section  1430. 

Section  613.— FORM  OF  JOINT  AND  SEVERAL 
NOTE. — A  joint  and  several  note  may  be  made  in  the  fol- 
lowing form: — 

.,  Cal, ,  191.. 

after  date,  for  value  received,  wc  or 

either  of  us  promise  to  pay ,  or 

order,  at ,  California,  the  sum  of 

Dollars,  Gold  Coin  of  the  United  States,  with 

interest  thereon  in  like  Gold  Coin  at  the  rate  of per 

cent  per  annum  from  date  until  paid.  Interest  payable 
semi-annually,  and  if  not  so  paid  to  be  added  to  the  prin- 
cipal and  bear  interest  at  the  same  rate  until  paid. 


560  BUSINESS   LAWS   FOR   BUSINESS   MEN. 

Section  614.— LIABILITY  OF  MAKERS  OF  JOINT 
AND  SEVERAL  NOTE.— The  makers  of  a  joint  and 
several  note  are  liable  in  a  twofold  capacity.  All  are  liable 
together,  each  for  his  proportionate  share  of  the  sum  speci- 
fied in  the  note,  and  each  one  of  the  makers  is  severally 
liable,  standing  alone.  The  holder  of  the  note  may  sue 
all  of  the  makers  together,  and  recover  a  judgment  against 
all,  or  he  may,  at  his  option,  sue  any  one  of  the  makers 
alone,  and  compel  him  to  pay  the  whole  note.  If  one  of 
the  makers  is  compelled  to  pay  the  whole  note,  he,  in  turn, 
may  compel  the  others  to  pay  him  their  proportionate  share 
for  which  they  became  liable  on  the  note.  With  this,  how- 
ever, the  holder  has  nothing  to  do.  He  has  the  right  to 
single  out  any  one  or  more  of  the  signers  of  a  joint  and 
several  note,  and  collect  from  him  or  them,  or  he  may  col- 
lect from  all. 

Section  615.— INTEREST.— The  California  law  of  inter- 
est does  not  recognize  usury,  and  any  rate  may  be  charged 
which  the  parties  agree  upon.  In  many  States  of  the  Union 
the  law  limits  the  rate  of  interest  which  can  be  charged  to 
a  certain  per  cent  per  annum,  ranging  in  amount  from 
5  to  12  per  cent;  but  in  California  the  conditions  of  settle- 
ment and  early  business  dealings  always  were  such  as  to 
encourage  inflation  and  speculation,  and  consequent  high 
rates  of  interest,  and  the  Legislature  has  several  times  re- 
fused to  enact  a  law  against  usury.  Therefore  the  law  now 
is  that  the  parties  to  a  promissory  note  may  agree  upon  any 
rate  of  interest,  and  the  note  will  be  valid. 

Section   616.— LEGAL   RATE   OF   INTEREST.— The 

legal  rate  of  interest  in  California,  that  is,  the  rate  allowed 
by  law  when  the  note  does  not  say  anything  about  interest, 
is  seven  per  cent  per  annum.  Therefore,  if  a  note  is  made 
which  does  not  say  anything  at  all  about  interest,  and  suit 
is  brought  to  collect  it,  the  judgment  against  the  maker 
will  bear  interest  at  the  rate  of  seven  per  cent  per  annum. 
This  interest  will  commence  at  the  date  when  the  note  be- 
came due. 


NOTES   AND    MORTGAGES.  561 

Section  617.— ATTORNEY  FEES.— A  note  may  be 
made  providing  that,  in  the  event  of  the  holder  commencing 
suit  to  collect  it,  the  maker  will  pay  an  attorney  fee  to  the 
payee.  Such  a  note  is  negotiable.  The  session  of  the 
Legislature  of  1905  adopted  an  amendment  to  the  Civil 
Code,  providing  that  a  negotiable  note  may  provide  for  the 
payment  of  attorney's  fees  and  costs  of  suit,  in  case  suit  be 
brought  to  collect  the  note,  and  the  note  will  still  be  nego- 
tiable. (Amendment  to  Section  3088,  Civil  Code,  approved 
March  10,  1905.) 

Section    618.— WHEN    NOTE    IS    OUTLAWED.— In 

California  a  note  is  outlawed  if  it  is  allowed  to  run  more 
than  four  years  after  it  becomes  due.  For  instance,  if  a 
note  is  made  payable  one  year  after  date,  it  will  not  out- 
law for  five  years ;  the  holder  may  commence  a  suit  on  the 
note  after  the  expiration  of  the  one  year;  but  he  may  wait, 
and  commence  the  suit  at  any  time  within  four  years  after 
the  note  by  its  terms  becomes  due.  The  same  rule  of 
course  applies  to  a  note  made  payable  at  any  other  term. 
The  note  remains  good  for  four  years  after  it  is  due.  After 
four  years  from  the  date  when  the  note  becomes  due,  in  a 
suit  upon  the  note,  the  maker  or  other  person  liable  to  pay 
it  can  set  up  as  a  defense  that  it  is  outlawed.  And  if  in 
fact  the  holder  has  waited  more  than  four  years  after  the 
note  has  become  due,  before  commencing  a  suit  upon  it, 
the  note  will  be  outlawed,  and  cannot  be  collected  if  such 
defense  is  made. 

Code  of  Civil  Procedure,  Section  337. 

Section  619.— APPARENT   MATURITY  OF   NOTE. 

— The  apparent  maturity  of  a  promissory  note,  payable  at 
sight  or  demand,  is  as  follows:  If  it  bears  interest,  one  year 
after  its  date ;  or,  if  it  does  not  bear  interest,  six  months  after 
its  date.  Therefore,  if  an  interest-bearing  note  is  made, 
reading,  "For  value  received  I  promise  to  pay,"  etc.,  it  ma- 
tures one  year  after  its  date.    If  the  holder  presents  the  note 


562  BUSINESS   LAWS  FOR  BUSINESS  MEN. 

for  payment  within  one  year  from  its  date,  he  has  four 
years  from  the  time  when  he  demands  payment  in  which  to 
sue  upon  the  note.  If  he  does  not  demand  payment  until 
after  one  year  from  its  date,  the  four  years  will  not  begin  at 
the  time  when  he  demands  payment,  but  will  begin  one  year 
after  the  date  of  the  note.  Where  a  promissory  note  is  pay- 
able at  a  certain  time  after  sight  or  demand,  such  time  is 
to  be  added  to  the  periods  mentioned. 

What  has  been  said  above  applies  only  to  promissory 
notes  in  which  the  time  of  maturity  does  not  appear  upon 
the  face  of  the  note,  that  is,  where  the  time  when  the  note 
becomes  due  is  not  stated. 

Civil  Code,  Sections  3135,  3136. 

Section  620.— WHEN  OUTLAWED  NOTE  IS  RE- 
NEWED.— A  note  is  renewed  by  the  promise  of  the  maker 
to  pay  the  sum  due.  But  the  promise  must  be  in  writing, 
in  all  cases,  or  the  note  will  not  be  renewed.  There  must 
be  a  written  acknowledgment  of  the  debt  and  an  uncon- 
ditional promise  to  pay  it,  in  order  to  revive  it,  after  a  note 
is  outlawed.  The  acknowledgment  and  promise  are  not 
required  to  be  in  any  particular  form.  It  may  be  indorsed 
on  the  note;  it  may  be  by  letters  written  by  the  maker  to 
the  creditor;  or  it  may  be  by  writing,  in  the  form  of  a 
contract,  to  revive  and  keep  alive  the  note.  But  in  what- 
ever form  the  writing  is,  whether  by  indorsement,  or  letter, 
or  formal  contract,  the  written  promise  must  be  signed  by 
the  debtor  and  made  to  the  creditor.  If  the  maker  of  the 
note  admits,  after  it  is  outlawed,  to  a  third  person  that 
he  owes  the  money,  the  note  will  still  remain  outlawed. 
The  law  is  that  the  acknowledgment  of  an  outlawed  debt 
and  the  new  promise  to  pay  it,  must  be  made  to  the  creditor 
himself,  and  must  be  in  writing,  signed  by  the  debtor.  The 
payment  of  interest  will  not  revive  an  outlawed  note,  un- 
less such  payment  is  accompanied  by  a  written  acknowl- 
edgment of  the  principal  debt  and  a  promise  to  pay  it.  A 
part  payment  of  the  amount  of  a  note,  after  it  has  become 


NOTES   AND    MORTGAGES,  563 

outlawed,  will  not  revive  the  whole  debt  without  a  writ- 
ten acknowledgment.  A  letter  from  the  -maker  of  the  note 
to  the  creditor,  after  it  is  outlawed,  expressing  a  desire  to 
pay  it,  will  revive  the  debt  and  create  a  new  promise  to 
pay.  The  holder  of  the  note  may  then  sue  to  collect  the 
amount  due,  at  any  time  within  four  years  after  the  new 
promise  was  made.  The  effect  of  the  new  promise  to  pay 
is  to  extend  the  obligation  of  the  debtor  four  years  longer. 
If  one  only  of  several  joint  makers  of  a  note,  after  it  is  out- 
lawed, signs  a  written  acknowledgment  and  promise  to  pay 
the  debt,  he  binds  himself  alone.  He  cannot  bind  anybody 
but  himself,  and  if  the  creditor  wants  the  obligation  ex- 
tended as  to  all  the  joint  makers  of  the  note,  he  must  get 
the  signatures  of  all. 

Code  of  Civil  Procedure,  Section  360. 

Section  621.— INDORSEMENT  OF  NEGOTIABLE 
NOTE, — A  negotiable  note,  if  payable  "to  order,"  passes 
from  one  person  to  another  by  indorsement.  This  indorse- 
ment must  be  in  writing.  One  who  agrees  to  indorse  a 
negotiable  note  is  bound  to  write  his  signature  upon  the 
back  of  the  note,  if  there  is  sufficient  space  on  the  back  for 
that  purpose.  But  it  sometimes  happens  that  the  holder 
of  a  note  has  written  on  the  back  acknowledgments  of 
money  paid,  or  that  many  previous  indorsers  have  signed 
their  names,  and  in  this  manner  the  entire  back  of  the  note 
is  covered,  and  there  is  no  more  room  for  any  further  writ- 
ing upon  it.  The  law  of  California  provides,  that  when  this 
happens,  the  holder  may  pin  or  paste  on  a  piece  of  paper 
sufficient  for  his  own  and  subsequent  indorsements.  Such 
addition  to  the  original  note  thus  becomes  incorporated  as 
a  part  of  it.  A  note  with  the  name  of  the  holder  written 
by  him  on  the  back,  or,  if  there  is  no  room  on  the  back, 
on  a  piece  of  paper  pinned  or  pasted  to  the  note,  passes  the 
legal  title  in  the  debt  to  the  person  to  whom  the  note  is 
delivered. 

Civil  Code,  Sections  3108,  3109,  3110, 


564  BUSINESS   LAWS   FOR  BUSINESS   MEN, 

Section  622.— KINDS   OF   INDORSEMENTS.— There 

are  two  l^inds  of  indorsements;  one  is  called  a  general  in- 
dorsement, and  the  other  is  called  a  special  indorsement. 

Section  623.— GENERAL  INDORSEMENT.— A  gen- 
eral indorsement  is  one  where  the  name  of  the  indorser 
is  written  on  the  back  of  the  note,  without  writing  the 
name  of  any  indorsee.  The  note  may  then  be  delivered  to 
anybody.  The  indorsement  is  general,  because  not  made  to 
any  one  in  particular.  Therefore  the  title  to  the  note  passes 
to  any  person  to  whom  it  is  delivered,  is  payable  to  the 
bearer,  and  may  be  indorsed  and  transferred  by  the  bearer. 

Section  624.— SPECIAL  INDORSEMENT.— A  special 
indorsement  is  where  the  holder  writes  his  name  on  the  back 
of  the  note,  and  also  writes  the  name  of  the  indorsee,  thus 
specifying  a  particular  person  to  whom  payment  is  to  be 
,  made.  A  note  thus  indorsed  cannot  be  indorsed  again  and 
passed  on  by  anybody  but  the  indorsee  whose  name  is  written 
on  the  back  of  the  note. 

Civil  Code,  Sections  3112,  3113. 

Section  625.— INDORSER  OF  NON-NEGOTIABLE 
NOTE. — One  who  writes  his  name  upon  the  back  of  a  non- 
negotiable  promissory  note,  to  give  it  credit,  is  a  guarantor, 
and  is  liable  prima  facie  for  the  payment  of  the  note  upon 
default  of  the  maker. 

Where  a  corporation  has  received  the  money  obtained  on 
a  promissory  note,  upon  which  its  name  appears  as  an  in- 
dorser, it  cannot  thereafter  question  the  authority  of  its 
officers  to  make  such  indorsement.  (Decided  by  the  Cali- 
fornia District  Court  of  Appeals,  in  the  case  of  Tilden  vs. 
Goldy  Machine  Co.,  which  decision  is  printed  in  California 
Appellate  Decisions,  Volume  7,  page  323.) 

Section  626.— ASSIGNMENT  OF  NOTE  NOT  NEGO- 
TIABLE.— The  difference  between  a  note  which  is  nego- 
^iable,  and  a  note  which  is  not  negotiable,  has  been  explained. 


NOTES   AND    MORTGAGES.  565 

A  note  which  is  not  negotiable,  for  any  reason,  may 
nevertheless  be  transferred,  by  assignment.  There  is 
no  particular  form  of  assignment.  The  following  words 
written  on  the  back  of  a  non-negotiable  note  are  sufficient 
to  assign  the  note  from  the  holder  to  another  person : 

"I  hereby  assign  the  within  note  to  John  Smith. 

"James  Green." 

It  has  also  been  held  by  the  courts  that  a  non-negotiable 
note  may  be  legally  assigned  by  the  mere  endorsement  of 
the  name  of  the  holder  and  a  delivery  of  the  note  to  an- 
other person. 

Section  627.— LIABILITY   OF   INDORSERS.— Every 

indorser  of  a  negotiable  note,  unless  his  indorsement  is 
qualified  in  some  way,  by  his  indorsement  warrants  to 
every  subsequent  holder  thereof  that  the  note  is  in  all  re- 
spects what  it  purports  to  be;  that  he  has  a  good  title  to 
it;  that  the  signatures  of  all  prior  parties  are  genuine;  and 
that  if  the  note  is  dishonored  the  indorser,  upon  notice  of 
the  dishonor  being  given  him,  will  pay  the  amount  due 
on  the  note,  with  interest,  to  the  indorsee  or  other  holder. 
Any  number  of  indorsements  may  be  made  of  a  promissory 
note,  and  the  last  indorsee  may  look  to  all  of  the  indorsers 
for  his  money,  and  he  will  have  the  same  rights  against 
every  one  of  the  indorsers  as  he  has  against  the  particular 
holder  who  indorsed  the  note  to  him.  Sometimes  a  note, 
which  has  been  indorsed  by  a  prior  indorser,  comes  back 
again  to  him  by  re-indorsement  in  the  course  of  business, 
when  he  will  thereby  become  reinstated  in  his  original 
rights  in  the  note;  but  he  will  have  no  claim  upon  any  of 
the  indorsers  whose  names  appear  on  the  note  subsequent 
to  his  own.  The  indorsement  of  a  note  amounts  to  a  con- 
tract on  the  part  of  the  indorser,  unless  he  qualifies  his 
indorsement,  that  he  will  pay  the  indorsee,  or  other  holder, 
the  amount  due,  upon  receiving  notice  of  the  dishonor  of 
the  note. 

Civil  Code,  Sections  3116,  3120. 


566  BUSINESS    LAWS   FOR  BUSINESS   MEN. 

Section  628.—  INDORSEMENT  "WITHOUT  RE- 
COURSE."— An  indorsement  may  be  so  qualified  that  the 
liability  of  the  indorser  will  be  greatly  limited.  Thus,  if 
the  indorser  writes  his  name  on  the  back  of  the  note,  and 
adds  the  words,  "without  recourse,"  he  thus  notifies  the 
person  to  whom  he  transfers  the  note  that  he  will  not  be 
responsible  as  an  indorser,  and  cannot  be  held  liable  in 
case  the  maker  does  not  pay.  But  there  are  circumstances 
under  which  the  indorser  "without  recourse"  will  neverthe- 
less be  liable.  By  the  act  of  transferring  and  delivering  the 
note  to  another,  although  indorsed  "without  recourse,"  the 
indorser  impliedly  warrants  that  the  note  is  valid,  that  the 
signatures  of  prior  parties  whose  names  appear  thereon  are 
genuine,  that  the  note  has  not  been  paid,  and  that  he  himself 
has  practiced  no   fraud  in  the  transfer. 

Section  629.— RIGHTS  OF  INDORSEE  IN  DUE 
COURSE  OF  BUSINESS.— An  indorsee  in  due  course  of 
business,  who  acquires  for  value  a  promissory  note  duly 
indorsed,  before  its  apparent  maturity,  and  without  knowl- 
edge of  its  actual  dishonor,  gets  an  absolute  title  to  the 
note.  'It  is  thereafter  valid  in  his  hands,  notwithstanding 
any  defect  in  the  title  of  the  person  from  whom  he  acquired 
it.  It  has  been  said  that  the  law  of  California  cuts  off  all 
defenses  on  the  part  of  the  maker  of  a  note,  as  against  a 
holder  in  due  course  of  business. 

Civil  Code,  Sections  3123,  3124. 

Section  630.— WHEN  NOTE  MUST  BE  PRESENT- 
ED FOR  PAYMENT. — Many  vexatious  questions  con- 
stantly arise  about  the  presentation  of  a  note  for  payment, 
and  these  usually  refer  to  the  indorsers.  The  maker  is  bound 
whether  the  note  is  presented  to  him  or  not,  for  he  agrees 
to  pay  it  at  all  events.  But  the  indorser  occupies  a  differ- 
ent position.  He  agrees  to  pay  if  the  note  is  dishonored. 
The  indorser  is  only  a  surety.  So,  before  the  indorser  can 
be  called  upon  for  the  money,  the  holder,  whoever  he  is, 
must  try  to  collect  the  money  from  the  maker  of  the  note. 


NOTES   AND    MORTGAGES.  567 

The  Legislature  of  California  has  prescribed  by  law  when 
a  note  must  be  presented  for  payment.  The  law  provides, 
that  a  note  payable  on  demand  may  be  presented  to  the 
maker  for  payment  upon  any  day;  but  a  note  made  payable 
at  a  certain  specified  time  must  be  presented  for  payment 
upon  the  day  it  is  due.  It  must  be  presented  within  rea- 
sonable hours;  and  if  it  be  payable  at  a  bank,  within  the 
usual  banking  hours  of  the  vicinity,  unless  the  person  to 
whom  it  should  be  presented  consents  to  its  being  pre- 
sented at  any  hour  of  the  day.  What  are  reasonable  hours, 
within  which  the  note  must  be  presented,  will  depend  upon 
circumstances.  If  the  maker  has  a  place  of  business,  it 
must  be  presented  within  the  usual  business  hours  of  the 
place  or  town ;  if  presented  at  the  maker's  residence,  it  may 
be  presented  during  the  whole  day  until  the  hours  of  rest 
in  the  evening. 

Civil  Code,  Section  3131. 

Section  631.— BY  WHOM  NOTE  MUST  BE  PRE- 
SENTED FOR  PAYMENT.— The  holder  ol  the  note  must 
present  it  to  the  maker.  By  this  is  not  meant  that  the 
holder  should  go  in  person  and  present  the  note.  He  may 
go  in  person,  or  he  may  send  his  agent  or  attorney.  If 
the  holder  is  dead,  at  the  time  the  note  is  due,  then  the 
executor  or  administrator  of  his  estate  can  present  the  note 
and  demand  payment. 

Section  632.— TO  WHOM  NOTE  MUST  BE  PRE- 
SENTED FOR  PAYMENT.— The  note  must  be  presented 
to  the  maker,  if  he  can  be  found  at  the  place  where  pre- 
sentment should  be  made.  If  the  maker  cannot  be  found 
there,  then  it  is  lawful  to  present  the  note  to  his  agent  in 
charge  of  his  place  of  business  or  other  place  specified  in 
the  note  as  the  place  of  payment.  It  may  be  presented 
to  a  clerk  of  the  maker  at  his  place  of  business;  or  to  one 
partner  of  a  firm,  if  a  firm  note;  or  to  the  administrator  or 
executor  of  a   deceased  maker;   or  to   an   employee   of   the 


568  BUSINESS   LAWS   FOR  BUSINESS   MEN. 

maker  at  the  place  where  the   note   is   to  be  presented,   if 
one  can  be  found  there,   and  the  maker  cannot  be   found. 

Section  633.— AT  WHAT  PLACE  NOTE  MUST  BE 
PRESENTED  FOR  PAYMENT.— A  note  which  specifies 
a  place  for  payment  must  be  presented  there.  It  is  a  com- 
mon thing  for  notes  to  be  made  payable  at  a  certain  bank, 
and  in  such  case  it  will  not  do  to  present  the  note  anywhere 
else,  and  so  as  to  any  particular  place  of  payment  specified 
in  a  note.  If  a  note  does  not  name  any  particular  place  for 
its  payment,  then  it  must  be  presented  at  the  place  of  resi- 
dence or  the  place  of  business  of  the  maker,  or  wherever 
he  may  be  found.  It  is  at  the  option  of  the  holder,  where 
no  place  is  specified  in  the  note,  whether  he  will  present 
it  to  the  maker  at  his  residence,  or  his  place  of  business, 
or  in  the  street,  or  at  any  other  place  which  may  appear 
convenient. 

Section  634.— WHAT  WILL  EXCUSE  PRESENT- 
MENT FOR  PAYMENT. — There  are  some  circumstances 
which  under  the  law  of  California  will  excuse  presentment 
for  payment.  If  the  maker  of  the  note  has  no  place  of 
business,  or  if  his  place  of  business  or  residence  cannot, 
with  reasonable  diligence,  be  ascertained,  then  presentment 
for  payment  is  excused  and  the  indorser  is  bound.  If  the 
maker  moves  away,  after  executing  the  note,  and  the  holder 
makes  diligent  inquiry,  and  cannot  learn  his  residence  or 
place  of  business  when  the  note  becomes  due,  the  failure 
to  present  the  note  to  the  maker  for  payment,  under  such 
circumstances,  will  not  relieve  the  indorser  from  liability. 
This  is  upon  the  principle  that  the  holder  has  done  all 
he  can  do,  has  shown  good  faith  and  diligence,  and  there 
is  no  reason  why  the  indorser  should  be  allowed  to  take 
advantage  of  a  circumstance  over  which  the  holder  of  the 
note  had  no  control. 

Section  635.— WHAT  IS  REASONABLE  DILI- 
GENCE.— Reasonable  diligence  is  a  question  of  circum- 
stances.    Inevitable  accident  or  overwhelming  calamity  may 


NOTES   AND    MORTGAGES,  569 

prevent  the  holder  of  a  note  from  presenting  it  for  payment 
to  the  maker  on  the  day  it  is  due,  yet  if  he  does  present  it  at 
the  very  earliest  practicable  time  thereafter,  it  will  be  suffi- 
cient. For  it  may  happen  that  the  holder  had  the  intention  in 
good  faith  to  present  the  note  at  the  proper  time,  yet  all  inter- 
course is  stopped  between  the  places  where  the  holder  and 
the  maker  live,  by  freshets,  or  by  violent  storms,  or  earth- 
quakes, or  other  unforeseen  conditions  of  natural  objects 
rendering  travel  or  communication  impossible;  or  the  pres- 
ence of  some  dread  and  contagious  disease  in  one  or  the 
other  neighborhood,  such  as  the  yellow  fever,  or  cholera, 
or  smallpox,  renders  commercial  intercourse  impossible; 
or  a  political  revolution  may  exist  in  the  place  where  the 
holder  or  the  maker  lives,  and  by  a  blockade,  or  a  battle^ 
prevent  the  holder  from  presenting  the  note  on  the  day 
when  it  is  due;  or  war  may  be  going  on  between  the  coun- 
try where  the  maker  lives  and  the  country  where  the  holder 
resides.  In  all  the  cases  above  supposed,  if  the  note  is 
presented  within  a  reasonable  time  after  the  prohibitive 
obstacle  is  removed,  it  will  be  held  sufficient  under  the  law. 

Section  636.— WHEN  A  NOTE  IS  DISHONORED.— 

A  note  is  dishonored  when  it  is  not  paid,  on  presentment 
to  the  maker  for  that  purpose;  and  it  is  also  dishonored 
when  it  is  not  paid  without  presentment,  when  presentment 
is  excused. 

Civil  Code,  Section  3141. 

Section  637.— NOTICE  OF  DISHONOR.— If  the  holder 
wishes  to  make  the  indorser  pay  the  note,  after  vainly  at- 
tempting to  collect  it  from  the  maker,  he  must  give  the 
indorser  notice  of  the  dishonor  of  the  note.  He  may  give 
the  notice  in  person,  or  through  his  agent.  A  Notary,  at- 
torney, or  bank,  or  other  agent  for  collection,  may  give  the 
notice  as  the  agent  of  the  holder.  If  there  are  several  in- 
dorsers  on  a  note,  and  notice  of  dishonor  is  given  by  the 
holder  to  the  last  indorser,  he  in  turn  must  give  notice  of 
the  dishonor  to  the  indorser  immediately  before  him,  other- 


570  BUSINESS   LAWS   FOR  BUSINESS   MEN. 

wise   he   cannot   reimburse    himself    for    the    amount    he    is 
compelled  to  pay  the  holder. 

Civil   Code,   Section  3142. 

Section  638.— HOW  NOTICE  OF  DISHONOR  MAY 
BE  GIVEN. — A  notice  of  dishonor  may  be  given  by  deliv- 
ering it  to  the  indorser,  personally,  at  any  place;  or,  by 
delivering  it  to  some  person  of  discretion,  at  the  place  of 
residence  or  business  of  the  indorser,  apparently  acting 
for  him;  or,  by  getting  the  best  information  obtainable  of 
the  place  of  residence  of  the  indorser,  and  depositing  the 
notice  in  the  mail  directed  to  the  indorser  at  that  place, 
postage  paid.  In  case  of  the  death  of  the  indorser,  the 
notice  must  be  given  to  his  executor  or  administrator,  or 
if  there  is  no  executor  or  administrator,  then  to  any  mem- 
ber of  his  family  who  resided  with  him  at  his  death,  or 
if  he  had  no  family,  then  it  must  be  mailed  to  his  last 
place  of  residence.  A  notice  of  dishonor  sent  to  an  in- 
dorser after  his  death  is  nevertheless  valid,  if  the  person 
sending  it  was  ignorant  of  his  death,  and  could  not  by 
ordinary  diligence  have  ascertained  the  fact. 
Civil  Code,  Sections  3144,  3145,  3146. 

Section  639.— WHEN  NOTICE  OF  DISHONOR 
MUST  BE  GIVEN.— If  the  notice  of  dishonor  of  a  note  is 
not  given  by  mail,  then  it  must  be  given  either  on  the  same 
day  the  maker  fails  to  pay  it,  or  on  the  next  business  day 
thereafter.  When  notice  of  dishonor  is  given  by  mail,  it 
must  be  deposited  in  the  post-office  in  time  for  the  first 
mail  which  closes  after  noon  of  the  first  business  day  suc- 
ceeding the  dishonor,  and  which  leaves  the  place  where  the 
note  was  dishonored  for  the  place  to  which  the  notice  should 
be  sent.  The  holder  has  at  least  the  whole  forenoon  of  the 
first  business  day  after  the  dishonor  to  send  off  the  notice. 
One  of  several  indorsers,  who  receives  notice  of  dishonor 
from  the  holder  of  the  note,  has  the  same  time  to  give 
notice  to  another  indorser;  that  is,  he  must  give  notice  to 
a   prior   indorser    either   on   the    same    day   he    receives    his 


NOTES   AND   MORTGAGES.  571 

notice  from  the  holder,  or  on  the  next  business  day,  unless 
he  gives  notice  by  mail,  which  must  be  in  the  same  man- 
ner as  the  holder  is  required  to  give  notice  by  mail. 
Civil  Code,  Sections  3147,  3148,  3150. 

Section  640.— FORM  OF  NOTICE  OF  DISHONOR. 

— No  particular  form  of  notice  is  necessary.  It  may  be  given 
in  any  form  which  describes  the  note  with  reasonable  cer- 
tainty, and  substantially  informs  the  party  receiving  it 
that  the  note  has  been  dishonored.  The  following  is  a 
form  of  notice  in  writing,  to  be  served  on  the  indorser: — 

,  Cal., ,191.. 

JOHN  GREEN:— 

Dear  Sir:  You  are  hereby  notified  that  the  certain 
note  made  and  delivered  by  John  Smith  to  Samuel  Stokes, 
dated  April  1st,  1911,  for  $500,  and  interest  at  8  per  cent  per 
annum,  and  indorsed  April  1st,  1912,  by  you,  is  now  held  by 
me;  that  on  the  day  when  said  note  was  due  I  presented 
it  for  payment  to  the  said  John  Smith  and  demanded 
payment,  but  he  failed  and  refused  to  pay  the  same;  and  I 
hereby  notify  you  that  I  will  hold  you  for  the  amount  due 
on  said  note.  JAMES  BROWN. 

Section  641.— WHEN  NOTICE  OF  DISHONOR  IS 
EXCUSED. — Notice  of  the  dishonor  of  a  note  is  excused, 
when  the  holder  cannot,  with  reasonable  diligence,  ascer- 
tain either  the  place  of  residence  or  business  of  the  indorser 
to  be  charged;  or,  when  there  is  no  mail  communication 
between  the  town  of  the  holder  and  the  town  in  which  the 
place  of  residence  or  business  of  the  party  to  be  charged 
is  situated;  or,  when  the  notice  is  waived  by  the  party  him- 
self upon  whom  it  was  to  be  served.  If,  before  or  after  a 
note  becomes  due,  an  indorser  has  received  full  security, 
or  the  maker  has  assigned  all  his  estate  to  him  as  such 
security,  presentment  and  notice  to  him  are  excused.  De- 
lay in  giving  notice  of  dishonor  is  also  excused,  when 
caused  by  circumstances  which  the  holder  could  not  have 
avoided  by  the  exercise  of  reasonable  care  and  diligence — 
as,  by  an  epidemic,  or  riot,  or  war,  or  flood,  or  storm. 
Civil  Code,  Sections  3156,  3157,  3158. 


572  BUSINESS   LAWS   FOR   BUSINESS   MEN. 

Section    642.— PROTEST    OF    FOREIGN    NOTE.— 

What  has  been  said  of  notice  of  dishonor  applies  only  to  a 
note  made  and  payable  in  California.  A  note  made  in  a  for- 
eign country  or  in  another  State,  and  sent  to  this  State  for 
collection  and  dishonored,  must  be  protested  by  a  Notary 
Public. 

Section  643.— WHEN  SUIT  TO  COLLECT  NOTE 
CAN  BE  BROUGHT.— In  California  a  suit  to  collect  a 
note  can  be  brought  at  any  time  within  four  years  after 
it  is  due,  provided  the  note  was  made  in  this  State.  If 
the  note  was  made  out  of  the  State,  a  suit  can  be  brought 
in  this  State  to  collect  it  at  any  time  within  two  years  after 
it  is  due. 

Code  of  Civil  Procedure,  Sections  337,  338. 

Section  644.— IN  WHAT  COURT  SUIT  TO  COL- 
LECT NOTE  MUST  BE  BROUGHT.^In  all  cases 
where  the  sum  sued  for  amounts  to  $300,  exclusive  of  inter- 
est, the  suit  must  be  brought  in  the  Superior  Court.  In 
cases  where  the  sum  sued  for,  exclusive  of  interest,  amounts 
to  less  than  $300,  the  suit  must  be  brought  in  the  Justice 
Court. 

Code  of  Civil  Procedure,  Sections  Td,  112. 

Section  645.— INSTALLMENT  NOTE.— A  note  is 
valid  which  provides  for  payment  in  stated  installments.  This 
note  may  also  lawfully  provide  that  upon  default  in  the 
payment  of  any  installment  or  of  interest  the  whole  sum 
shall  immediately  become  due  and  payable. 

Section  645a.— FORM  OF  INSTALLMENT  NOTE.— 

The  following  is  a  form  of  installment  note: 

,  California, ,  191 . . 

For  value  received,  I  promise  to  pay 

or  order,  at California,  the  sum  of 

Dollars,   lawful   money   of   the 

United  States,  with  interest  thereon  in  like  lawful  money  at 


NOTES   AND   MORTGAGES.  573 

the  rate  of per  cent  per  annum  from  date  until 

paid.      Said    sum   of Dollars 

to  be  paid  by  installments  as  follows,  to-wit :       The  sum  of 

dollars   on   the day   of . . ; , 

191..,  and  the  remainder  in.... equal  monthly  payments  of 

Dollars   on   the   first   day   of  each 

and  every  month  thereafter,  until  the  whole  principal  sum 
and  the  interest  thereon  shall  have  been  paid.  If  default 
shall  be  made  in  the  payment  of  any  installment,  as  above 
provided,  then  the  whole  amount  of  this  note  and  the  inter- 
est thereon  shall  become  immediately  due  and  payable. 


Mortgages. 

Section  646.— MORTGAGE  SECURITY.— The  ordi- 
nary security  for  the  payment  of  a  promissory  note  is  a 
mortgage  of  either  personal  or  real  property.  By  a  mort- 
gage the  debtor  secures  his  creditor  without  the  necessity  of 
changing  the  possession  of  the  property. 

Section  647.— WHAT  INTEREST  IN  REAL  PROP- 
ERTY MAY  BE  MORTGAGED.— Any  interest  in  real 
property  which  is  capable  of  being  transferred  may  be 
mortgaged.  Interest  in  real  property  covering  the  absolute 
title  in  fee  simple  may,  of  course,  be  mortgaged.  But  the 
right  to  mortgage  does  not  stop  here.  The  interest  of  an 
heir  or  devisee  under  a  will,  being  a  vested  right,  may  be 
mortgaged.  One  in  possession  of  the  land  under  a  verbal 
agreement  to  purchase  may  mortgage  the  interest  that  he 
has.  Any  interest  in  the  reversion  of  lands,  or  any  interest 
in  lands  which  will  surely  come  to  a  person  upon  the  hap- 
pening of  some  event,  may  be  mortgaged. 
Civil  Code,  Section  2947. 

Section  648.— WHAT  PERSONAL  PROPERTY  MAY 
BE  MORTGAGED. — Mortgages  may  be  made  upon  all 
growing  crops,  including  grapes  and  fruit,  and  upon  any 
and  all  kinds  of  personal  property,  except  the  following : 


574  BUSINESS  LAWS  FOR  BUSINESS   MEN. 

1.  Personal  property  not  capable  of  manual  delivery; 

2.  Articles  of  wearing  apparel  and  personal  adornment; 

3.  The  stock  in  trade  of  a  merchant. 

Act  of  the  Legislature,  approved  February  20,  1909. 

Section  649.— HOW  MORTGAGE  IS  EXECUTED 
AND  ACKNOWLEDGED.— A  mortgage  must  be  in 
writing,  and  signed  by  the  mortgagor.  It  should  be  re- 
corded, and  therefore  must  be  acknowledged  before  an  offi- 
cer authorized  to  administer  oaths.  It  is  usual  in  California 
to  have  a  mortgage  acknowledged  before  a  Notary  Public, 
but  an  acknowledgment  before  a  Justice  of  the  Peace,  or 
County  Clerk,  or  County  Recorder,  is  equally  good.  If 
the  person  executing  the  mortgage  cannot  write,  he  may 
sign  the  mortgage  by  an  X  or  mark,  with  two  witnesses  to 
his  signature. 

Section  650— MORTGAGE  OF  MARRIED  WOMAN. 

— A  married  woman  may  mortgage  her  own  property,  with- 
out the  consent  of  her  husband,  and  without  his  joining 
her  in  the  mortgage  in  any  way.  A  married  woman's  ac- 
knowledgment to  a  mortgage  is  made  in  the  same  manner 
as  that  of  any  other  person. 

Section  651.— MORTGAGE  OF  MINOR.— A  minor  in 
California  cannot  under  the  age  of  18  make  a  contract 
relating  to  real  property.  Over  the  age  of  18  he  may  exe- 
cute a  mortgage  of  his  real  property,  but  it  is  voidable  at 
his  election  when  he  comes  of  age.  He  may  mortgage  his 
personal  property,  whether  under  or  over  18  years  of  age, 
provided  the  property  is  in  his  own  possession  or  control ; 
but  this  mortgage  is  also  subject  to  be  disaffirmed  by  him 
when  he  comes  of  age. 

Section  652.— MORTGAGE  OF  PARTNERSHIP 
PROPERTY. — Partners  may  make  a  mortgage  of  partner- 
ship property,  but  they  must  sign  their  own  names.     Thus, 


NOTES   AND    MORTGAGES.  575 

if  Samuel  Jones  and  James  Smith  are  partners,  doing  busi- 
ness under  the  firm  name  of  Jones  &  Smith,  their  mortgage 
of  partnership  property  should  not  be  signed  with  the  firm 
name,  "Jo^^^s  &  Smith,"  but  should  be  signed  with  their 
individual  names,  "Samuel  Jones.     James  Smith." 

Section  653.— RECORDING  MORTGAGES.— The  law 

of  California  provides  for  the  acknowledgment  and  record- 
ing of  mortgages,  real  or  personal.  The  mortgage  is  re- 
corded in  the  office  of  the  County  Recorder  of  the  county 
where  the  property  is  situated. 

Section  654.— PROOF  OF  EXECUTION  OF  MORT- 
GAGE.— It  sometimes  happens  that  a  mortgage  is  made, 
but  not  acknowledged  by  the  mortgagor;  and  the  holder 
of  the  mortgage  afterwards  desires  to  record  it.  Not  hav- 
ing been  acknowledged  when  made,  it  is  not  entitled  to 
be  recorded.  But  the  law  provides  that  proof  of  the  exe- 
cution of  the  mortgage,  when  not  acknowledged,  may  after- 
wards be  made  by  either  the  mortgagor  or  the  mortgagee. 
Proof  is  made  by  going  before  a  Notary  Public,  or  other 
officer  authorized  to  take  acknowledgments,  who  upon  the 
evidence  presented  to  him  certifies  to  the  fact  of  the  execu- 
tion of  the  mortgage.  When  there  is  a  defect  in  the  No- 
tary's certificate,  any  party  interested  may  sue  in  the  Su- 
perior Court  and  obtain  a  judgment  correcting  the  cer- 
tificate. 

Section  655.— EFFECT  OF  RECORDING  MORT- 
GAGES OF  REAL  PROPERTY.— The  effect  of  recording 
a  mortgage  of  real  property  is  to  give  notice  to  the  world 
of  the  encumbrance  upon  it,  and  to  give  the  mortgage  prec- 
edence over  every  other  lien  which  subsequently  attaches 
to  the  property.  A  recorded  mortgage  has  precedence  over 
one  of  earlier  date  which  was  not  recorded,  and  of  which 
the  holder  of  the  recorded  mortgage  had  no  notice.  A  re- 
corded mortgage  is  good  against  an  attachment  or  home- 
stead subsequently  put  on  the  property,  or  any  other  lien 
subsequent  to  the  mortgage. 


576  BUSINESS  LAWS  FOR  BUSINESS  MEN. 

(a)  Chattel  Mortgage — Planing  Mill  Machinery — Subse- 
quent Attachment  to  Real  Property — Mortgage  of  Real 
Property — Priority  of  Mortgages  as  to  Machinery. — A  mort- 
gage of  real  property  upon  which  at  the  time  of  its  execution 
there  is  a  planing  mill  plant  in  operation  with  its  machinery, 
engine,  boiler  and  other  equipment  permanently  attached  to 
the  property,  takes  priority,  as  to  such  machinery  and  equip- 
ment, over  a  prior  chattel  mortgage  regularly  executed 
thereon  before  its  installation  on  the  property,  where  the 
only  notice  or  knowledge  of  the  latter  mortgage  is  such  con- 
structive notice  as  is  imparted  by  its  recordation. 

(b)  Lien  of  Mortgagee  of  Personal  Property — Change  of 
Property  to  Realty. — So  long  as  mortgaged  personal  prop- 
erty remains  personal  property  and  is  not  removed  from  the 
county  where  the  mortgage  is  recorded,  the  mortgagee  is 
protected  in  his  lien  as  against  subsequent  purchasers  from 
the  mortgagor,  but  when  the  property  has  been  permanently 
affixed  by  the  mortgagor  to  land  and  its  character  changed 
from  personalty  to  realty,  a  different  situation  arises. 

(c)  Mortgage  of  Fixtures  to  Realty. — A  purchaser  of  real 
estate  is  bound  only  to  take  notice  of  the  record  title  of  the 
realty,  and  is  not  in  any  way  bound  to  examine  the  records 
of  chattel  mortgages,  for  he  is  not  affected  by  the  record  of 
a  chattel  mortgage  upon  fixtures  of  such  realty. 

(Decided  by  the  District  Court  of  Appeals,  in  the  case  of 
Elliott  vs.  Hudson  et  al.,  which  decision  is  printed  in  Vol- 
ume 14  of  California  Appellate  Decisions,  page  511.) 

Section  656.— EFFECT  OF  RECORDING  A  CHAT- 
TEL MORTGAGE. — A  mortgage  of  personal  property 
must  be  recorded  in  the  office  of  the  County  Recorder  of 
the  county  in  which  the  mortgagor  resides.  But  if  the 
mortgagor  resides  in  one  county,  and  the  property  is  situ- 
ated in  another  county,  then  the  mortgage  must  be  recorded 
in  both  counties.  If  the  property  is  removed  to  another 
county  by  the  mortgagor,  the  mortgagee  must,  within  thirty 
days,  cause  the  mortgage  to  be  recorded  in  the  county  to 


NOTES   AND    MORTGAGES.  577 

which  the  property  has  been  removed.  If  these  provisions 
are  complied  with  a  chattel  mortgage,  properly  executed, 
gives  the  same  prior  lien  to  the  mortgagee  of  personal 
property  which  he  would  acquire  under  a  recorded  real 
estate  mortgage.  A  certified  copy  of  a  mortgage  of 
personal  property  once  recorded  may  be  recorded  in  any 
other  county. 

Civil  Code,  Sections  2959,  2964,  2965. 

Act  of  the  Legislature,  approved  February  22,  1909. 

Section  657.  —  MORTGAGE  NOT  RECORDED 
GOOD  BETWEEN  PARTIES.— Even  though  a  mort- 
gage is  not  recorded,  it  is  good  between  the  parties  to  it,  if 
the  mortgage  was  executed  and  signed  in  the  manner  pro- 
vided by  law. 

Section    658.— MORTGAGE    ON    HOMESTEAD.— A 

mortgage  on  a  homestead  is  void  unless  it  is  signed  and 
acknowledged  by  both  husband  and  wife.  A  mortgage 
may  be  given  by  the  husband  alone,  on  community  property, 
if  there  is  no  homestead,  and  it  will  be  good.  But  the  law 
of  California  provides  that  a  mortgage  made  after  a  home- 
stead has  been  filed,  signed  by  the  husband  alone,  is  abso- 
lutely void.  The  homestead  may  be  mortgaged,  but  it 
must  be  by  the  joint  act  of  the  husband  and  wife.  They 
must  both  sign  the  mortgage  at  the  time  it  is  made,  and 
they  must  both  know  that  it  covers  the  homestead  property. 
So,  if  the  husband  signs  a  mortgage  on  the  homestead,  and 
his  wife  is  induced  to  sign  it  also,  but  under  the  belief  that 
the  mortgage  covers  other  property  alone,  it  will  not  be 
good  against  the  homestead.  A  mortgage  of  the  home- 
stead, to  be  valid,  must  be  the  united  act  of  the  husband 
and  wife. 

Civil  Code,  Section  1242. 

Section  659.— DECLARATION  OF  HOMESTEAD.— 

Sometimes  a  question  will  arise  as  to  whether  there  is  a 
legal  homestead  on  file,  sufficient  to  protect  the  property 
against  creditors.  This  question  will  be  easily  answered, 
by  getting  from  the  County  Recorder  a  copy  of  the  declara- 


578  BUSINESS   LAWS   FOR   BUSINESS   MEN. 

tion  of  homestead.  The  law  provides  what  must  be  stated 
in  the  declaration  of  homestead  filed  with  the  County  Re- 
corder, and  from  what  property  the  homestead  may  be 
taken.  If  the  claimant  be  married,  the  homestead  may  be 
selected  from  the  community  property,  or  the  separate 
property  of  the  husband,  or,  with  the  consent  of  the  wife, 
from  her  separate  property.  When  the  claimant  is  not 
married,  but  is  the  head  of  a  family,  the  homestead  can  be 
selected  from  any  of  his  or  her  property.  In  order  to  select 
a  homestead,  the  claimant  must  sign  and  acknowledge  a 
declaration  and  file  it  for  record  in  the  office  of  the  County 
Recorder.  The  declaration  of  homestead  must  contain: 
(1)  A  statement,  showing  that  the  person  making  it  is  the 
head  of  a  family;  or  when  the  declaration  is  made  by  the 
wife,  showing  that  her  husband  has  not  made  such  declara- 
tion, and  that  she  therefore  makes  the  declaration  for  their 
joint  benefit;  (2)  a  statement  that  the  person  making  it 
is  residing  on  the  premises,  and  claims  them  as  a  home- 
stead; (3)  a  description  of  the  premises;  (4)  an  estimate 
of  their  actual  cash  value. 

Civil  Code,  Sections  1237,  1238,  1261,  1263. 

Section  660.— FORM  OF  DECLARATION  OF 
HOMESTEAD  BY  HUSBAND  AND  WIFE.— The  fol- 
lowing is  a  good  form  of  Declaration  of  Homestead  by  hus- 
band and  wife,  which  must  be  recorded  in  the  office  of  the 
County  Recorder  of  the  county  where  the  land  is  situated: — 

DECLARATION  OF  HOMESTEAD :— Know  all  men 
by  these  presents,  that  we  do  hereby  certify  and  declare  that 
we  are  husband  and  wife,  and  that  we  do  now  at  the  time 
of  making  this  declaration  actually  reside  together  on  the 
land  and  premises  herein  described;  that  the  land  and  prem- 
ises on  which  we  reside  are  situate,  bounded,  and  described 
as  follows,  to-wit: — 

(Here  insert  description  of  land.) 

That  it  is  our  intention  to  use  and  claim  the  said  lot  of 
land  and  premises  above  described,  together  with  the  dwell- 
ing house  thereon,  and  its  appurtenances,  as  a  homestead,  and 
we   do  hereby  select  and  claim  the  same   as   a  homestead ; 


NOTES   AND   MORTGAGES.  579 

that  we  make  this  declaration  for  our  joint  benefit,  and 
we  declare  that  we  have  not  heretofore  made  a  declara- 
tion of  homestead ;  that  the  actual  cash  value  of  said  prop- 
erty we  estimate  to  be  $ 

In   witness   whereof,   we  have   hereto   set   our   hands   and 

seals  this day  of ,   191 .  . 

(Seal.) 

(Seal.) 


STATE  OF  CALIFORNIA,  1 


County   of 

On  this day  of ,  191. .,  before  me,  a  Notary 

Public  in  and  for  said  County  and  State,  personally  appeared 
and     , 

personally  known  to  me  to  be  the  persons  described  in  and 
who  executed  the  foregoing  Declaration  of  Homestead,  and 
they  acknowledged  to  me  that  they  executed  the  same. 

■In    witness   whereof    I    have   hereunto    set   my    hand    and 

affixed  my  official  seal,  at  my  office,  on  this day  of 

,  191.. 

Notary  Public  in  and  for  the  County  of , 

State  of  California. 
Commission  expires ,  191 . . 

Section  661.— FORM  OF  DECLARATION  OF 
HOMESTEAD  BY  HUSBAND.— The  following  is  a 
good  form  of  Declaration  of  Homestead  by  the  husband 
alone,  and  must  be  recorded  in  the  office  of  the  County 
Recorder  of  the  county  in  which  the  land  is  situated: — 

DECLARATION  OF  HOMESTEAD  :— 

Know  all  men  by  these  presents,  that  I  do  hereby  cer- 
tify and  declare,  that  I  am  the  head  of  a  family;  that  I  do 
now  at  the  time  of  making  this  declaration  actually  reside 
with  my  family  on  the  land  and  premises  hereinafter  de- 
scribed; that  the  land  and  premises  on  which  I  reside  are 
situate,  bounded,  and  described  as  follows,  to-wit: — 

(Here  insert  description  of  land.) 

That  my  wife's  name  is 

That  it  is  my  intention  to  use  and  claim  the  said  lot  of 
land  and  premises  above  described,  together  with  the  dwell- 
ing house  thereon,  and  its  appurtenances,  as  a  homestead, 
and  I  do  hereby  select  and  claim  the  same  as  a  homestead; 


580  BUSINESS   LAWS   FOR   BUSINESS   MEN. 

that  I  make  this  declaration  for  the  joint  benefit  of  myself 
and  wife,  and  I  declare  that  my  wife  has  not  made  a  dec- 
laration of  homestead;   that  the  actual   cash   value   of   said 

property  I  estimate  to  be  $ 

In  witness  whereof,  I  have  hereto  set  my  hand  and  seal 

this day   of 191.. 

(Seal.) 

STATE  OF  CALIFORNIA,  )  ^^ 
County   of ) 

On  this day  of ,  191. .,  before  me,  a  Notary 

Public  in  and  for  the  said  County  and  State,  personally  ap- 
peared   ,    personally    known    to    me    to 

be  the  person  described  in  and  who  executed  the  foregoing 
Declaration  of  Homestead,  and  he  acknowledged  to  me  that 
he  executed  the  same. 

In   witness   whereof   I   have   hereunto   set   my   hand   and 

affixed  my  official  seal,  at  my  office,  on  this day  of 

191.. 


Notary  Public  in  and  for  the  County  of , 

State  of  California. 
Commission  expires ,  191 . . 

Section  662.— FORM  OF  DECLARATION  OF 
HOMESTEAD  BY  WIFE.— The  following  is  a  good 
form  of  Declaration  of  Homestead  by  the  wife  alone,  and 
must  be  recorded  in  the  office  of  the  County  Recorder  of  the 
county  in  which  the  land  is  situated: — 

DECLARATION  OF  HOMESTEAD:— 

Know  all  men  by  these  presents,  that  I  do  hereby  cer- 
tify and  declare,  that  I  do  now  at  the  time  of  making  this 
declaration  actually  reside  with  my  family  on  the  land  and 
premises  hereinafter  described;  that  the  land  and  premises 
on  which  I  reside  are  situate,  bounded,  and  described  as 
follows,  to-wit: — 

(Here  insert  description  of  land.) 

That  my  husband's  name  is 

That  it  is  my  intention  to  use  and  claim  the  said  lot  of 
land  and  premises  above  described,  together  with  the  dwell- 
ing house  thereon,  and  its  appurtenances,  as  a  homestead, 
and  I  do  hereby  select  and  claim  the  same  as  a  homestead; 
that  I  make  this  declaration  for  the  joint  benefit  of  myself 


NOTES   AND    MORTGAGES.  581 

and  husband  and  I  declare  that  my  husband  has  not  made 
a  declaration   of   homestead;  that  the   actual   cash   value   of 

said  property  I  estimate  to  be  $ 

'In  witness  whereof  I  have  hereunto  set  my  hand  and  seal 

this day  of ,   191.. 

(Seal.) 

STATE  OF  CALIFORNIA,  )  ^^ 
County   of 3 

On  this day  of ,  191 .  . ,  before  me,  a  Notary 

Public   in   and    for   the    said    County    and    State,    personally 

appeared ,  personally  known  to  me 

to  be  the  person  described  in  and  who  executed  the  fore- 
going Declaration  of  Homestead,  and  she  acknowledged  to 
me  that  she  executed  the  same. 

In   witness    whereof    I    have    hereunto    set    my    hand   and 

affixed   my   official   seal,   at   my   office,   on   this day   of 

191.. 

Notary  Public  in  and  for  the   County  of , 

State  of  California. 
Commission  expires ,  191 .  . 

Section  663.— VALUE  OF  HOMESTEAD.— The  home- 
stead of  husband  and  wife  must  not  exceed  in  value  the 
sum  of  $5,000.  The  value  of  the  homestead  selected  by 
the  head  of  a  family  other  than  the  husband  or  wife  must 
not  exceed  in  value  the  sum  of  $1,000.  Besides  the  hus- 
band or  wife,  any  other  person  may  take  a  State  homestead, 
as  the  head  of  a  family,  who  has  residing  on  the  premises 
and  is  caring  for  and  maintaining,  his  or  her  minor  child, 
or  minor  grandchild,  or  the  minor  child  of  his  or  her  de- 
ceased wife  or  husband,  a  minor  brother  or  sister  or  the 
minor  child  of  a  deceased  brother  or  sister,  a  father,  mother, 
grandmother,  or  grandfather  of  a  deceased  husband  or  wife, 
or  an  unmarried  sister. 

Civil  Code,  Section   1261. 

Section  664.— FORM  OF  REAL  ESTATE  MORT- 
GAGE.— A  good  form  of  mortgage  on  real  estate  is  as 
follows,  the  blank  spaces  to  be  filled  in  with  the  proper 
names,  dates,  amounts,  and  descriptions: — 

This   mortgage   made  the day   of ,   in   the 

year    191..,   by 


582  BUSINESS   LAWS   FOR  BUSINESS   MEN. 


Mortgagor to Mortgagee    

Witnesseth    

That  the   Mortgagor mortgages   to   the    Mortgagee 

those   certain    lots,    or   tracts    of   land   situated   in 

County,  State  of  California,  particularly  de- 
scribed as  follows,  to-wit: — 

(Here  insert  description  of  property.) 


as  security  for  the  payment  of  a  certain  obligation  in  writ- 
ing, of  which  the  following  is  a  copy: — 

,  Cal., ,  191.. 

after  date 

for  value  received,   . . .  .promise  to  pay 

,  or  order,  at 

Dollars,  with  inter- 
est from at  the 

rate  of per  cent  per  annum,  payable  semi- 
annually, principal  and  interest  payable  in  United  States 
Gold  Coin.  Interest  if  not  paid  when  due,  to  be  added  to 
the  principal  and  bear  interest  at  the  same  rate  until  paid. 


$ 

But  in  case  default  be  made  in  the  payment  of  either  the 
principal  or  any  installment  of  interest  provided  for  in  said 
obligation  when  due,  then  the  whole  shall  be  due  at  the 
option  of  the  holder  of  the  said  obligation,  and  action  may 
be  immediately  commenced,  without  notice,  to  foreclose 
this  mortgage. 

And  the  plaintiff,  in  action  to  foreclose  this  mortgage 
shall,   upon   filing   the   complaint   in    foreclosure,    be   entitled 

to per  cent  on  the  amount  due  on  said  obligation 

as  counsel  fees. 

And  the  holder  of  said  obligation  may  pay  all  taxes  or 
other  encumbrances  now  subsisting  or  hereafter  to  be  laid 
upon  said  land,  and  may  at  his  option  keep  fully  insured 
against  all  risks  by  fire  the  buildings  which  are  now  and 
may  be  hereafter  erected  thereon,  and  such  payment  shall 
be  allowed  with  interest  thereon  at  the  rate  of  one  per  cent 
per  month. 

And  the  cost  of  foreclosure  and  sale,  counsel  fees,  and 
all  payments  herein  provided  for,  are  and  shall  be  a  charge 


NOTES   AND   MORTGAGES.  583 

upon  the   property   described   herein,   and   repayable   on   de- 
mand, and  payable  out  of  the  proceeds  of  the  sale  thereof. 

IN  WITNESS  WHEREOF,  the  said  Mortgagor, 

has  hereunto  set hand ....  and  seal . . .  . , 

the  day  and  year  first  above  written. 


(Seal.) 
(Seal.) 
(Seal.) 


STATE  OF  CALIFORNIA, 

County   of 

On  this day  of ,  A.  D.  one  thousand  nine 

hundred  and ,  before  me , 

a  Notary  Public  in  and  for  said  County  and  State,  residing 
therein,   duly  commissioned  and  sworn,   personally  appeared 


known  to  me  to  be  the  person  whose  name  is  subscribed 
to  and  who  executed  the  within  instrument,  and  he  ac- 
knowledged to  me  that  he  executed  the  same. 

In   witness   whereof,    I    have   hereunto    set   my   hand   and 

affixed  my  official  seal  at  my  office  in  the 

County  of ,  the  day  and  year  in  this  certificate 

first  above  written. 


Notary  Public  in  and  for  the   County  of , 

State  of  California. 
Commission  expires ,  191 . . 

Section  665.— RULES  WHICH  APPLY  TO  CHAT- 
TEL MORTGAGES.— The  law  provides  how  a  mortgage 
of  personal  property  must  be  made,  and  because  this  kind  of 
mortgage  is  on  movable  property,  subject  to  transportation 
from  one  place  to  another,  the  law  makes  certain  strict 
rules  which  must  be  applied  to  the  making  of  every  chattel 
mortgage  in  this  State.  A  mortgage  of  personal  property 
is  void  as  against  creditors  of  the  mortgagor,  unless  it  is 
accompanied  by  the  affidavit  of  all  the  parties  thereto  that 
it  is  made  in  good  faith  and  without  any  design  to  hinder, 
delay,  or  defraud  creditors ;  and  a  mortgage  without  this 
affidavit  is  also  void  as  against  subsequent  purchasers  and 


584  BUSINESS   LAWS   FOR   BUSINESS   MEN. 

encumbrancers  of  the  property  who  become  such  in  good 
faith  and  for  value.  The  law  also  provides  that  a  mort- 
gage of  personal  property,  to  be  valid  against  creditors  of 
the  mortgagor,  or  against  subsequent  purchasers  or  encum- 
brancers in  good  faith  and  for  value,  must  be  acknowl- 
edged, or  proved,  certified,  and  recorded  in  like  manner  as 
deeds  of  real  property. 

Civil  Code,  Section  2957. 

Section  666.— FORM  OF  CHATTEL  MORTGAGE.— 

A  good  form  of  mortgage  on  personal  property  is  as  fol- 
lows, the  blank  spaces  to  be  filled  in  with  the  proper  dates, 
names,  amounts,  and  descriptions: —   , 

THIS  MORTGAGE  made  the day  of ,  in 

the  year  191 . .,  by 

by  occupation  a ,  Mortgagor, 

to ,  by  occupation  a 

,  Mortgagee. 

WITNESSETH:  That  the  Mortgagor  mortgages  to  the 
Mortgagee    all    that    certain    personal    property,    with    the 

increase  thereof,  situated  in County,  State 

of  California,  and  more  particularly  described  as  follows, 
to-wit : — 

(Here   insert  description   of  property.) 


as  security  for  the  payment  to  the  said  Mortgagee  of  the 

sum  of Dollars,  Gold  Coin 

of  the  United  States,  on  the day  of ,  191 . . , 

with    interest   thereon    at    the    rate    of per    cent    per 

annum,  payable  semi-annually,  according  to  the  terms  and 
conditions  of  a  certain  promissory  note  of  which  the  fol- 
lowing is  a  copy: — 

,  Cal., ,  191.. 

after    date , 

for  value  received, promise  to  pay 

,  or  order,  at 

Dollars,  with  interest 

from ,  at  the  rate  of 

per   cent   per   annum,   payable    semi-annually,   principal    and 


NOTES   AND   MORTGAGES.  585 

interest  payable  in  United  States  Gold  Coin.  Interest,  if 
not  paid  when  due,  to  be  added  to  the  principal  and  bear 
interest  at  the  same  rate  until  paid. 


$ 

This  mortgage  is  also  made  as  security  for  all  other  sums 
now  due  or  that  may  hereafter  become  due  on  account  or 
otherwise  from  the  mortgagor  to  the  mortgagee.  It  is  also 
agreed  that  in  case  the  mortgagee  should  bring  suit  to  fore- 
close this  mortgage,  upon  filing  the  complaint  he  shall  be 
allowed  a  reasonable  attorney  fee,  the  same  to  be  secured 
by  this  mortgage. 

It  is  also  agreed  that  if  the  mortgagor  shall  fail  to  make 
any  payment  as  in  said  promissory  note  or  in  this  mortgage 
provided,  or  if  the  mortgagor  shall  sell  the  said  property 
herein  mortgaged  without  the  written  consent  of  the  mort- 
gagee, or  remove  the  same  from  the  County  of 

or,  if  the  mortgagee  shall  hereinafter  deem  himself  insecure, 
then  in  either  of  the  above  events  the  mortgagee  may  take 
possession  of  the  said  personal  property,  using  all  neces- 
sary force  so  to  do,  and  immediately  proceed  to  sell  the 
same  in  the  manner  provided  by  law,  and  without  fore- 
closure, and  from  the  proceeds  may  pay  the  whole  amount 
due  the  said  mortgagee,  as  specified  in  said  note  and  mort- 
gage. 

Signed  and  executed  in  the  presence  of 

W.W'.'.'.'.'.'.'.'.'. (Seal.) 

(Seal.) 

(Seal.) 

STATE  OF  CALIFORNIA, 
County   of 


,   the  mortgagor ....  in  the   foregoing 

mortgage    named,    and , 

the  mortgagee  in  said  mortgage  named,  being  duly  sworn, 
each  for  himself  doth  depose  and  say  that  the  aforesaid 
mortgage  is  made  in  good  faith  and  without  any  design  to 
hinder,  delay,  or  defraud  any  creditor  or  creditors. 

(Seal.) 

(Seal.) 

(Seal.) 


586  BUSINESS   LAWS   FOR   BUSINESS   MEN. 

Subscribed  and  sworn  to  before  me  this day 

of ,  191... 


Notary  Public  in  and  for County,  California. 

STATE  OF  CALIFORNIA,  ) 
County   of J  ^^• 

On   this day   of ,    191..,   before    me,    a 

Notary  Public  in  and  for  the  County  of ,  residing 

therein,   duly  commissioned  and  sworn,  personally  appeared 

,  known  to  me  to 

be  the  person  described  in,  whose  name  is  subscribed  to, 
and  who  executed  the  within  instrument,  and  he  acknowl- 
edged to  me  that  he  executed  the  same. 

IN  WITNESS  WHEREOF,  I  have  hereunto  set  my 
hand  and  affixed  my   official   seal   at  my  office   in  the   said 

County  of ,  the  day  and  year  in  this  certificate 

first  above  written. 


Notary  Public  in  and  for  the  County  of , 

State  of  California. 
Commission  expires ,  191 . . 

Section  667.— DEED  AS  SECURITY  AND  AGREE- 
MENT TO  DEED  BACK.— When  a  deed  of  property  is 
given  as  security  for  a  note,  and  a  written  agreement  is 
given  to  the  maker  that  the  property  will  be  deeded  back 
to  him  when  the  note  is  paid,  the  transaction  constitutes 
a  mortgage,  and  nothing  more.  Many  lawsuits  have  oc- 
curred, where  the  holder  of  such  a  deed  has  claimed  to  be 
the  absolute  owner  of  the  property,  but  the  courts  have 
invariably  held  that  it  is  nothing  more  than  a  mortgage, 
and  that  the  holder  must  bring  a  foreclosure  suit  upon  it, 
just  the  same  as  if  it  were  a  mortgage  in  the  ordinary  terms. 

Section  668.— LAWFUL  INTEREST.— There  is  no  law 
against  usury  in  California.  A  note  may  specify  any  rate 
of  interest,  and  it  will  be  allowed,  according  to  the  terms 
of  the  note,  until  the  entry  of  judgment  in  a  suit  to  collect 
the  note. 

Civil  Code,  Section  1918. 


NOTES    AND    MORTGAGES.  587 

Section  669.— LEGAL  RATE  WHERE  NO  INTER- 
EST SPECIFIED.— If  a  note  does  not  specify  any  rate, 
interest  is  payable  on  it  at  the  rate  of  seven  per  cent  per  an- 
num after  the  money  becomes  due.  Thus,  if  a  note  is  made 
payable  in  sixty  days,  which  does  not  specify  any  rate  of 
interest,  the  legal  rate  of  seven  per  cent  is  payable  on  it, 
beginning  with  the  termination  of  the  sixty  days.  If  part 
of  the  note  is  paid  in  sixty  days,  no  interest  is  payable 
except  on  so  much  of  it  as  remains  unpaid.  In  the  compu- 
tation of  interest  for  a  period  less  than  a  year  360  days 
are  deemed  to  constitute  a  year. 
Civil  Code,  Section  1917. 

Section  670.— COMPOUND  INTEREST.— The  maker 
of  a  note  may  lawfully  agree,  and  may  insert  in  the  note, 
that  if  the  interest  is  not  punctually  paid  it  shall  become  a 
part  of  the  principal,  and  thereafter  bear  the  same  rate 
of  interest  as  the  principal  debt. 
Civil  Code,  Section  1919. 

Section  671.— INTEREST  ON  JUDGMENT.— Interest 

is   payable   on    judgments    recovered    in    the    courts    of    this 
State  at  the  rate  of  seven  per  cent  per  annum,   but   such 
interest  cannot  be  compounded  in  any  manner. 
Civil  Code,  Section  1920. 

Section  672.— WHO  MUST  PAY  TAXES  ON  MORT- 
GAGE.— The  provision  of  the  Constitution,  prohibiting  the 
making  of  any  contract  for  the  mortgagor  to  pay  the  taxes, 
has  been  repealed.  The  mortgagee  and  mortgagor  may  now, 
make  any  agreement  they  please  about  the  payment  of  the 
taxes,  and  it  is  lawful  to  provide  in  the  mortgage  that  the 
mortgagor  shall  pay  the  taxes  on  the  mortgage. 

Section  673.—  INSURANCE  ON  MORTGAGED 
BUILDINGS. — Either  the  mortgagor  or  mortgagee  may 
keep  the  buildings  on  the  land  insured.  A  mortgage  gen- 
erally provides  that  the  mortgagee  may  insure  the  build- 
ings, and  the  mortgagor  must  repay  the  amount  paid  as  pre- 
miums, with  interest. 


588  BUSINESS   LAWS   FOR   BUSINESS   MEN. 

Section  .674.— ATTORNEY  FEES.— There  is  no  lien  on 
mortgaged  property  for  attorney  fees,  unless  the  mortgage 
expressly  so  provides. 

Section  675.— MORTGAGE  FOR  FUTURE  AD- 
VANCES.— A  mortgage  may  be  made  which  will  cover 
and  secure  not  only  a  sum  of  money  paid  in  hand,  but  also 
future  advances  of  the  mortgagee  to  the  mortgagor.  Such 
a  mortgage  is  good,  and  avoids  the  necessity  of  a  number 
of  mortgages  where  money  is  advanced  at  different  times 
to  the  same  person. 

Section  676.— FIRST  AND  SECOND  MORTGAGES. 

— A  mortgage  properly  executed  and  recorded  takes  prec- 
edence of  other  mortgages  subsequently  placed  on  the  same 
property.  If  the  property  is  sold  under  foreclosure,  the 
first  mortgage  must  be  first  paid. 

Section  677.— IN  WHAT  COURT  SUIT  MUST  BE 
BROUGHT  TO  FORECLOSE  MORTGAGE.— A  suit  to 
foreclose  a  mortgage  on  personal  property  can  be  brought 
in  either  the  Justice  Court  or  the  Superior  Court,  if  neither 
the  amount  of  the  lien  nor  the  value  of  the  property  is  as 
much  as  $300.  If  the  mortgage  lien  is  as  much  as  $300, 
or  if  the  value  of  the  property  mortgaged  is  $300  or  over, 
the  suit  to  foreclose  the  mortgage  must  be  brought  in  the 
Superior  Court.  All  suits  to  foreclose  mortgages  on  real 
property  must  be  brought  in  the  Superior  Court. 

Section  678.— WHEN  MORTGAGE  IS  OUTLAWED. 

— A  mortgage  is  outlawed  four  years  after  it  becomes  due. 
A  suit  to  foreclose  a  mortgage  must  be  commenced  within 
four  years  after  it  is  due,  otherwise  the  suit  cannot  be 
maintained. 

Code  of  Civil  Procedure,  Section  337. 

Section  679.— RENEWAL  OF  NOTE  DOES  NOT 
RENEW  MORTGAGE.— When  a  note  secured  by  a 
mortgage  becomes  barred  by  the  statute  of  limitations,  the 
lien  created  by  the  latter  is  extinguished,  and  a  subsequent 
renewal   of   the   note,   while   creating   the    debt   anew,    does 


NOTES   AND    MORTGAGES.  589 

not  revive  or  continue  the  mortgage.  (Decided  by  the 
Supreme  Court  of  CaHfornia,  in  the  case  of  Kern  Valley- 
Bank  vs.  Koehn,  which  decision  is  printed  in  Volume 
XXXIX  of  California  Decisions,  page  138.) 

Section  680.— WHAT  PROPERTY  CAN  BE  SOLD 
TO  SATISFY  MORTGAGE.— Only  so  much  of  the 
mortgaged  property  can  be  sold  as  will  bring  enough  to 
pay  the  debt  and  the  costs  and  expenses  of  foreclosure. 
Therefore,  neither  real  estate  nor  personal  property  will  be 
sold  in  one  lot,  to  satisfy  a  mortgage  debt,  if  it  appears  that 
a  sale  of  a  part  only  will  bring  enough  to  pay  the  debt  and 
costs  and  expenses. 

Section  681.— ORDER  IN  WHICH  PROPERTY 
MUST  BE  SOLD.— As  a  general  rule,  in  the  sale  of 
mortgaged  property  under  foreclosure,  where  the  mortgage 
covers  both  real  and  personal  property,  the  court  in  its 
decree  of  foreclosure  will  direct  that  the  personal  property 
be  sold  first.  When  the  sale  is  of  real  property,  consisting 
of  several  known  lots  or  parcels,  they  must  be  sold  sep- 
arately. The  judgment  debtor,  if  present  at  the  sale,  may 
also  direct  the  order  in  which  property,  real  or  personal, 
shall  be  sold,  when  such  property  consists  of  several  known 
lots  or  parcels,  or  of  articles  which  can  be  sold  to  advan- 
tage separately,  and  the  Sheriff  must  follow  such  directions. 
Code  of  Civil  Procedure,  Section  694. 

Section     682— COSTS     OF     FORECLOSURE.— The 

costs  of  foreclosure,  including  reasonable  attorney  fees,  when 
provided  for  in  the  mortgage,  are  taxed  to  the  mortgagor, 
and  must  be  paid  out  of  the  proceeds  of  the  sale  of  the 
mortgaged  premises. 

Section  683— WHO  MAY  BUY  AT  FORECLOSURE 
SALE.— Any  person  may  buy  in  the  property  at  a  fore- 
closure sale,  except  the  officer  making  the  sale,  or  his 
deputy.  The  mortgagee  may  buy  in  the  property,  if  he 
will  bid  higher  than  other  bidders,  or  if  no  one  else  appears 
to  bid. 


590  BUSINESS   LAWS   FOR   BUSINESS   MEN. 

Section  684.— CERTIFICATE  OF  SALE.— The  officer 
making  the  sale  gives  to  the  purchaser  a  certificate  of  sale, 
containing  a  particular  description  of  the  real  property  sold, 
the  price  bid  for  each  distinct  lot  or  parcel,  the  whole  price 
paid,  and  when  the  property  is  subject  to  redemption  the 
certificate  must  so  state.  And  when  the  judgment  under 
which  the  sale  has  been  made  is  payable  in  a  specified  kind 
of  money  or  currency,  the  certificate  must  specify  the  same 
as  the  money  or  currency  in  which  redemption  may  be 
made.  Besides  giving  to  the  purchaser  the  certificate  of 
sale,  a  duplicate  of  such  certificate  must  be  filed  by  the 
officer  in  the  office  of  the  Recorder  of  the  county.  If  the 
property  sold  is  personal  property,  capable  of  manual  de- 
livery, the  officer  must  actually  deliver  the  property  to  the 
purchaser  upon  payment  of  the  purchase  price. 

Code  of  Civil  Procedure,  Sections  698,  700. 

Section  685.— ASSIGNMENT  OF  CERTIFICATE 
OF  SALE. — The  certificate  of  sale  received  by  the  purchaser 
can  be  sold  and  assigned  by  him,  and  such  assignment 
passes  his  right  and  title.  The  assignment  should  be  re- 
corded, and  a  notice  of  the  assignment  should  be  served  on 
the  officer  who  made  the  sale. 

Section  686.— WHAT  PROPERTY  CAN  BE  RE- 
DEEMED.— There  is  no  redemption  from  sales  of  personal 
property.  The  purchaser  acquires  an  absolute  title  to  per- 
sonal property.  When  a  leasehold  interest  in  real  prop- 
erty is  sold,  and  the  lease  has  less  than  two  years  to  run, 
there  is  no  redemption  from  the  sale.  In  all  other  cases 
the  property  is  subject  to  redemption. 

Code  of  Civil  Procedure,  Section  700. 

Section  687.— TIME  FOR  REDEMPTION.— The  prop- 
erty sold  may  be  redeemed  from  the  purchaser  at  any  time 
within  twelve  months  after  the  sale.     The  judgment  debtor 
has  the  whole  of  the  last  day  in  which  to  redeem. 
Code  of  Civil  Procedure,  Section  702. 

Section  688.— WHO  MAY  REDEEM.— The  persons 
who  may  redeem  in  this  State  are,  the  judgment  debtor,  or 


NOTES   AND   MORTGAGES.  591 

his  successor  in  interest,  in  the  whole  or  any  part  of  the 
property;  and  a  creditor  having  a  lien  by  judgment  or 
mortgage  on  the  property  sold,  or  on  some  share  or  part 
thereof,  subsequent  to  the  lien  on  which  the  property  was  sold. 
Code  of  Civil  Procedure,  Section  701. 

Section  689.— HOW  TO  REDEEM.— The  law  provides, 
that  the  judgment  debtor,  or  other  redemptioner,  who 
wishes  to  redeem,  must  pay  the  purchaser  the  amount  of 
his  purchase,  with  one  per  cent  per  month  thereon  up  to 
the  time  of  redemption,  together  with  the  amount  of  any 
assessment  or  taxes  which  the  purchaser  may  have  paid  on 
the  property  after  purchase,  and  interest  on  such  amount. 
The  purchaser  from  whom  redemption  is  made  may  also 
be  a  creditor  having  a  lien  other  than  the  judgment  under 
which  he  purchased,  and  if  this  lien  was  prior  to  the  lien 
of  the  person  who  seeks  to  redeem  from  him,  he  must  be 
paid  the  amount  of  his  lien,  with  interest,  in  addition  to 
the  amount  of  his  purchase.  When  property  has  been  once 
redeemed,  it  may  be  again  redeemed  by  another  person 
within  sixty  days  after  the  last  redemption,  by  paying  the 
amount  paid  on  the  last  redemption,  with  two  per  cent 
additional,  and  any  assessment  or  taxes  on  the  property 
which  the  last  redemptioner  may  have  paid,  and  interest; 
and  other  redemptioners  may  in  like  manner  redeem  again 
and  again,  by  making  similar  payments.  Written  notice 
of  redemption  must  be  given  to  the  officer  making  the  sale 
and  a  duplicate  filed  with  the  Recorder  of  the  county.  No 
form  of  written  notice  is  here  given,  for  the  reason  that  it 
is  not  safe  for  a  redemptioner  to  attempt  to  fill  out  a  blank 
notice  and  use  it  himself,  without  the  services  of  a  lawyer. 
Knowing  his  rights,  the  redemptioner  should  seek  the  serv- 
ices of  a  competent  lawyer,  to  prepare  and  serve  the  neces- 
sary notice  and  make  the  proper  tenders  of  money  in  a  law- 
ful manner. 

Code  of  Civil  Procedure,  Sections  702,  703. 

Section  690.— THE  SHERIFF'S  DEED.— If  no  re- 
demption is  made  within  twelve  months  after  the  sale,  the 


592  BUSINESS   LAWS   FOR   BUSINESS    MEN. 

purchaser  or  his  assignee  is  entitled  to  a  Sheriff's  deed.  If 
redeemed,  whenever  sixty  days  have  elapsed,  and  no  other 
redemption  has  been  made,  and  the  time  for  redemption 
has  expired,  the  last  redemptioner  or  his  assignee  is  entitled 
to  a  Sheriff's  deed.  But  in  all  cases  the  judgment  debtor 
has  the  entire  period  of  twelve  months  from  the  date  of 
the  sale  to  redeem  the  property.  If  the  debtor  redeems, 
the  effect  of  the  sale  is  terminated,  and  he  is  restored  to 
his  estate. 

Code  of  Civil  Procedure,  Section  703. 

Section  691.  — DEFICIENCY  JUDGMENT.— If  after 
the  sale  of  mortgaged  property  the  proceeds  are  insufficient 
to  pay  the  debt,  and  a  balance  still  remains  due,  a  judgment 
is  docketed  by  the  clerk  of  the  court  for  such  balance  against 
the  defendants  personally  liable  for  the  debt.  Such  deficiency 
judgment  then  becomes  a  lien  against  the  real  estate  of 
the  judgment  debtor. 

Code  of  Civil  Procedure,  Section  726. 

Section  692.— POSSESSION  OF  PROPERTY  DUR- 
ING  FORECLOSURE   PROCEEDINGS.— Generally  the 

mortgagor  remains  in  possession  of  the  mortgaged  property 
during  foreclosure  proceedings,  and  it  is  only  under  peculiar 
circumstances  that  the  court  will  disturb  his  possession. 
Where  it  appears  that  the  mortgaged  property  is  in  danger 
of  being  lost,  removed,  or  materially  injured,  or  where  it 
appears  that  the  conditions  of  the  mortgage  have  not  been 
performed,  and  that  the  property  is  insufficient  to  discharge 
the  mortgage  debt,  the  Superior  Court  has  the  power  to 
appoint  a  Receiver,  into  whose  hands  the  property  is  placed 
while  the  suit  is  going  on. 

Code  of  Civil  Procedure,  Section  564. 

Section  693.— POSSESSION  OF  REAL  PROPERTY 
DURING  TIME  FOR  REDEMPTION.— It  has  been 
shown  that  there  is  no  redemption  of  personal  property  sold 
under  foreclosure,  but  that  a  redemption  of  real  property 
is  allowed,  and  that  the  time  within  which  redemption  may 
be  made  is  twelve  months.  During  this  period  of  twelve 
months  allowed  for  redemption  the  mortgagor  has  the  right 


NOTES   AND    MORTGAGES.  593 

to  remain  in  possession  of  the  mortgaged  premises,  and 
during  this  time  he  is  entitled  to  use  the  same  and  take  the 
proceeds  thereof. 

Section  694.— RIGHT  TO  RENTS  AND  PROFITS.— 

Where  the  mortgaged  property  is  occupied  by  a  tenant,  the 
purchaser,  from  the  time  of  the  sale  until  redemption,  is 
entitled  to  receive  the  rents  or  the  value  of  the  use  and 
occupation  of  the  property.  Where  a  person  other  than  the 
judgment  debtor  redeems,  he  is  entitled  to  receive  the  rents 
until  another  redemption  takes  place.  But  all  rents  or  profits 
collected  by  the  judgment  creditor  or  by  a  purchaser  must 
be  credited  upon  and  deducted  from  the  redemption  money 
to  be  paid. 

Code  of  Civil  Procedure,  Section  707. 

Section  695.— WHO  MUST  PAY  FOR  IMPROVE- 
MENTS MADE  DURING  FORECLOSURE  PRO- 
CEEDINGS.— Sometimes  the  mortgagee  gets  possession 
of  the  premises,  either  by  consent  or  by  force,  and  succeeds 
in  retaining  such  possession  during  foreclosure  proceedings. 
Then  the  question  arises.  Who  is  to  pay  for  improvements 
to  the  property  made  by  the  mortgagee  in  possession?  In 
California  the  law  is,  that  where  a  mortgagee  is  in  posses- 
sion, and  makes  improvements  without  the  consent  of  the 
mortgagor,  he  will  not  be  allowed  anything  for  them  further 
than  is  proper  to  keep  the  premises  in  necessary  repair; 
therefore,  if  a  mortgagee  in  possession  should  build  a  new 
house  on  the  land,  or  clear  uncultivated  land  and  put  it 
into  a  state  of  cultivation,  or  make  any  other  improvements 
not  necessary  to  keep  the  premises  in  repair,  he  must  stand 
the  expense  himself,  and  cannot  recover  from  the  mortgagor 
or  any  redemptioner  the  cost  of  such  improvements.  The 
reason  for  this  rule  is,  that  while  unreasonable  improvements 
may  be  of  benefit  to  the  estate,  yet  the  mortgagee  has 
no  right  to  impose  them  upon  the  owner  and  thus  increase 
the  burden  of  redeeming. 

Section  696.— HOW  TO  COLLECT  A  NOTE  WHEN 
MAKER  IS  DEAD.— If  the  maker  of  a  note  dies  before 


594  BUSINESS   LAWS   FOR   BUSINESS   MEN. 

it  becomes  due,  the  holder  may  collect  it  from  the  maker's 
estate.  If  the  estate  is  of  less  value  than  $10,000,  a  claim 
for  the  amount  due  on  the  note  must  be  presented  to  the 
executor  or  administrator  within  four  months  after  the  first 
publication  of  notice  to  creditors.  If  the  estate  is  of  a 
value  of  $10,000  or  over,  a  claim  for  the  amount  due  on 
the  note  must  be  presented  to  the  executor  or  administrator 
within  ten  months  after  the  first  publication  of  notice  to 
creditors.  If  the  executor  or  administrator  allows  the  claim, 
it  is  then  presented  to  the  Judge  of  the  Probate  Court  for 
his  allowance,  and  when  allowed  it  is  filed  in  the  Clerk's 
office,  and  becomes  an  acknowledged  debt  of  the  estate,  which 
the  executor  or  administrator  will  be  bound  to  pay  in  the 
course  of  the  administration  of  the  estate.  When  a  claim 
is  rejected,  either  by  the  executor  or  administrator,  or  by  the 
Judge  of  the  court,  the  holder  must  bring  suit  against  the 
executor  or  administrator  within  three  months  after  the 
date  of  its  rejection,  if  it  be  then  due,  or  within  two  months 
after  it  becomes  due,  otherwise  the  claim  will  be  forever 
barred. 

Code  of  Civil  Procedure,  Section  1498. 

Section  697.— EXCUSE  FOR  NOT  PRESENTING 
CLAIM  IN  TIME.— When  the  claimant  was  out  of  the 
State  during  the  publication  of  notice  to  creditors,  and  makes 
affidavit  to  the  fact,  and  that  he  had  no  notice,  this  will  be 
an  excuse  for  not  presenting  his  claim  against  an  estate  in 
time,  and  he  will  be  allowed  to  present  the  claim  to  the 
executor  or  administrator  at  any  time  before  a  decree  of 
distribution  of  the  estate  is  entered. 

Code  of  Civil  Procedure,  Section  1493. 

Section  698.— FORECLOSURE  OF  MORTGAGE 
WHEN  THE  MAKER  IS  DEAD.— A  mortgage  may  be 
foreclosed,  even  though  the  maker  is  dead,  by  a  suit  against 
the  executor  or  administrator  of  his  estate.  But  a  claim 
against  the  estate  must  be  presented  to  the  executor  or 
administrator  if  the  mortgagee  wishes  to  recover  attorney 
fees.     If  he  does  not  present  his  claim  for  the  amount  due, 


NOTES   AND    MORTGAGES.  595 

he  may  still  foreclose  his  mortgage,  but  he  cannot  recover 
fees  paid  to  his  attorney. 

Section  699.—  FORECLOSURE  OF  MORTGAGE 
PAYABLE  IN  INSTALLMENTS.— If  the  debt  for 
which  the  mortgage  is  held  is  not  all  due,  as  where  a  note 
is  payable  in  installments,  and  foreclosure  is  had  for  failure 
to  pay  an  installment  due,  so  soon  as  sufficient  of  the  property 
has  been  sold  to  pay  the  amount  due,  with  costs,  the  sale 
must  cease;  and  afterwards,  as  often  as  more  becomes  due, 
for  principal  or  interest,  the  court  may,  on  motion,  order 
more  to  be  sold.  But  if  the  property  cannot  be  sold  in  por- 
tions, without  injury  to  the  parties,  the  whole  may  be  ordered 
to  be  sold  in  the  first  instance,  and  the  entire  debt  and  costs 
paid;  but  where  this  is  done  there  will  be  a  rebate  of  inter- 
est on  installments  not  yet  due. 

Code  of  Civil  Procedure,  Section  728. 

Section  700.—  COLLECTION  OF  LOST  OR  DE- 
STROYED NOTE.— The  amount  due  on  a  note  may  be 
collected,  notwithstanding  the  note  may  have  been  lost  or 
destroyed.  If  the  note  is  lost  or  destroyed,  then  the  holder 
must  give  a  bond,  executed  by  himself  and  two  sufficient 
sureties,  to  indemnify  the  party  paying  the  note  against  any 
lawful  claim  which  any  other  person  may  make  upon  it. 
Civil   Code,   Section   3137. 

Section   701.  — NOTE    MADE    BY    PARTNERS.— A 

note  may  be  made  by  partners  for  the  debts  of  the  firm,  or 
in  the  usual  course  of  business  of  the  firm,  for  goods,  or 
advancements,  or  as  security  for  a  loan  to  the  firm.  One 
partner  may  execute  the  note  in  the  firm  name,  and  all  the 
partners  will  be  bound  by  it,  for  each  partner  has  an  equal 
right,  so  far  as  third  parties  are  concerned,  to  bind  the 
firm  by  acts  and  conduct  in  the  usual  course  of  its  business. 

Section  702.  _  LIABILITY  OF  PARTNERS  ON 
PARTNERSHIP  NOTE.— Every  general  partner  is  liable 
to  third  persons  for  all  the  obligations  of  the  partnership, 
jointly  with  his  co-partners.  Therefore,  a  promissory  note, 
executed  for  the  firm,  makes  each  partner  liable  to  pay  the 
note.     The  partnership  property  may  be  taken  for  the  pay- 


596  BUSINESS   LAWS   FOR  BUSINESS   MEN. 

merit  of  the  debt,  and  the  property  of  each  partner  may 
also  be  taken,  if  the  property  of  the  firm  is  not  sufficient. 

Section  703.— ASSIGNMENT    OF    MORTGAGE.— A 

mortgage  may  be  assigned,  and  the  assignee  will  then  have 
the  same  rights  as  the  original  mortgagee.  The  assignment 
must  be  in  writing,  and  must  be  signed  and  acknowledged 
by  the  person  making  the  assignment.  The  following  is  a 
good  form  of  assignment  of  mortgage,  which  must  be 
acknowledged  in  the  same  manner  as  a  mortgage  is 
acknowledged : 

ASSIGNMENT  OF   MORTGAGE. 

Know  All  Men  by  These  Presents : — That 

of  the  County  of ,  State  of  California,  the 

party  of  the  first  part,  for  and  in  consideration  of  the  sum 

of Dollars,  Gold  Coin  of  the  United  States  of 

America,  to  him  in  hand  paid  by , 

of  the  County  of State  of  California, 

the  party  of  the  second  part,  the  receipt  whereof  is  hereby 
acknowledged,  does  by  these  presents,  grant,  bargain,  sell, 
assign,  transfer,  and  set  over,  unto  the  said  party  of  the  sec- 
ond part,  a  certain  indenture  of  mortgage  bearing  date  the 

day  of ,   191 . . ,  made  and  executed  by 

to  the  said  party  of  the  first  part, 

and  recorded  in  the  office  of  the   County  Recorder  of  the 

County  of ,  State  of  California,  in  book 

of  mortgages,  page ,  on  the day  of , 

191 . . ,  at minutes  past o'clock   M. 

Together  with  the  promissory  note  therein  described,  and 
the  money  due  and  to  grow  due  thereon,  with  the  interest. 

And  the  said  party  of  the  first  part  does  hereby  make, 
constitute,  and  appoint  the  said  party  of  the  second  part 
his  true  and  lawful  attorney,  irrevocable,  in  his  name  or 
otherwise,  but  at  the  proper  costs  and  charges  of  the  said 
party  of  the  second  part,  to  have,  use,  and  take  all  lawful 
ways  and  means  for  the  recovery  of  the  said  money  and 
interest ;  and  in  case  of  payment  to  discharge  the  same  as 
fully  as  the  said  party  of  the  first  part  might  or  could  do  if 
these  presents  were  not  made. 

In  witness  whereof  the  said  party  of  the  first  part  has 
hereunto  set  his  hand  and  seal  this day  of , 

m... 

(Seal.) 

(Acknowledgment  in  usual  form.) 


PART   IV. 

ATTACHMENTS,  JUDGMENTS,  AND 
EXECUTIONS. 

Attachments. 

Section  704.  —  ATTACHMENT  OF  DEBTOR'S 
PROPERTY. — A  creditor,  in  a  suit  to  collect  a  bill,  account, 
or  promissory  note  not  secured  by  mortgage,  can  attach  the 
property  of  his  debtor.  The  court  in  which  the  suit  is 
brought  will  issue  the  writ  of  attachment,  to  be  placed  in 
the  hands  of  an  officer  for  service,  at  the  time  the  summons 
is  issued  in  the  suit,  or  at  any  time  afterward  before  judg- 
ment is  given.  Always,  the  plaintiff  in  the  suit  must  give 
bond,  usually  in  the  sum  of  two  hundred  dollars,  when  the 
suit  is  in  the  Superior  Court,  to  the  effect  that  if  the  de- 
fendant recover  judgment  the  plaintiff  will  pay  all  costs  that 
may  be  awarded  to  the  defendant  and  all  damages  which 
he  may  sustain  by  reason  of  the  attachment,  not  exceed- 
ing the  sum  specified  in  the  bond.  The  bond  must  be 
signed  by  two  or  more  sureties.  Upon  the  filing  of  the 
bond  the  Clerk  of  the  Superior  Court,  if  the  suit  is  in  that 
court,  or  the  Justice  of  the  Peace,  if  the  suit  is  before  a 
Justice,  will  issue  a  writ  of  attachment.  The  bond  in  a 
Justice  Court  is  usually  in  the  sum  of  fifty  dollars. 

A  writ  to  attach  the  property  of  the  defendant  must 
be  issued  by  the  Justice  at  the  time  of,  or  after  issuing  sum- 
mons, in  actions  in  which  the  sum  claimed  exclusive  of  in- 
terest exceeds  ten  dollars. 

Act   of   the    Legislature,    approved    March    20,    1911. 

Code  of  Civil  Procedure,  Sections  538,  539,  867. 

(597) 


598  BUSINESS   LAWS   FOR   BUSINESS    MEN. 

Section  705.— WHAT  PROPERTY  CAN  BE  AT. 
TACHED. — Real  estate  belonging  to  the  debtor,  whether 
standing  upon  the  records  of  the  county  in  his  name  or 
in  the  name  of  another;  personal  property  of  all  kinds; 
corporation  stocks  or  shares;  money  owing  to  the  debtor 
by  any  person, — all  these  may  be  attached  as  security  for 
the  payment  of  the  judgment  which  the  creditor  expects 
to  obtain  when  he  sues  the  debtor  to  collect  the  amount 
due  from  him. 

Section  706.— WHAT  PROPERTY  IS  EXEMPT 
FROM   ATTACHMENT   OR   EXECUTION.— The   law 

of  California  singles  out  certain  property  of  the  debtor,  and 
says  that  it  shall  not  be  taken  for  a  debt.  This  it  does  to 
protect  the  unfortunate  and  the  improvident,  and  to  secure 
to  the  family  of  the  debtor  provision  at  least  for  temporary 
wants.  Therefore,  the  law  states  that  certain  property  of 
the  debtor  shall  be  exempt,  no  matter  how  pressing  his 
debts  or  how  eager  his  creditors  may  be.  An  attachment 
cannot  hold,  nor  can  a  sale  on  execution  be  had,  of  any  of 
the  following  property,  if  the  owner  objects:  (1) — Chairs, 
tables,  desks,  and  books,  to  the  value  of  $200,  belonging 
to  the  judgment  debtor.  (2) — Necessary  household,  table, 
and  kitchen  furniture,  belonging  to  the  judgment  debtor, 
including  one  sewing-machine,  stove,  stovepipes,  and  fur- 
niture, wearing  apparel,  beds,  bedding,  and  bedsteads, 
hanging  pictures,  oil  paintings  and  drawings,  drawn  or 
painted  by  any  member  of  the  family,  and  family  portraits 
and  their  necessary  frames,  provisions  and  fuel  actually 
provided  for  individual  or  family  use  sufficient  for  three 
months,  and  three  cows  and  their  sucking  calves,  four  hogs 
with  their  sucking  pigs,  and  food  for  such  cows  and  hogs 
for  one  month ;  also  one  piano,  one  shotgun,  and  one  rifle. 
(3) — The  farming  utensils  or  implements  of  husbandry  of 
the  judgment  debtor,  not  exceeding  in  value  the  sum  of  one 
thousand  dollars;  also,  two  oxen,  or  two  horses,  or  two 
mules,  and  their  harness,  one  cart  or  buggy  and  two  wag- 
ons, and  food  for  such  oxen,  horses,  or  mules  for  one  month ; 


ATTACHMENTS,    JUDGMENTS,    AND   EXECUTIONS.  599 

also,  all  seed,  grain,  or  vegetables  actually  provided,  re- 
served, or  on  hand  for  the  purpose  of  planting  or  sowing 
at  any  time  within  the  ensuing  six  months  not  exceeding 
in  value  the  sum  of  two  hundred  dollars;  75  bee-hives; 
and  one  horse  and  vehicle  belonging  to  any  person  who 
is  maimed  and  crippled,  if  same  is  necessary  in  his  busi- 
ness. (4) — The  tools  or  implements  of  a  mechanic  or 
artisan,  necessary  to  carry  on  his  trade;  the  notarial  seal, 
records,  and  office  furniture  of  a  Notary  Public;  the  instru- 
ments and  chest  of  a  surgeon,  physician,  surveyor,  or 
dentist,  necessary  to  the  exercise  of  his  profession,  with 
his  professional  library,  and  necessary  office  furniture;  the 
professional  libraries  of  attorneys,  judges,  ministers  of  the 
gospel,  editors,  school-teachers,  and  music  teachers,  and 
their  necessary  office  furniture,  including  one  safe  and  one 
typewriter;  the  musical  instruments  of  music  teachers 
actually  used  by  them  in  giving  instructions;  all  the  in- 
dexes, abstracts,  books,  papers,  maps,  and  office  furniture 
of  a  searcher  of  records,  necessary  to  be  used  in  his  pro- 
fession; the  typewriters,  or  other  mechanical  contrivances 
employed  for  writing  in  type,  actually  used  by  the  owner 
thereof  for  making  his  living;  also,  one  bicycle,  when  the 
same  is  used  by  its  owner  for  the  purpose  of  carrying  on 
his  regular  business,  or  when  the  same  is  used  for  the  pur- 
pose of  transporting  the  owner  to  and  from  his  place  of 
business.  (5) — The  cabin  or  dwelling  of  a  miner,  not  ex- 
ceeding in  value  the  sum  of  five  hundred  dollars;  also  his 
sluices,  pipes,  hose,  windlass,  derrick,  cars,  pumps,  tools, 
implements  and  appliances,  necessary  for  carrying  on  any 
mining  operations,  not  exceeding  in  value  the  aggregate  sum 
of  five  hundred  dollars ;  and  two  horses,  mules,  or  oxen, 
with  their  harness,  and  food  for  such  horses,  mules,  or  oxen 
for  one  month,  when  necessary  to  be  used  on  any  whim, 
windlass,  derrick,  car,  pump,  or  hoisting  gear;  and  also  his 
mining  claim,  actually  worked  by  him,  not  exceeding  in 
value  the  sum  of  one  thousand  dollars.  (6) — ^Two  horses, 
two  oxen,   or  two  mules,   and  their  harness,   and   one  cart 


600  BUSINESS  LAWS  FOR  BUSINESS   MEN. 

or  wagon,  one  dray  or  truck,  one  coupe,  one  hack  or  car- 
riage, for  one  or  two  horses,  by  the  use  of  which  a  cartman, 
drayman,    truckman,    huckster,    peddler,    hackman,    teamster, 
or  other  laborer  habitually  earns  his  living;  and  one  horse, 
with   vehicle   and   harness   or   other   equipments,   used   by   a 
physician,   surgeon,  constable,  or  minister  of  the  gospel,  in 
the  legitimate  practice  of  his  profession   or  business;   with 
food  for  such  oxen,  horses,  or  mules,  for  one  month.     (7) 
— One  fishing  boat  and  net,   not  exceeding  the  total  value 
of  five  hundred  dollars,  the  property  of  any  fisherman,  by 
the  lawful  use  of  which  he  earns  his  livelihood.     (8) — Poul- 
try not  exceeding  in  value  seventy-five   dollars.      (9) — The 
wages  and  earnings  of  all  seamen,  sea-going  fishermen,  and 
sealers,  not  exceeding  three  hundred   dollars,   regardless  of 
where  or  when  earned,  and  in  addition  to  all  other  exemp- 
tions otherwise  provided  by  any  law,     (10) — The  earnings 
of  the  judgment  debtor   for  his  personal   services   rendered 
at  any  time  within  thirty  days  next  preceding  the  levy  of 
execution   or  attachment,   when   it   appears   by   the   debtor's 
affidavit  or  otherwise  that  such  earnings  are  necessary   for 
the  use  of  his   family,  residing  in  this   State,   supported  in 
whole  or  in  part  by  his  labor;  but  where  debts  are  incurred 
by  any  such  person,  or  his  wife  or  family,  for  the  common 
necessaries  of  life,  or  have  been  incurred  at  a  time   when 
the  debtor  had  no   family  residing  in  this   State  supported 
in  whole  or  in  part  by  his  labor,  the  one-half  of  such  earn- 
ings above  mentioned  is  nevertheless  subject  to  attachment 
or    execution,    to    satisfy    debts    so    incurred.       (11) — The 
shares    held    by    a    member    of    an    incorporated    homestead 
association,    not    exceeding   in    value    one    thousand    dollars, 
if  the  person  holding  the  shares  is  not  the  owner  of  a  home- 
stead under  the  laws  of  this  State.     (12) — All  the  nautical 
instruments  and  wearing  apparel  of  any  master,  officer,  or 
seaman   of   any    steamer   or   other   vessel.        (13) — All    fire 
engines,  hooks,  and  ladders,  with  the  carts,  trucks,  and  car- 
riages,   hose,    buckets,    implements,    and    apparatus    there- 
unto  appertaining,   and   all   furniture   and   uniforms   of   any 
fire   company   or   department    organized    under   any    law    of 


ATTACHMENTS,    JUDGMENTS,    AND   EXECUTIONS.  601 

this  State.  (14) — All  arms,  uniforms,  and  accoutrements 
required  by  law  to  be  kept  by  any  person,  and  also  one 
gun,  to  be  selected  by  the  debtor.  (IS) — All  court-houses, 
jails,  public  offices  and  buildings,  lots,  grounds,  and  per- 
sonal property;  the  fixtures,  furniture,  books,  papers,  and 
appurtenances  belonging  and  pertaining  to  jails  and  pub- 
lic offices  of  any  county  of  this  State;  and  all  cemeteries, 
public  squares,  parks,  and  places,  public  buildings,  town 
halls,  markets,  buildings  for  the  use  of  fire  departments 
and  military  organizations,  and  the  lots  and  grounds  thereto 
belonging,  owned  or  held  by  any  town  or  incorporated  city, 
or  dedicated  by  such  town  or  city  to  health,  ornament,  or 
public  use,  or  for  the  use  of  any  fire  or  military  company 
organized  under  the  laws  of  this  State.  (16) — All  mate- 
rial not  exceeding  one  thousand  dollars  in  value,  purchased 
in  good  faith  for  use  in  the  construction,  alteration,  oi 
repair  of  any  building,  mining  claim,  or  other  improvements, 
as  long  as  in  good  faith  the  same  is  about  to  be  applied  to 
the  construction,  alteration,  or  repair  of  such  building, 
mining  claim,  or  other  improvement.  (17) — All  machinery, 
tools,  and  implements  necessary  in  and  for  boring,  sinking, 
putting  down,  and  constructing  surface  or  artesian  wells, 
also,  the  engines  necessary  for  operating  such  machinery, 
implements,  tools,  etc. ;  also,  all  trucks  necessary  for  the 
transportation  of  such  machinery,  tools,  implements,  en- 
gines, etc. ;  provided,  that  the  value  of  all  the  articles  ex- 
empted under  this  subdivision  shall  not  exceed  one  thou- 
sand dollars.  (18) — All  moneys,  benefits,  privileges,  or 
immunities  accruing  or  in  any  manner  growing  out  of  any 
life  insurance,  if  the  annual  premiums  paid  do  not  exceed 
five  hundred  dollars,  and  if  they  exceed  that  sum,  a  like 
exemption  exists,  bearing  the  same  proportion  to  the 
moneys,  benefits,  privileges,  and  immunities  so  accruing 
or  growing  out  of  such  insurance  that  five  hundred  dollars 
bears  to  the  whole  annual  premiums  paid.  (19) — Shares 
of  stock  in  any  building  and  loan  association  to  the  value 
of  one  thousand  dollars.  No  article,  however,  or  species 
of    property    mentioned    above,    is    exempt    from    execution 


602  BUSINESS   LAWS   FOR   BUSINESS   MEN. 

issued  upon  a  judgement  recovered  for  its  price,,  or  upon 
a  judgment  of  foreclosure  of  a  mortgage  or  other  lien 
thereon,  (20) — A  United  States  homestead  cannot  be  at- 
tached or  sold  under  execution  for  any  debt  contracted 
prior  to  proving  up  and  obtaining  title  to  the  land.  (21) — 
All  money  received  by  any  person,  a  resident  of  the  State, 
as  a  pension  from  the  United  States  government,  whether 
the  same  shall  be  in  the  actual  possession  of  such  pensioner, 
or  deposited,  loaned  or  invested  by  him. 

Act  of  the  Legislature,  in  eflfect  May  22,  1907. 

Section    707.— HOMESTEAD    MONEY    EXEMPT.— 

The  law  with  reference  to  State  homesteads  has  already  been 
stated  in  preceding  sections,  and  to  what  extent  such  home- 
steads are  exempt  from  attachment  or  execution.  It  should 
be  added,  that  if  the  homestead  be  sold  by  the  owner,  the 
proceeds  arising  from  such  sale,  to  the  extent  of  the  value 
allowed  for  a  homestead  exemption,  as  above  stated,  will  be 
exempt  from  attachment  for  a  period  of  six  months  from 
the  time  of  the  sale.  If,  for  instance,  the  husband  and 
wife  should  sell  their  homestead  for  five  thousand  dollars, 
they  can  take  that  money  at  any  time  within  six  months 
and  put  it  into  another  homestead,  and  it  will  be  also  exempt 
when  another  declaration  of  homestead  has  been  filed.  The 
money  will  be  exempt  for  six  months,  so  as  to  give  an 
opportunity  to  select  and  purchase  another  homestead  with  it. 
Act  of  the  Legislature,  approved  February   15,   1911. 

Section  708.— MORTGAGED  PROPERTY  MAY  BE 
ATTACHED. — Property,  real  or  personal,  which  is  mort- 
gaged to  another  person,  may  be  attached  in  a  suit  by  a 
creditor,  but  the  lien  of  the  attachment  is  subject  to  the 
mortgage. 

Section  709.— CREDITOR  LIABLE  FOR  UNLAW- 
FUL ATTACHMENT.— A  creditor  who  makes  an  un- 
lawful attachment,  or  causes  it  to  be  made,  will  be  liable 
in  damages  for  all  injury  done  to  the  person  whose  property 


ATTACHMENTS,   JUDGMENTS,   AND   EXECUTIONS.  603 

is  attached.  If  the  holder  of  an  obligation  sues  upon  it, 
and  causes  an  attachment  to  be  issued  and  placed  upon 
property  of  the  debtor,  as  upon  household  furniture,  or 
farming  utensils,  or  horses,  or  cows,  exempt  by  law  from 
execution,  he  will  be  liable  for  all  damages  sustained  by 
the  unlawful  seizure.  His  sureties  on  the  attachment  bond 
are  liable  to  the  extent  of  their  bonds  only,  but  he  is  liable 
to  the  full  extent  of  the  injury.  The  debtor  may  have  the 
attachment  released,  upon  the  ground  that  the  property 
attached  is  exempt,  and  bring  a  suit  for  damages  against 
the  creditor  and  his  bondsmen. 

Section  710.— CREDITOR  ATTACHING  PER- 
SONAL   PROPERTY    MUST    PAY    MORTGAGE.— It 

has  already  been  shown  that  mortgaged  property  may  be  at- 
tached by  a  creditor  of  the  owner,  subject  to  the  mortgage. 
Personal  property  mortgaged  may  be  taken  under  attach- 
ment or  execution  issued  at  the  suit  of  a  creditor  of  a 
mortgagor;  but  before  the  property  can  be  taken,  the  officer 
levying  the  attachment  or  execution  must  pay  or  tender  to 
the  mortgagee  the  amount  of  the  mortgage  debt  and  interest, 
or  must  deposit  the  money  with  the  County  Clerk  or  Treas- 
urer, payable  to  the  order  of  the  mortgagee. 
Civil  Code,  Section  2969. 

Section  711.— GARNISHMENT.— There  are  certain  ef- 
fects of  a  debtor  which  cannot  be  seized  and  taken  into 
the  custody  of  the  officer,  but  which  may  still  be  rendered 
liable  to  the  payment  of  the  debt,  such  as  money  owing 
to  the  debtor  by  a  third  person,  or  property  in  the  hands 
of  a  third  person  belonging  to  the  debtor.  In  a  suit  by 
the  creditor  against  the  debtor,  the  officer  serves  a  notice 
upon  the  person  owing  the  debtor,  or  having  property  of 
the  debtor  in  his  hands,  that  such  property  is  attached, 
and  this  is  called  garnishment.  The  person  upon  whom 
the  notice  is  served  is  called  the  garnishee.  Thereafter, 
he  cannot  pay  his  debt  to  the  defendant,  nor  deliver  the 
property  to  him,   but  must  hold   it  to   await  the   result   of 


604  BUSINESS   LAWS   FOR   BUSINESS   MEN. 

the  suit.  In  this  State,  when  required  by  the  officer  the 
garnishee  must  make  a  statement  of  the  amount  owing 
by  him  to  the  defendant,  or  showing  the  character  and 
description  of  the  property  in  his  hands  belonging  to  the 
defendant. 

Section  712.— FOR  WHAT  PROPERTY  GAR- 
NISHEE LIABLE.— The  garnishee  will  be  held  liable  for 
all  personal  property  in  his  hands  belonging  to  the  defendant 
which  is  capable  of  being  seized  and  sold  upon  execution. 
The  garnishee  will  be  liable  for  money  in  his  hands  be- 
longing to  the  defendant,  and  a  garnishment  may  be  levied 
upon  a  bank  or  corporation,  as  well  as  upon  an  individual. 
The  property  must  be  in  the  actual  possession  of  the 
garnishee,  or  within  his  control,  so  that  he  may  be  able 
to  turn  it  over  to  the  officer  on  execution. 

Section  713.— MONEY  DUE  AS  SALARY  TO  PUB- 
LIC OFFICER.— The  salary  of  a  public  officer  can  be  at- 
tached or  garnished.  When  a  judgment  is  obtained  against  a 
public  officer,  a  transcript  of  it  may  be  filed  with  the  State 
Controller  or  County  or  City  Auditor,  and  so  much  of  the 
officer's  salary  as  is  not  exempt  from  execution  shall  be 
then  paid  over  to  the  judgment  debtor.  (Statutes  of 
1903,  page  362.)  A  decision  has  been  made  by  the 
Supreme  Court  in  a  test  case  under  the  statute  of  1903. 
A  suit  was  brought  in  San  Francisco  to  compel  the  Auditor 
to  allow  the  salary  of  a  public  officer,  but  he  refused  on 
the  ground  that  a  part  of  the  money  had  been  attached 
under  the  new  law.  The  Supreme  Court  decided  that  the 
law  is  constitutional,  and  that  it  will  stand  good  as  to  all 
public  officers  and  employees  created  or  provided  for  by 
the  Legislature.  Therefore,  when  the  Auditor  pays  the 
money  due,  from  the  State,  or  city,  or  county,  into  court, 
SO  much  as  is  not  exempt  from  execution  must  be  paid  to 
the  judgment  creditor.  (Decided  by  the  Supreme  Court 
of  California,  in  the  case  of  Ruperich  vs.  Baehr,  which  de- 
cision is  printed  in  Volume  27  of  California  Decisions,  No. 
1465,  page  359.) 


ATTACHMENTS,   JUDGMENTS,   AND  EXECUTIONS.  605 

Section   714.— MONEY   IN   THE   HANDS    OF   THE 

LAW. — Money  in  the  hands  of  the  law,  as  money  in  the 
hands  of  a  sheriff,  or  constable,  or  money  deposited  with 
a  clerk  of  court  to  wait  the  determination  of  a  suit,  or 
money  in  the  hands  of  a  Receiver  appointed  by  the  court, 
cannot  be  taken  by  garnishment  or  attachment;  for  all 
such  property  is  in  the  custody  of  the  law,  and  until  the 
law  has  done  with  it,  no  interference  from  any  other  source 
will  be  tolerated  or  allowed. 

Section  715.— ATTACHMENT  OF  PARTNERSHIP 
PROPERTY. — Partnership  property  may  always  be  at- 
tached for  partnership  debts.  But  a  more  serious  question 
arises,  where  one  partner  owes  debts  and  is  sued  by  his 
creditor,  outside  of  the  partnership  business.  The  deci- 
sions of  the  courts  in  different  States  have  not  been  uni- 
form, but  in  California  the  law  appears  to  be  settled,  that 
a  creditor  of  one  partner  may  have  an  attachment  levied 
upon  the  partnership  property.  The  sheriff  must  take  the 
whole  property  into  his  possession,  but  he  cannot  sell  on 
execution  the  interests  of  both  partners;  he  can  only  sell 
under  the  execution  the  interest  of  the  partner  against 
whom  the  judgment  was  obtained. 

Section   716.— DISSOLUTION    OF   ATTACHMENT. 

— If  an  attachment  has  been  improperly  or  irregularly  issued, 
by  the  court  in  which  the  suit  was  brought,  it  will  be  dis- 
charged on  motion  of  the  defendant.  If  an  attachment  is 
issued  in  a  case  where  the  law  does  not  provide  for  an 
attachment,  or  if  the  plaintiff's  complaint  does  not  state  a 
cause  of  action,  or  if  other  necessary  papers  essential  to 
obtain  a  Writ  of  Attachment  are  fatally  defective,  the  at- 
tachment will  be  held  to  be  improperly  or  irregularly  issued 
and  the  defendant  will  have  a  right  to  ask  for  the  discharge 
of  the  attachment. 

Section  717.— BOND  FOR  RELEASE  OF  AT- 
TACHED PROPERTY.— The  defendant  in  a  suit,  whose 
property  is  attached,  may  have  the  attachment  released  by 


606  BUSINESS   LAWS   FOR  BUSINESS   MEN. 

giving  a  bond,  in  a  sum  to  be  fixed  by  the  court,  with  at 
least  two  sureties,  as  security  that  the  property  released  will 
be  re-delivered  to  the  proper  officer  if  the  plaintiff  recover  a 
judgment  in  the  action;  or  that,  if  the  property  is  not 
turned  over  to  the  officer,  that  the  sureties  will  pay  to  the 
plaintiff  the  full  value  of  the  property  released. 
Code  of  Civil  Procedure,  Section  555. 

Section  718.— LIEN  OF  ATTACHMENT.— The  at- 
tachment will  be  a  lien  upon  all  real  property  attached  for  a 
period  of  three  years  after  date  of  levy,  unless  sooner  re- 
leased or  discharged  by  dismissal  of  the  suit  or  by  entry  of 
judgment.  The  time  may  be  extended,  by  the  court,  upon 
motion  made  not  less  than  five  nor  more  than  sixty  days 
before  the  expiration  of  the  three  years. 

Act  of  the  Legislature,  approved  March  25,  1909. 

Judgments  and  Executions. 

Section  719.— JUDGMENTS.— Whether  any  property  is 
attached  or  not,  a  judgment  may  be  obtained  for  the  amount 
due,  and  costs  of  suit,  and  upon  the  judgment  an  execution 
is  issued  from  the  court  in  which  suit  is  brought,  directed 
to  the  Sheriff,  and  commanding  that  officer  to  sell  enough 
of  the  debtor's  property  to  pay  the  debt.  All  property  not 
exempt  from  execution  may  be  sold  by  the  Sheriff  and  ap- 
plied to  the  payment  of  the  judgment.  All  sales  of  prop- 
erty under  execution  are  made  at  public  auction  to  the 
highest  bidder. 

Section  720.— JUDGMENT  A  LIEN  ON  REAL 
PROPERTY. — When  a  judgment  is  rendered  in  a  suit  in 
the  Superior  Court,  the  Clerk  of  the  Court  enters  the  judg- 
ment in  his  official  records,  and  makes  up  what  is  called  a 
Judgment  Roll,  attaching  together  and  filing  the  pleadings 
and  certain  other  papers,  for  that  purpose.  Immediately 
after  filing  the  Judgment  Roll,  the  Clerk  of  the  Court  makes 
the  proper  entry  of  the  judgment  in  the  docket  kept  by  him; 


ATTACHMENTS,    JUDGMENTS,    AND   EXECUTIONS.  607 

and  from  the  time  the  judgment  is  docketed  it  becomes  a 
lien  upon  all  the  real  property  of  the  judgment  debtor  not 
exempt  from  execution  in  the  county,  owned  by  him  at  the 
time  or  which  he  may  afterward  acquire,  until  the  lien 
ceases. 

Code  of  Civil  Procedure,  Sections  670,  671. 

Section  721.— HOW  LONG  JUDGMENT  LIEN  CON- 
TINUES.— The  lien  of  a  judgment  docketed  in  the  Superior 
Court  continues  for  five  years,  on  real  property  of  the 
judgment  debtor  in  the  county. 

Section  722.— JUDGMENT  LIEN  ON  PROPERTY 
IN  ANOTHER  COUNTY.— A  transcript  of  the  original 
docket  of  the  judgment,  certified  by  the  Clerk,  may  be  filed 
with  the  Recorder  of  any  other  county,  and  from  the  time 
of  the  filing  the  judgment  becomes  a  lien  upon  all  the  real 
property  of  the  judgment  debtor  not  exempt  from  execu- 
tion in  such  other  county,  and  this  lien,  unless  the  judgment 
be  previously  satisfied,  continues  for  two  years. 
Code  of  Civil  Procedure,  Section  674. 

Section  723.— HOW  JUSTICE  COURT  JUDGMENT 
IS    MADE   LIEN   ON   REAL   PROPERTY.— Reference 

has  been  made  in  the  preceding  Sections  to  the  lien  of  judg- 
ments obtained  in  the  Superior  Court.  But  a  lien  upon  the 
real  property  of  the  debtor  may  also  be  secured  on  a  Justice 
Court  judgment,  by  following  certain  requirements  of  the 
law  of  California.  A  person  obtaining  a  judgment  in  the 
Justice  Court,  if  he  wishes  to  make  it  a  lien  upon  the  real 
property  of  his  debtor,  must  ask  the  Justice  to  give  him  an 
abstract  of  the  judgment,  which  it  is  the  duty  of  the  Justice 
to^  furnish  on  demand.  This  abstract  of  the  judgment  must 
be  filed  in  the  office  of  the  Recorder  of  the  county  in  which 
the  land  of  the  debtor  is  situated,  and  when  so  filed,  and 
from  the  time  of  filing,  the  judgment  becomes  a  lien  on 
such    property. 

A  judgment  rendered  in  a  Justice's  court  creates  no 
lien  upon  any  lands  of  the  defendant,  unless  such  an  abstract 


BUSINESS    LAWS   FOR   BUSINESS   MEN. 

is  filed  in  the  office  of  the  Recorder  of  the  county  in  which 
the  lands  are  situated.  When  so  filed,  and  from  the  time  of 
filing,  the  judgment  becomes  a  lien  upon  all  the  real  property 
of  the  judgment  debtor,  not  exempt  from  execution,  in  such 
county,  owned  by  him  at  the  time,  or  which  he  may  after- 
wards, and  before  the  lien  expires,  acquire.  The  lien  con- 
tinues for  two  years,  unless  the  judgment  be  previously  sat- 
isfied. 

At  any  time  before  the  expiration  of  two  years  from  the 
time  of  filing  such  abstract  of  judgment,  and  while  the  judg- 
ment is  yet  in  force  or  unsatisfied,  a  successive  abstract  of 
such  judgment  may  be  likewise  filed,  and  it  shall  have  the 
effect  of  continuing  such  lien  for  a  further  period  of  two 
years  from  the  time  of  filing  the  subsequent  abstract  of 
judgment;  provided,  however,  that  no  such  lien  shall  con- 
tinue or  be  in  force  after  five  years  from  the  time  of  the 
rendition  of  such  judgment. 

Code  of  Civil  Procedure,  Sections  897,  900. 

Act  of  the  Legislature,  approved  March  20,  1911. 

Section  724.— TIME  WITHIN  WHICH  EXECU- 
TION MAY  ISSUE.— The  party  in  whose  favor  judgment 
is  given  may,  at  any  time  within  five  years  after  the  judgment 
is  entered,  have  a  writ  of  execution  issued  for  its  enforce- 
ment. 

Section  725.— EXEMPTION  MUST  BE  CLAIMED 
BY  DEBTOR. — While  the  law  exempts  certain  property  of 
a  judgment  debtor  from  execution  and  forced  sale,  such  ex- 
emption is  a  personal  privilege,  which  may  be  waived  by  the 
debtor;  and  a  failure  to  claim  the  property  as  exempt,  when 
levied  on  to  satisfy  a  judgment  against  him,  within  a  rea- 
sonable time  thereafter,  is  a  waiver  of  the  exemption  right; 
and  the  officer  selling  exempt  property  without  such  claim 
of  exemption  is  not  liable  for  its  value. 


PART  V. 
LAST    WILLS. 

Section  726.— MAKING  A  WILL.— The  law  of  Califor- 
nia designs  to  encourage  the  making  of  wills,  and  whenever 
the  last  will  and  testament  of  a  deceased  person — who   in 
his    lifetime    thus    endeavored    to    direct    the    disposition    of 
his  property  when  he  should  have   done  with  the  business 
of  this  world — whenever  such  an  instrument  has  come  be- 
fore the  Supreme  Court  of  this  State,  and  has  become  the 
subject  of  attack   by   dissatisfied   relatives,   the   law   relative 
to  the  making  of  wills  has  always  been  liberally  construed, 
with   a    sincere    desire    to    carry    out   the    intentions    of   the 
testator.       The  courts  of  late  years  have  come  to  look  with 
more   or   less   suspicion   upon   the   many   attempts   to   break 
wills   made   in  this   State.     Disgraceful   scandals   have  been 
the   aftermath   of   so   many    will    contests,    and   bribery   and 
perjury  of  witnesses   such   frequent  circumstances,   that  the 
Supreme    Court   alone   has   been    able   to    stem   the   tide   of 
corruption    which    has    followed    many    of    California's    rich 
men   to   the   grave.       Now,   the    frequent   decisions    of   the 
Supreme   Court   in   favor  of  the  validity   of  wills,   and   the 
fearless    rulings    of    some    Judges    of    the    Superior    Court, 
setting  aside  verdicts   of  juries   when   evidently   induced   by 
passion  and  prejudice,  are  having  a  good  effect.      The  num- 
ber   of    will    contests    may    not    be    decreased,    as    long    as 
credulous   clients    have   money    to    pay    eager    lawyers;    but 
the    people    of    California    may    at    all    events    feel    greater 
security  in  the  irrevocable  character  of  last  wills  and  testa- 
ments.      And  whether  a  person  be   rich   or  poor,   whether 
the  estate  disposed  of  by  will  be  large  or  small,   it  is   the 
intention  of  the  law  of  California  that  the  solemn  act  thus 
expressed  shall  be  protected  and  enforced. 

(609) 


610  BUSINESS   LAWS   FOR   BUSINESS   MEN. 

Section   727.— WHO    MAY   MAKE   A    WILL.— Every 

person  in  California  over  the  age  of  18  years,  and  of  sound 
mind,  may  make  a  last  will,  and  thus  dispose  of  all  his 
estate,  real  and  personal. 

Section    728.— WILL    OF    MARRIED    WOMAN.— A 

married  woman  may  dispose  of  all  her  separate  property 
by  will,  without  the  consent  of  her  husband,  and  may  alter 
or  revoke  the  will  in  like  manner  as  if  she  were  single. 
The  will  of  a  married  woman  must  be  executed  and  proved 
in  the  same  manner  as  other  wills. 
Civil  Code,  Section   1273. 

Section  729.— WHAT  MAY  BE  DISPOSED  OF  BY 
WILL. — Every  estate  and  interest  in  real  or  personal 
property,  to  which  heirs,  husband,  widow,  or  next  of  kin, 
if  there  were  no  will,  might  succeed,  may  be  disposed 
of  by  last  will;  provided,  the  husband  can  only  dispose  of 
one-half  of  the  community  property  by  his  will,  the  other 
half  belonging  to  his  wife  at  his  death  and  not  being  sub- 
ject to  his  will;  and  provided,  also,  that  the  wife  can  only 
dispose  of  her  separate  property  by  her  will,  or  such  of 
the  community  property  as  may  have  been  set  aside  to 
her  by  the  judgment  of  a  court  for  her  support  and 
maintenance. 

Civil  Code,  Sections  1401,   1402. 

Section    730.— WHO    MAY    TAKE    BY    WILL.— Any 

person  may  take  property  by  will,  except  the  artificial  per- 
sons known  as  corporations.  A  testamentary  disposition 
of  property  cannot  in  this  State  be  made  to  any  corpora- 
tion, except  such  as  are  formed  for  scientific,  literary",  or 
solely  .educational  or  hospital  purposes;  and  except  that 
property  may  lawfully  be  willed  to  charitable  or  benevolent 
societies  or  corporations  for  use  by  them  in  the  furtherance 
of  their  designs.  But  no  estate,  real  or  personal,  can  be 
lawfully  left  to  any  charitable  or  benevolent  society  or 
corporation,  or  to  any  person  or  persons  in  trust  for  char- 
itable uses,  unless  the  will  is  executed  at  least  thirty  days 


LAST   WILLS.  611 

before  the  death  of  the  testator;  and  the  law  provides  that 
bequests    for    charitable    uses    must    not    collectively    exceed 
one-third  of  the  estate  of  the  testator  leaving-  legal  heirs. 
Civil  Code,  Sections  1275,  1313. 

Section  731.— KINDS  OF  WILLS.— There  are  three 
kinds  of  wills  recognized  by  the  law  of  California — a  nun- 
cupative will;  an  olographic  will;  and  a  will  signed  by  the 
testator  and  by  attesting  witnesses. 

Section  732.— NUNCUPATIVE  WILLS.— The  kind  of 
will  called  "nuncupative"  is  only  made  under  peculiar  and 
extraordinary  circumstances.  A  person  in  actual  military 
service  in  the  field,  or  doing  duty  on  a  ship  at  sea,  and  in 
actual  contemplation,  fear,  or  peril  of  death,  or  in  expecta- 
tion of  immediate  death  from  an  injury  received  the  same 
day,  may  make  a  nuncupative  will.  A  nuncupative  will  is 
not  required  to  be  in  writing,  nor  to  be  declared  or  attested 
with  any  formalities.  To  make  a  nuncupative  will  valid, 
and  to  entitle  it  to  be  admitted  to  probate,  it  must  further 
appear  that  the  estate  bequeathed  does  not  exceed  in  value 
the  sum  of  one  thousand  dollars;  and  two  witnesses  who 
were  present  at  the  making  of  the  will  must  prove  it,  and 
one  of  the  witnesses  must  have  been  asked  by  the  testator 
at  the  time  to  be  a  witness  that  such  was  his  will. 

Section  733.— OLOGRAPHIC  WILLS.— An  olographic 
will  is  one  that  is  entirely  written,  dated,  and  signed  by 
the  hand  of  the  testator  himself.  It  is  subject  to  no  other 
form,  and  may  be  made  in  or  out  of  this  State,  and  need 
not  be  witnessed.  The  law  must  be  strictly  followed  in 
making  such  a  will.  It  may  be  written  on  any  kind  of 
paper,  and  it  is  not  required  to  be  in  any  particular  form; 
but  it  must  be  entirely  in  the  testator's  handwriting.  If 
a  person,  intending  to  make  an  olographic  will,  dictates  to 
some  one  who  writes  the  body  of  it  for  him  and  then  signs 
it  himself,  it  is  not  a  valid  will,  for  the  law  expressly  de- 
clares that  he  must   write   it  all  himself.     So,   if  a   person 


612  BUSINESS   LAWS   FOR  BUSINESS   MEN. 

uses  a  blank  form,  and  fills  out  the  blanks  in  his  own  hand- 
writing, and  signs  his  name,  yet  the  law  has  not  been  com- 
plied with,  and  the  instrument  is  void  as  a  will.       Every 
word  and  every  figure  in  it,  to  be  a  valid  olographic  will, 
must  be  in  the  handwriting  of  the  person   making   it.     If 
any  part  of  it  is  in  the  handwriting  of  any  other  person, 
or  if  any  part  of  it  is  printed,  it  will  be  illegal  and  invalid. 
In  one  case  in  California  it  was  decided  that  nothing  more 
than   the   figures   "1880"    in   print,   after   "April    1"    in   the 
testator's    handwriting,    made    the    document    illegal    as    an 
olographic   will.     Not   only   must   the   document  be   entirely 
in  the  handwriting  of  the  person  making  an  olographic  will, 
but  it  must  always  be  dated.     If  otherwise  lawfully  made, 
that    is,    written    and    signed    by    the    testator    himself,    but 
with  the  date  omitted,  the  paper  is  invalid  as  a  will.       As 
before  stated,  a  will  of  this  kind  need  not  be  in  any  par- 
ticular form.     It  may  even  be  in  the  form  of  a  letter,  and 
if  it  appears  that  the  writer  intended  to  thus  make  a  testa- 
mentary  disposition   of   his   property,    it   will    be   considered 
as  his  last  will  and  testament.     When  a  will  is  thus  law- 
fully made,  entirely  written,  dated,  and  signed  by  the  hand 
of  the  testator  himself,  it  constitutes  the  most  satisfactory 
manner  in  which  a  will  can  be  made,  and  is  less  liable  to 
the  attacks  of  will-breaking  lawyers  than  is  a  formal  will, 
written    and    executed    under    the    supervision    of    a    legal 
adviser.      For    olographic    wills    are    usually    brief,    whereas 
a  will  in  the   handwriting  of  a  lawyer   is  apt  to  have   its 
length  gauged  by  the  size  of  the  estate  or  the  amount  of 
the    fee;    and,    too,    an    olographic    will    is    free    from    the 
technical  terms  and  legal  phrases  which  never  cease  to  stir 
up  controversies  in  the  courts.     For  these  reasons,  an  olo- 
graphic  will,   when   made  by   a  person   of   ordinary   intelli- 
gence, is  the  kind  to  be  preferred. 
Civil  Code,  Section  1277. 

Section    734.— FORM    OF    OLOGRAPHIC    WILL.— 

The  following  is  a  form  of  olographic  will,  which  meets  the 
requirements  of  the  law.       The  date,  names,  amounts,  and 


LAST   WILLS.  613 

the  signature  must  be   filled  in,   and  the  whole   written  by 
the  maker  of  the  will  alone : — 

,  Cal., ,  191.. 

I  declare  this  to  be  my  last  will  and  testament.     I  give 

and  bequeath  to the  sum  of 

Dollars ;  I  give  and  bequeath  to 

the    sum    of 

Dollars ;  I  give  and  bequeath  to 

and all  the  residue  of  my 

property,    of    whatever    kind    and    wherever    situated,    share 
and  share  alike. 

The  foregoing  form  will  be  as  good  as  any  other;  and, 
indeed,  any  form  is  good  as  an  olographic  will,  if  the  in- 
tention of  the  writer  to  make  it  his  will  appears  in  it,  and 
the  disposition  which  he  desires  to  make  of  his  property. 

Section  735.— WILL  ATTESTED  BY  WITNESSES. 

— A  will  which  is  not  in  the  handwriting  of  the  maker  must 
be  executed  and  attested  as  follows:  (1)  It  must  be  sub- 
scribed at  the  end  by  the  testator  himself,  or  some  person 
in  his  presence  and  by  his  direction  must  subscribe  his 
name  to  it;  (2)  The  subscription  must  be  made  in  the 
presence  of  the  attesting  witnesses,  or  be  acknowledged 
by  the  maker  to  them  to  have  been  made  by  him  or  by  his 
authority;  (3)  The  maker  must,  at  the  time  of  subscribing 
or  acknowledging  the  will,  declare  to  the  attesting  wit- 
nesses that  the  instrument  is  his  will;  (4)  There  must  be 
two  attesting  witnesses  to  a  will,  and  each  of  them  must 
sign  the  will  as  a  witness,  at  the  end  of  it,  at  the  testator's 
request  and  in  his  presence.  The  testator  must  either  sign 
his  name  at  the  end  of  the  will,  or  have  it  signed  by  some 
one  in  his  presence  and  at  his  direction. 
Civil  Code,  Section  1276. 

Section  736.— GIFTS  TO  SUBSCRIBING  WIT- 
NESSES.— All  legacies  and  gifts  of  any  kind,  made  or 
given  in  any  will  to  a  subscribing  witness,  are  void,  unless 


614  BUSINESS   LAWS   FOR   BUSINESS   MEN. 

there  are  two  other  competent  subscribing  witnesses  to  the 
will. 

Civil  Code,   Section   1282. 

Section   737.— HOW   A   WILL   IS   REVOKED.— The 

law  declares  what  acts  work  the  revocation  of  a  will  in  this 
State. 

A  will  is  revoked  by  a  later  will,  declaring  the  revocation 
of  the  prior  one. 

A  will  is  revoked  by  being  burned,  torn,  canceled,  ob- 
literated, or  destroyed,  with  the  intent  and  purpose  of  re- 
voking it,  by  the  testator  himself,  or  by  some  person  in 
his  presence  and  by  his  direction. 

When  a  will  is  canceled  or  destroyed  by  any  other  per- 
son than  the  testator,  the  direction  of  the  testator,  and  the 
fact  of  such  cancellation  or  destruction,  must  be  proved  by 
two  witnesses. 

A  prior  will  is  not  revoked  by  a  subsequent  will,  unless 
the  latter  contains  an  express  revocation,  or  provisions 
wholly  inconsistent  with  the  terms  of  the  former  will;  but 
in  other  cases  the  prior  will  remains  effectual  so  far  as 
consistent  with  the  provisions  of  the  subsequent  will. 
Civil  Code,  Sections  1292,  1293,  1296. 

Section    738.— REVOCATION    BY    MARRIAGE.— If 

after  having  made  a  will,  the  testator  marries,  and  has 
issue  of  such  marriage,  born  either  in  his  lifetime  or  after 
his  death,  and  the  wife  or  issue  survives  him,  the  will  is 
revoked,  unless  provision  has  been  made  for  such  issue  by 
some  settlement,  or  unless  such  issue  are  provided  for  in 
the  will,  or  mentioned  in  the  will  so  as  to  show  an  inten- 
tion not  to  make  provision  for  the  child. 

If,  after  making  a  will,  the  testator  marries,  and  the  wife 
survives  the  testator,  the  will  is  revoked,  unless  provision 
has  been  made  for  her  by  marriage  contract,  or  unless  she 
is  provided  for  in  the  will,  or  mentioned  in  the  will  so  as 
to  show  an  intention  not  to  make  provision  for  her. 


LAST   WILLS.  615 

A  will,  executed  by  an  unmarried  woman,  is  revoked  by 
her  subsequent  marriage,  and  is  not  revived  by  the  death 
of  her  husband. 

Civil  Code,  Sections  1298,  1299,  1300. 

Section  739.— SHARE  OF  CHILD  BORN  AFTER 
THE  WILL. — Whenever  a  testator  has  a  child  born  after 
the  making  of  his  will,  either  in  his  lifetime  or  after  his 
death,  and  dies  leaving  such  child  unprovided  for  by  any  set- 
tlement, and  neither  provided  for  nor  in  any  way  mentioned 
in  his  will,  the  child  succeeds  to  the  same  portion  of  the 
testator's  real  and  personal  property  that  he  would  have 
succeeded  to  if  the  testator  had  died  intestate. 
Civil  Code,  Section  1306. 

Section  740.— OMISSION  TO  PROVIDE  FOR 
CHILDREN. — When  any  testator  omits  to  provide  in  his 
will  for  any  of  his  children,  or  for  the  issue  of  any  deceased 
child,  unless  it  appears  that  such  omission  was  intentional, 
the  law  declares  that  such  child  or  the  issue  of  such  child 
must  have  the  same  share  in  the  estate  of  the  testator  as  if 
he  had  died  intestate.  But  the  law  also  provides  that  a 
child  who  has  had  his  share  of  the  estate  advanced  to  him 
during  the  lifetime  of  the  testator,  even  though  not  men- 
tioned in  the  will,  is  not  entitled  to  any  more. 
Civil  Code,  Sections  1307,  1309. 

Section  741.— CHILDREN  OF  DEVISEE.— When  any 

estate  is  devised  to  any  child,  or  other  relation  of  the  tes- 
tator, and  the  devisee  dies  before  the  testator,  leaving  lineal 
descendants,  such  descendants  take  the  estate  so  given  by 
the  will  in  the  same  manner  as  the  devisee  would  have  done 
had  he  survived  the  testator. 

Civil  Code,  Section  1310. 

Section   742.— WHEN    WILL   TAKES    EFFECT.— A 

will  takes  effect  at  the  testator's  death.  It  can  have  no 
effect  to  pass  any  title  before  his  death. 


616  BUSINESS   LAWS   FOR   BUSINESS   MEN. 

Section  743.— WHEN  LEGACIES  ARE  DUE.— Lega- 
cies are  due  to  those  entitled  to  them  at  the  expiration  of 
one  year  after  the  testator's  death. 

Section  744.— INTEREST  ON  LEGACIES.— Ordinary 
legacies  bear  interest  from  the  time  when  they  become  due. 
A  legacy  to  the  testator's  widow  bears  interest  from  the 
date  of  his  death. 

Section  745.— GROUNDS  FOR  CONTEST  OF 
WILL. — The  law  specifies,  as  the  grounds  for  the  contest  of 
a  will,  duress,  menace,  fraud,  or  undue  influence;  and,  also, 
it  is  a  common  ground  for  the  contest  of  a  will,  that  the 
testator  was  not  of  sound  mind.  If  advantage  is  taken  of 
an  old  and  feeble  person,  and  the  facts  are  misrepresented  or 
concealed,  or  threats  or  fraudulent  persuasions  resorted  to, 
by  which  a  testator  is  fraudulently  induced  to  exclude  from 
his  will  the  natural  object  of  his  bounty,  whom  he  would 
otherwise  have  remembered  and  provided  for,  the  law  will 
interfere  on  behalf  of  the  injured  party  and  set  the  will 
aside.  Yet  it  will  require  clear  and  convincing  proof  to 
set  aside  a  will  upon  these  grounds. 

By  far  the  larger  number  of  will  contests  are  made  upon 
the  ground  that  the  testator  was  not  of  sound  and  dispos- 
ing mind,  but  on  the  contrary  was  afflicted  with  insanity. 
On  this  subject  it  may  be  said,  that  if  there  had  not  been 
so  many  expert  witnesses  the  world  would  never  have 
heard  of  so  many  forms  of  insanity.  Expert  witnesses  on 
insanity  are  ever  ready  to  swear  on  either  side  of  a  will 
contest,  as  they  happen  to  be  first  employed,  and  to  frame 
their  theories  according  to  their  interests.  The  Supreme 
Court  of  California  has  announced,  time  and  time  again,  its 
own  distrust  of  expert  testimony,  and  has  endeavored  to  be 
glided  by  the  rules  of  reason  and  common  sense  in  its  dis- 
position of  will  cases.  The  facts  must  be  recognized,  that 
there  is  no  satisfactory  definition  of  insanity,  either  in  or 
out  of  the  medical  profession;  that  no  man  can  truly  mark 
the  dividing  line  between  sanity  and  insanity;  that  a  person 


LAST   WILLS.  617 

may  be  exceedingly  eccentric,  and  yet  not  be  at  all  insane; 
that  by  a  "sound  mind"  is  meant  only  that  a  person,  in  order 
to  make  a  vaUd  will,  must  be  of  sufficient  understanding  to 
know  the  character  and  extent  of  his  property,  to  know  and 
recollect  the  natural  objects  of  his  bounty,  to  know  to  whom 
he  wishes  to  leave  his  property,  arid  to  appreciate  and  know 
the  character  of  his  act  when  he  makes  his  will.  If  this 
is  the  state  of  his  mind,  no  eccentricity  of  speech  or  conduct, 
and  no  impairment  of  mental  power,  will  have  any  effect  to 
invalidate  the  solemn  act  of  disposing  of  his  estate  by  last 
will  and  testament. 


PART  VI. 

CORPORATIONS    IN    CALIFORNIA. 

Section  746.— NATURE  OF  CORPORATIONS.— The 

definition  of  corporations  given  by  the  law  of  California  is, 
"A  corporation  is  a  creature  of  the  law,  having  certain  pow- 
ers and  duties  of  a  natural  person."  Unlike  a  natural  per- 
son, who  may  act  in  business  affairs  as  his  individual  will 
may  dictate,  a  corporation  can  only  act  through  its  officers 
in  the  manner  prescribed  by  the  law  creating  it.  The 
nature  of  a  corporation  is  peculiar  in  another  respect. 
While  the  rights  and  privileges  of  a  natural  person,  con- 
sidered as  such,  will  terminate  by  his  death,  the  rights  and 
privileges  of  the  corporation  do  not  end,  or  vary,  upon  the 
death  or  change  of  any  of  the  individual  members.  Judge 
Kent,  the  eminent  lecturer  on  law,  has  said  that  the  object 
of  a  corporation  is  "to  enable  the  members  to  act  by  one 
united  will,  and  to  continue  their  joint  powers  and  property 
in  the  same  body,  undisturbed  by  the  change  of  members, 
and  without  the  necessity  of  perpetual  conveyances,  as  the 
rights  of  members  pass  from  one  individual  to  another. 
All  the  individuals  composing  a  corporation,  and  their  suc- 
cessors, are  considered  in  law  but  as  one  moral  person, 
capable,  under  an  artificial  form,  of  taking  and  conveying 
property,  contracting  debts  and  duties,  and  of  enjoying  a 
variety  of  civil  and  political  rights." 
Civil  Code,  Section  283. 

Section   747.— FOR   WHAT    PURPOSE    CORPORA- 
TIONS MAY  BE  FORMED.— In  California,  corporations 
may  be  formed  for  any  purpose  for  which  individuals  may 
lawfully    associate    themselves.        And    as    individuals    may 
(618) 


CORPORATIONS    IN    CALIFORNIA.  619 

enter  into  any  business  transactions  not  prohibited  by  law. 
so  a  corporation  may  be  formed  for  the  purpose  of  carry- 
ing on  any  lawful  business,  of  any  kind  whatever. 
Civil  Code,  Section  286. 

Section  748.— WHO  MAY  FORM  A  CORPORA- 
TION.— The  law  places  but  two  restrictions  upon  the  for- 
mation of  corporations,  respecting  the  persons  who  may  or- 
ganize them.  At  lease  three  persons  must  join  in  the  forma- 
tion of  a  corporation,  or  as  many  more  as  may  be  desired; 
and,  whether  a  corporation  be  formed  by  three  persons,  or  a 
number  more  than  three,  a  majority  of  such  persons  must  be 
residents  of  the  State  of  California.  Foreign  corporations 
may  do  business  in  the  State,  but  a  corporation  cannot  be 
formed  here  unless  a  majority  of  the  persons  forming  it  are 
residents  of  the  State. 

Civil  Code,  Section  285 ;  Statutes  of  1905,  page  502. 

Section  749.— ARTICLES  OF  INCORPORATION.— 

The  instrument  by  which  a  corporation  is  formed  is  called 
"Articles  of  Incorporation."  Articles  of  Incorporation  must 
be  prepared,  setting  forth:  (1)  The  name  of  the  corpora- 
tion; (2)  the  purpose  for  which  it  is  formed;  (3)  the  place 
where  its  principal  business  is  to  be  transacted;  (4)  the  term 
for  which  the  corporation  is  to  exist;  (5)  the  number  of  its 
Directors;  (6)  the  amount  of  its  capital  stock,  if  any,  and 
the  number  of  shares  into  which  it  is  divided;  (7)  the 
amount  actually  subscribed,  and  by  whom. 
Civil  Code,  Sections  289,  290. 

Section  750.— FORM  OF  ARTICLES  OF  INCOR- 
PORATION.—The  following  is  a  form  of  Articles  of  In- 
corporation, which  meets  the  requirements  of  the  law : — 

Articles  of  Incorporation. 

KNOW  ALL  MEN  BY  THESE  PRESENTS :  That  we, 
the  undersigned,  have  this  day  voluntarily  associated  our- 
selves  together   for  the  purpose   of   forming   a   corporation, 


620  BUSINESS   LAWS   FOR   BUSINESS   MEN. 

under  the  laws  of  the  State  of  California;  and  we  hereby 
certify, 

First — That  the  name  of  said  corporation  is 

(Here  insert  the  name  selected  for  the  corporation.) 

Second — That  the  purposes  for  which  it  is  formed  are  to 
carry  on  the  business  of 

(Here  insert  the  purposes  of  the  corporation.) 

Third — That  the  place  where  its  principal  business  is  to 
be  transacted  is  the  city  of 

(Here  insert  the  name  of  the  place.) 

Fourth — That  the  term  for  which  said  corporation  is  to 
exist  is    

(Here  insert  number  of  years.) 

years  from  and  after  the  date  of  its  incorporation. 

Fifth — That  the  number  of  Directors  of  said  corporation 
shall  be  

(Here  insert  number  of  Directors  agreed  upon.) 

and  that  the  names  and  residence  of  the  Directors  who  are 
appointed  for  the  first  year  are: — 

Names.  Residence. 

(Here  insert  names  and  residence  of  Directors.) 


Sixth — ^That  the  amount  of  the  capital  stock  of  said  cor- 
poration shall  be Dollars,  divided 

into thousand  shares,  of  the  par 

value  of Dollars  each. 

Seventh — That  the  amount  of  said  capital  stock  which 
has  been  actually  subscribed  is Dol- 
lars, and  the  following  are  the  names  of  the  persons  by 
whom  the  same  has  been  subscribed,  to-wit: — 


CORPORATIONS   IN    CALIFORNIA.  621 

Subscriber.  Number  of  Shares.  Amount. 


(Here  insert  names  of  subscribers,   number  of   shares   sub- 
scribed for,  and  amount  of  each  subscription.) 


In  witness  whereof,  we  have  hereunto  set  our  hands  and 
seals,  this day  of ,  191 . . 


STATE  OF  CALIFORNIA,  1  ^^ 

County   of ) 

On  this day  of ,  in  the  year  one 

thousand  nine  hundred  and ,  before  me, 

,    a    Notary    Public    in 

and    for    said    county,    residing   therein,    duly    commissioned 
and  sworn,  personally  appeared 


and ,   personally 

known  to  me  to  be  the  persons  whose  names  are  subscribed 
to  the  within  instrument,  and  they  each  duly  acknowledged 
to  me  that  they  executed  the  same. 

In   witness   whereof,   I   have   hereunto   set   my   hand   and 
affixed    my    official    seal,    at    my    office    in    the    County    of 

,   State  of  California,  the  day  and  year  in 

this  certificate  first  above  written. 


Notary  Public  in  and  for  the  County 
of ,  State  of  California. 

Commission  expires ,  191 . . 


Section  751.— NUMBER  OF  SIGNERS.— The  Articles 
of  Incorporation  must  be  signed  by  at  least  three  persons, 
a  majority  of  whom  must  be  residents  of  California,  and 
each  of  whom  must  make  an  acknowledgment  before  a 
Notary  or  other  officer  authorized  to  take  acknowledgments. 


622  BUSINESS   LAWS   FOR  BUSINESS   MEN. 

If  there  are  more  than  three  Directors,  all  must  sign  and 
acknowledge  the  Articles  of  Incorporation. 

Civil  Code,  Section  292;  Statutes  of  1905,  page  502. 

Act  of  the  Legislature,  approved  April  26,  1911. 

Section  752.— FILING  OF  ARTICLES  OF  INCOR- 
PORATION.— The  Articles  of  Incorporation,  when  pre- 
pared and  signed  and  acknowledged,  must  be  filed  in  the 
office  of  the  County  Clerk  of  the  county  in  which  the  prin- 
cipal place  of  business  is  located;  and  a  copy,  certified  by 
the  County  Clerk,  must  be  filed  in  the  office  of  the  Secre- 
tary of  State  at  Sacramento. 

Section  753.— CERTIFICATE  OF  SECRETARY  OF 
STATE. — Upon  receiving  and  filing  in  his  office  the  certi- 
fied copy  of  the  Articles  of  Incorporation  filed  with  the 
County  Clerk,  the  Secretary  of  State  issues  to  the  corpora- 
tion, over  the  great  seal  of  the  State  of  California,  a  certifi- 
cate that  a  copy  of  the  Articles  containing  the  required 
statement  of  facts  has  been  filed  in  his  office;  and  from  the 
time  when  this  certificate  is  issued  the  persons  signing  the 
Articles  of  Incorporation,  and  their  associates  and  suc- 
cessors, become  and  are  created  a  corporation,  under  the 
name  chosen  by  them. 

Civil  Code,  Section  296. 

Section  754.— -NAME  OF  CORPORATION  MUST 
BE  NEW. — The  name  selected  by  the  incorporators  must  be 
new;  that  is,  it  must  not  have  the  same  name  as  any  other 
corporation  before  organized  in  this  State;  nor  can  the  name 
selected  so  closely  resemble  the  name  of  any  other  existing 
corporation  that  it  will  tend  to  deceive;  and  if  Articles  of 
Incorporation  are  sent  to  the  Secretary  of  State  which  con- 
tain the  same  name  as  an  existing  corporation,  or  a  name 
so  closely  resembling  it  as  tends  to  deceive  the  public,  it 
will  be  his  duty  under  the  law  to  refuse  to  file  the  Articles 
or  issue  his  certificate. 

Statutes  of  1901,  page  629. 


CORPORATIONS   IN   CALIFORNIA.  623 

Section    755.— COST     OF    INCORPORATING.— The 

fees  for  forming  a  corporation,  to  be  paid  the  Secretary  of 
State,  are  as  follows:  (1)  For  filing  Articles  of  Incorpora- 
tion, if  the  capital  stock  amounts  to  twenty-five  thousand 
dollars  or  less,  fifteen  dollars;  if  the  capital  stock  amounts  to 
over  twenty-five  thousand  dollars,  and  not  over  seventy-five 
thousand  dollars,  twenty-five  dollars;  if  the  capital  stock 
amounts  to  over  seventy-five  thousand  dollars,  and  not  over 
two  hundred  thousand  dollars,  fifty  dollars;  if  the  capital 
stock  amounts  to  over  two  hundred  thousand  dollars,  and 
not  over  five  hundred  thousand  dollars,  seventy-five  dollars; 
if  the  capital  stock  is  over  five  hundred  thousand  dollars, 
and  not  over  one  million  dollars,  one  hundred  dollars;  if 
the  capital  stock  is  over  one  million  dollars,  fifty  dollars 
additional  for  every  five  hundred  thousand  dollars  or  frac- 
tion thereof  of  capital  stock  over  and  above  one  million 
dollars.  (2)  For  filing  Articles  of  Incorporation  without 
capital  stock,  except  co-operative  associations,  five  dollars. 
(3)  For  filing  Articles  of  Incorporation  of  co-operative 
associations,  fifteen  dollars.  (4)  For  recording  Articles  of 
Incorporation,  twenty  cents  per  folio.  (5)  For  issuing 
certificate  of  incorporation,  three  dollars. 
Political  Code,  Section  409. 

Section  756.  — LIMIT  OF  CORPORATE  EXIST- 
ENCE.— A  corporation,  being  a  creature  of  the  law,  can 
only  continue  for  the  length  of  time  which  the  law  pre- 
scribes. The  law  of  California  provides  that  the  limit  of 
time  for  which  a  corporation  can  be  formed  in  this  State 
is  fifty  years.  The  Articles  of  Incorporation  may  fix  a  period 
of  existence  less  than  fifty  years,  but  cannot  provide  for  a 
longer  period. 

Civil  Code,  Section  296. 

Section  757.— EXTENDING  CORPORATE  EXIST- 
ENCE.— Every  corporation  formed  for  a  period  less  than 
fifty  years  may,  at  any  time  prior  to  the  expiration  of  the 
term    of    its    corporate    existence,    extend    such    term    to    a 


624  BUSIlSfESS   LAWS   FOR  BUSINESS   MEN. 

period  not  exceeding  fifty  years  from  its  formation.  Such 
extension  may  be  made  at  a  meeting  of  the  stockholders 
or  members,  called  by  the  directors  expressly  for  con- 
sidering the  subject,  if  voted  by  stockholders  representing 
two-thirds  of  the  capital  stock;  or  by  two-thirds  of  the 
members;  or  may  be  made  upon  the  written  assent  of  that 
number  of  stockholders  or  members.  A  certificate  of  the 
proceedings  of  the  meeting  must  be  signed  by  the  chairman 
and  the  secretary  of  the  meeting  and  a  majority  of  the 
directors,  and  be  filed  in  the  office  of  the  County  Clerk 
where  the  original  Articles  of  Incoi  poration  were  filed,  and 
a  certified  copy  must  be  filed  in  the  office  of  the  Secretary 
of  State,  and  thereupon  the  term  of  the  corporation  is  ex- 
tended for  the  specified  period. 

Section  758.— AMENDMENT  OF  ARTICLES  OF  IN- 
CORPORATION.—If  a  corporation  is  formed,  and  it 
should  be  discovered  that  some  important  and  material 
provision  respecting  the  purposes  of  the  corporation  was 
omitted  from  the  Articles  of  Incorporation,  or  that  the 
Articles  as  filed  did  not  contain  all  the  statements  of  fact 
required  by  the  law,  amended  Articles  may  be  filed  con- 
taining the  omitted  matters.  In  order  to  amend  the  Articles 
of  Incorporation,  however,  the  amendment  must  be  ordered 
by  a  majority  vote  of  the  Board  of  Directors  and  must  be 
assented  to  by  the  stockholders  representing  two-thirds 
of  the  subscribed  capital  stock,  such  assent  being  given 
either  by  vote  at  a  meeting  or  by  writing.  A  copy  of  the 
Articles  of  Incorporation,  as  amended,  must  then  be  filed 
in  the  office  where  the  original  was  filed.  The  law  declares 
that  the  time  of  the  existence  of  a  corporation  cannot  be 
extended  by  amendment  of  its  Articles  of  Incorporation. 
Statutes  of  1903,  page  411. 

Section  759.— CHANGE  OF  NAME.— A  corporation 
may  change  its  name.  If  a  corporation  desires  to  change  its 
name,  a  petition  asking  for  the  change  of  name  may  be 
filed  in  the  Superior  Court  of  the  county  in  which  its 
Articles  of  Incorporation  were  originally  filed.  Or  in  which 


CORPORATIONS   IN   CALIFORNIA.  625 

its  property  is  situated.  A  copy  of  the  petition  must  be 
published  for  four  weeks.  The  Court  will  then  hear  the 
petition,  and  any  objections  which  any  person  may  have 
to  make  against  the  change  of  name;  and  if  satisfied  that 
the  application  is  made  for  a  good  reason,  the  court  may 
make  an  order  changing  the  name  of  the  corporation.  A 
certified  copy  of  the  decree  of  the  court  must  be  filed  in  the 
office  of  the  Secretary  of  State  and  in  the  office  of  the  County 
Clerk. 

Civil  Code,  Sections  1276,  1277,  1278;  Act  of  the 
Legislature,  in  effect  May  19,  1907. 

Act  of  the  Legislature,  approved  April  16,  1909. 

Section  760.— CHANGE  OF  PLACE  OF  BUSINESS. 

— A  corporation  may  change  its  place  of  business  from  one 
place  to  another  in  the  same  county,  or  from  one  city  or 
county  to  another  city  or  county  in  the  State.  Before 
such  change  can  be  made,  the  consent,  in  writing,  of  the 
holders  of  two-thirds  of  the  capital  stock  must  be  obtained 
and  filed  in  the  office  of  the  corporation;  then  notice  of  the 
intended  removal  must  be  published,  for  three  weeks,  in 
a  newspaper  in  the  county;  the  Board  of  Directors  must 
then  meet  and  authorize  the  change ;  and  a  copy  of  the 
resolution  adopted  by  the  Board,  together  with  an  affidavit 
of  the  publication  of  the  notice  (certified  by  the  President 
and  Secretary,  with  the  corporate  seal  affixed),  must  be 
filed  in  each  office  where  the  original  Articles  of  Incor- 
poration were  filed.  After  these  requirements  are  complied 
with,  a  corporation  may  lawfully  change  its  place  of  busi- 
ness. 

Statutes  of  1903,  page  254. 

Section  761.— REMOVAL  FROM  ONE  LOCATION 
TO  ANOTHER  IN  SAME  CITY.— The  law  does  not 
require  any  consent  of  stockholders,  or  notice,  or  publica- 
tion, where  a  corporation  desires  to  remove  its  place  of 
business  from  one  location  to  another  in  the  same  city, 
town,  or  village.  Such  removal  may  be  made  by  authoritjt 
alone  of  a  resolution  of  the  Board  of  Directors. 


626  BUSINESS   LAWS   FOR   BUSINESS   MEN. 

Section  762.— USE  OF  WORD  "TRUST."— No  corpo- 
ration is  allowed  to  use  the  word  "trust,"  or  "trustee,"  as  a 
part  of  its  corporate  name,  unless  its  Articles  of  Incorpora- 
tion authorize  it  to  act  as  executor,  administrator,  guardian, 
assignee,  receiver,  depositary,  or  trustee.  Before  the  Secre- 
tary of  State  issues  to  any  corporation^  authorized  in  its 
articles  of  incorporation  to  act  as  executor,  administrator, 
guardian,  assignee,  receiver,  depositary  or  trustee,  there 
must  be  filed  in  his  office  the  affidavit  of  the  persons  named 
in  said  articles  as  the  first  directors  of  the  corporation,  that 
at  least  one  hundred  thousand  dollars  of  the  capital  stock, 
has  actually  been  subscribed,  and  paid  in  to  a  person  named 
in  such  affidavit,  for  the  benefit  of  the  corporation. 

Act  of  the  Legislature,  in  effect  March  21,  1907. 

Section  763.— ANNUAL  LICENSE  TAX.— The  law 
imposes  an  annual  license  tax,  to  be  paid  to  the  Secre- 
tary of  State,  between  the  first  day  of  July  and  the 
first  day  of  September.  If  not  paid  on  or  before  the  hour 
of  four  o'clock  P.  M.,  of  the  first  day  of  September,  the 
tax  becomes  delinquent,  and  ten  dollars  is  added  thereto, 
as  a  penalty  for  such  delinquency.  The  license  tax  author- 
izes the  corporation  to  transact  its  business  during  the  year, 
or  for  any  fractional  part  of  the  year,  in  which  the  license 
is  paid.  The  year  meant  by  the  law  is  from  the  first  day 
of  July  to  and  including  the  thirtieth  day  of  June  next 
thereafter.  For  the  failure  to  pay  the  tax,  the  charter  of  a 
domestic  corporation  may  be  forfeited. 

At  the  time  of  filing  a  certified  copy  of  Articles  of  Incor- 
poration of  any  corporation  when  filed  on  or  between  the 
first  day  of  July  and  the  thirtieth  day  of  September,  in  any 
year,  there  shall  be  paid,  in  addition  to  all  other  fees  required 
by  law  to  be  paid  to  the  Secretary  of  State,  the  full  amount 
of  the  license  tax  provided  to  be  paid  in  section  two  of  this 
act;  when  filed  on  or  between  the  first  day  of  October  and 
the  thirty-first  day  of  December,  in  any  year,  a  sum  equal 
to  three-fourths  of  the  license  tax  provided  for  in  section  two 
of  this  act  shall  be  paid;  when  filed  on  or  between  the  first 
day  of  January  and  the  thirty-first  day  of  March,  in  any 


CORPORATIONS    IN    CALIFORNIA.  627 

year,  a  sum  equal  to  one-half  of  such  license  tax  provided 
for  in  section  two  of  this  act  shall  be  paid,  and  when  filed 
on  or  between  the  first  day  of  April  and  the  thirtieth  day  of 
June,  in  any  year,  a  sum  equal  to  one-fourth  of  such  license 
tax  provided  for  in  section  two  of  this  act  shall  be  paid. 
Upon  receipt  of  such  full  or  fractional  license  tax  the  Secre- 
tary of  State  shall  issue  a  license  receipt  for  the  full  or  for 
the  fractional  part  of  the  then  current  fiscal  year. 

The  amount  of  the  license  tax  imposed  is  as  follows: 
When  the  authorized  capital  stock  of  the  corporation  does 
not  exceed  ten  thousand  dollars  the  tax  shall  be  ten 
dollars;  when  the  authorized  capital  stock  exceeds  ten 
thousand  dollars  but  does  not  exceed  twenty  thousand 
dollars  the  tax  shall  be  fifteen  dollars;  when  the  authorized 
capital  stock  exceeds  twenty  thousand  dollars  but  does  not 
exceed  fifty  thousand  dollars  the  tax  shall  be  twenty  dol- 
lars; when  the  authorized  capital  stock  exceeds  fifty  thou- 
sand dollars  but  does  not  exceed  one  hundred  thousand 
dollars  the  tax  shall  be  twenty-five  dollars ;  when  the  au- 
thorized capital  stock  exceeds  one  hundred  thousand  dol- 
lars but  does  not  exceed  two  hundred  and  fifty  thousand 
dollars  the  tax  shall  be  fifty  dollars;  when  the  authorized 
capital  stock  exceeds  two  hundred  and  fifty  thousand  dol- 
lars but  does  not  exceed  five  hundred  thousand  dollars  the 
tax  shall  be  seventy-five  dollars;  when  the  authorized  capi- 
tal stock  exceeds  five  hundred  thousand  dollars  but  does 
not  exceed  two  million  dollars  the  tax  shall  be  one  hundred 
dollars ;  when  the  authorized  capital  stock  exceeds  two 
million  dollars  but  does  not  exceed  five  million  dollars  the 
tax  shall  be  two  hundred  dollars;  when  the  authorized 
capital  stock  exceeds  five  million  dollars  the  tax  shall  be 
two  hundred  and  fifty  dollars. 

Act  of  the  Legislature,  approved  March  20,  1907. 

Section  764.— LICENSE  TAX  ON  FOREIGN  COR- 
PORATIONS UNCONSTITUTIONAL.  —  The  require- 
ment of  the  corporation  license  tax  law  that  all  foreign  cor- 
porations now  or  hereafter  doing  business  in  this  state  shall 
pay  an  annual  license  tax  based  upon  their  whole  capital 


628  BUSINESS   LAWS   FOR   BUSINESS    MEN. 

Stock  for  the  privilege  of  doing  business  in  this  state,  and 
the  requirement  of  section  409  of  the  Civil  Code  that  such 
corporation  shall  pay  the  same  fees  for  filing  a  certified  copy 
of  their  articles  as  domestic  corporations,  are  unconstitu- 
tional and  void,  as  to  foreign  corporations  engaged  in  an 
interstate  as  well  as  an  intra-state  business,  as  being  an 
imposition  of  a  direct  burden  upon  their  interstate  com- 
merce business  in  violation  of  the  commerce  clause  of  the 
constitution  of  the  United  States. 

Domestic  Corporations  Engaged  in  Interstate  Business — 
Invalidity  of  License  Laws. — Such  license  laws  are  also  in- 
valid as  to  domestic  corporations  engaged  in  an  interstate 
and  intra-state  business  and  owning  property  without  the 
state. 

Applicability  of  License  Laws. — Such  laws  are  only  ap- 
plicable to  domestic  corporations  nowhere  engaged  in  in- 
terstate business  and  to  foreign  corporations  seeking  to 
enter  the  state  solely  to  do  domestic  business. 

License  Tax  for  Intra-state  Business — Total  Capital 
Stock  as  Basis — Unconstitutional  Tax. — A  license  or  priv- 
ilege tax  for  the  conduct  of  such  intra-state  business,  based 
upon  the  total  capital  stock  of  such  corporation  without  just 
relation  to  the  proportion  which  the  capital  or  the  capital 
stock  used  in  the  state  bears  to  the  whole  capital  or  capital 
stock,  though  in  terms  declared  to  be  directed  solely  to 
intra-state  business  of  such  corporation,  is  unconstitutional 
and  void,  as  being  in  violation  of  the  commerce  clause  of 
the  constitution  of  the  United  States  by  the  imposition  of 
an  illegal  burden  upon  interstate  commerce,  and  because 
violative  of  the  fourteenth  amendment  of  the  constitution, 
and  its  due  process  of  law  clause,  as  an  effort  to  tax  the 
property  of  the  citizens  of  the  United  States,  which  prop- 
erty is  situated  beyond  the  jurisdiction  of  the  taxing  state 
and  is  not  amenable  to  its  revenue  laws. 

(Decided  by  the  Supreme  Court  of  California,  in  the  case 
of  H.  K.  Mulford  Company  vs.  C.  F.  Curry,  which  decision 
is  printed  in  Volume  44,  California  Decisions,  page  79.) 


CORPORATIONS   IN   CALIFORNIA.  ©29 

Section  765.  — REVIVAL  OF  CORPORATION 
WHICH  FAILED  TO  PAY  TAX.— A  corporation  which 
has  failed  to  pay  the  license  tax  may  be  reinstated,  and 
relieved  from  forfeiture,  by  paying  all  delinquent  license 
taxes  and  penalties  incurred. 

In  case  the  name  of  any  corporation  which  has  suffered 
forfeiture,  or  a  name  so  closely  resembling  the  name  of  such 
corporation  as  will  tend  to  deceive,  has  been  adopted  by  any 
other  corporation  since  the  date  of  said  forfeiture,  then  said 
corporation  having  suffered  said  forfeiture  shall  be  relieved 
therefrom  only  upon  the  adoption  by  said  corporation  seeking 
revivor  of  a  new  name,  and  in  such  case  nothing  in  this  act 
contained  shall  be  construed  as  permitting  such  corporation 
to  be  revived  or  carry  on  any  business  under  its  former 
name;  and  such  corporation  shall  have  the  right  to  use  its 
former  name  or  take  such  new  name  only  upon  filing  an 
application  therefor  with  the  Secretary  of  State,  and  upon 
the  issuing  of  a  certification  to  such  corporation  by  the  Sec- 
retary of  State  setting  forth  the  right  of  such  corporation  to 
take  such  new  name  or  use  its  former  name  as  the  case  may 
be;  provided,  however,  that  the  Secretary  of  State  shall  not 
issue  any  certificate  permitting  any  corporation  to  take  or 
use  the  name  of  any  corporation  heretofore  organized  in  this 
State  and  which  has  not  suffered  forfeiture,  or  to  make  or 
use  a  name  so  closely  resembling  the  name  of  such  corpora- 
tion heretofore  organized  in  this  state,  as  will  tend  to  deceive. 

The  Statute  provides  that  the  Secretary  of  State  shall 
immediately  after  the  first  day  of  December,  1911,  transmit 
to  the  County  Clerk  of  each  county  a  list  of  the  delinquent 
corporations  paying  up  for  the  purpose  of  being  reinstated. 
The  loose  wording  of  the  Statute  may  leave  open  for  dis- 
cussion and  litigation  whether  the  Legislature  intended  to 
allow  delinquent  corporations  to  be  reinstated  after  Decem- 
ber 1st,  1911. 

Act  of  the  Legislature,  approved  April  24,  1911. 

Section  766.— INCOME  TAX  ON  CORPORATIONS. 

— A  law  passed  by  the  Congress  of  the  United  States,  ap- 
proved August  5,  1909,  creates  an  income  tax  on  corpora- 


630  BUSINESS   LAWS   FOR   BUSINESS   MEN. 

tions.  The  law  applies  to  all  corporations,  joint  stock  com- 
panies or  associations,  having  a  capital  stock,  and  to  all 
insurance  companies,  whether  organized  under  the  laws  of 
any  state  or  territory  of  the  United  States,  or  under  the 
laws  of  a  foreign  country,  engaged  in  business  in  any  state 
or  territory  of  the  United  States  or  in  Alaska  or  District 
of  Columbia.  The  tax  must  be  paid  annually  to  the  United 
States,  of  one  percentum  upon  the  entire  net  income  over  and 
above  five  thousand  dollars  received  from  all  sources  during 
each  year,  exclusive  of  amounts  received  as  dividends  on 
stock  of  other  corporations.  The  tax  on  corporations  organ- 
ized under  the  laws  of  any  foreign  country  is  upon  the 
amount  of  net  income  over  and  above  five  thousand  dollars 
received  from  business  transacted  and  capital  invested  within 
the  United  States  and  its  territories,  Alaska  and  the  District 
of  Columbia,  during  each  year,  exclusive  of  amounts  received 
as  dividends  upon  the  stock  of  other  corporations.  The 
law  applies  only  to  corporations  organized  and  operated  for 
profit,  and  does  not  apply  to  fraternal  societies,  or  to  labor, 
agricultural  or  horticultural  organizations.  The  net  income 
must  be  ascertained  by  deducting  from  the  gross  amount  all 
ordinary  necessary  expenses  of  maintenance  and  operation, 
all  losses  actually  sustained  during  the  year  and  not  made 
up  by  insurance  (and  in  case  of  insurance  companies  other 
than  dividends  paid  within  the  year  on  policy  and  annuity 
contracts  and  annual  additions  made  to  reserve  funds) ;  inter- 
est paid  on  bonded  or  other  indebtedness  not  exceeding  the 
paid  up  stock  of  the  corporation,  and  in  the  case  of  a  bank, 
banking  association  or  trust  company,  interest  actually  paid 
on  deposits;  all  sums  paid  within  the  year  for  taxes;  all 
amounts  received  as  dividends  on  stock  of  other  corpora- 
tions. Each  corporation,  by  its  President,  Vice-President,  or 
other  principal  officer,  and  its  Treasurer  or  Assistant  Treas- 
urer, must  make  a  true  statement  under  oath  to  the  Col- 
lector of  Internal  Revenue  on  or  before  the  1st  day  of 
March  of  each  year,  showing  the  capital  stock,  indebtedness, 
gross  amount  of  income  for  the  year,  amount  of  dividends 
received,  expenses  paid  out,  losses  sustained,  interest  paid, 
and   the   net   income   of   the   corporation   after   making   the 


CORPORATIONS   IN    CALIFORNIA.  631 

above  deductions.  The  Government  may  appoint  revenue 
agents  to  examine  any  books  and  papers  of  any  corporation, 
and  to  take  the  testimony  of  the  officers  thereof,  whenever 
there  is  doubt  whether  a  statement  made  is  true  and  correct. 
The  law  provides  that  if  any  statement  made  is  false  or 
with  fraudulent  intent,  one  hundred  per  cent  must  be  added 
to  the  tax;  and  in  the  case  of  the  refusal  or  neglect  to  make 
any  statement  or  to  verify  the  same  fifty  per  cent  must  be 
added  to  the  tax.  If  the  officer  of  the  corporation  who 
should  make  this  statement  is  sick  or  absent,  the  Collector 
may  allow  further  time,  not  exceeding  thirty  days.  The 
assessment  of  the  tax  must  be  made,  and  the  corporation 
notified  of  the  amount  due  from  it,  on  or  before  the  first 
day  of  June  of  each  year,  and  the  tax  must  be  paid  on  or 
before  the  thirtieth  day  of  June.  If  any  tax  remains  un- 
paid after  the  thirtieth  day  of  June  in  any  year,  and  for 
ten  days  after  notice  and  demand  by  the  Collector,  there 
must  be  added  the  sum  of  five  per  cent  on  the  amount  of  the 
tax  unpaid,  and  interest  at  the  rate  of  one  per  cent  per  month 
from  the  time  the  tax  becomes  due.  Every  corporation 
failing  to  comply  with  the  law  requiring  a  true  statement 
to  be  made  each  year,  is  liable  to  a  penalty  of  not  less  than 
one  thousand  dollars  and  not  exceeding  ten  thousand  dollars. 
Any  person  guilty  of  making  a  false  or  fraudulent  statement, 
with  intent  to  defeat  or  evade  the  tax,  will  be  guilty  of  a 
misdemeanor  and  subject  to  a  fine  not  exceeding  one  thou- 
sand dollars  or  imprisonment  not  exceeding  one  year,  or 
both,  at  the  discretion  of  the  Court,  besides  the  costs  of  prose- 
cution. 

Act  of  Congress,  approved  August  5,  1909. 

Section  767.— INCOME  TAX  AFFIRMED.— The  Su- 
preme Court  of  the  United  States  has  affirmed  the  income 
tax  on  corporations,  declaring  that  the  law  is  valid  and  con- 
stitutional. The  decision  of  the  Court  was  unanimous.  In 
the  opinion  of  the  Court  it  is  said: 

"This  tax,  it  is  expressly  stated,  is  to  be  equivalent  to  1 
per  centum  of  the  entire  net  income  over  and  above  $5,000 
received  from  all  sources  during  the  year — this  is  the  meas- 


632  BUSINESS  LAWS   FOR  BUSINESS   MEN. 

ure  of  the  tax  explicitly  adopted  by  the  statute.  The  income 
is  not  limited  to  such  as  is  received  from  property  used 
in  the  business,  strictly  speaking,  but  is  expressly  declared  to 
be  upon  the  entire  net  income  above  $5,000  from  all  sources, 
excluding  the  amounts  received  as  dividends  on  stock  in 
other  corporations,  joint  stock  companies,  or  associations, 
or  insurance  companies  also  subject  to  the  tax.  In  other 
words,  the  tax  is  imposed  upon  the  doing  of  business 
of  the  character  described,  and  the  measure  of  the  tax 
is  to  be  the  income,  with  the  deduction  stated,  received 
not  only  from  the  property  used  in  business,  but  from  every 
source.  The  thing  taxed  is  not  the  mere  dealing  in  mer- 
chandise, in  which  the  actual  transactions  may  be  the  same, 
whether  conducted  by  individuals  or  corporations,  but  the 
tax  is  laid  upon  the  privileges  which  exist  in  conducting 
business  with  the  advantages  which  inhere  in  the  corporate 
capacity  of  those  taxed  and  which  are  not  enjoyed  by  private 
firms  or  individuals.  These  advantages  are  obvious  and 
have  led  to  the  formation  of  such  companies  in  nearly  all 
branches  of  trade.  The  continuity  of  the  business,  without 
interruption  by  death  or  dissolution,  the  transfer  of  property 
interests  by  the  disposition  of  shares  of  stock,  the  advantages 
of  business  controlled  and  managed  by  corporate  directors, 
the  general  absence  of  individual  liability,  these  and  other 
things  inhere  in  the  advantages  of  business  thus  conducted, 
which  do  not  exist  when  the  same  business  is  conducted  by 
private  individuals  or  partnerships.  It  is  this  distinctive 
privilege  which  is  the  subject  of  taxation,  and  not  the  mere 
buying  and  selling  nor  handling  of  goods,  which  may  be 
the  same,  whether  done  by  corporations  or  individuals." 

Measurement  of  the  tax  by  the  net  income  of  the  corpora- 
tion or  the  company  received  by  it  from  all  sources  was 
next  defended  by  Justice  Day  in  his  opinion  as  not  being 
so  unequal  and  so  arbitrary  and  baseless  as  to  fall  outside 
of  the  authority  of  the  taxing  power. 

In  conclusion,  the  constitutionality  and  validity  of  the  law 
is  fully  sustained  and  affirmed  by  the  Court. 

(Decided  by  the  Supreme  Court  of  the  United  States, 
March  13,  1911.) 


CORPORATIONS   IN   CALIFORNIA.  633 

Section  768.— DUPLICATE-  OF  LOST  CERTIFI- 
CATE.— Whenever  a  certificate  of  stock  in  a  California 
corporation  is  lost  or  destroyed,  the  owner  may  bring  an 
action  against  the  corporation,  in  the  Superior  Court  of 
the  county  in  which  its  principal  place  of  business  is  lo- 
cated, for  the  purpose  of  obtaining  a  new  or  duplicate 
certificate. 

Statutes  of  1905,  page  500. 

Section  769.— CORPORATIONS  TO  LOAN  MONEY 
ON  CHATTEL  MORTGAGES.— A  corporation  may  be 
organized  for  the  sole  purpose  of  loaning  money  upon  the 
pledge  of  goods  and  chattels.  Such  corporation  must  have 
a  capital  stock  of  $50,000,  or  over,  and  all  the  capital  stock 
must  be  actually  subscribed,  and  at  least  50  per  cent  actually 
paid  in,  before  any  business  is  transacted. 
Statutes  of  1905,  page  711. 

Section  770.— CAPITAL  STOCK.— The  law  provides 
that  all  corporations  for  profit  in  California  must  issue  cer- 
tificates for  stock  when  fully  paid  up,  signed  by  the  Presi- 
dent and  Secretary,  and  may  provide,  in  their  By-Laws 
for  issuing  certificates  prior  to  the  full  payment,  under  such 
restrictions  and  for  such  purposes  as  their  By-Laws  may 
provide.  The  corporation  must  keep  an  account  of  its  stock, 
by  whom  owned,  and  the  amount  of  subscriptions  unpaid. 
It  may  issue  its  stock  and  commence  business  before  sub- 
scriptions are  all  paid  up,  and  even  before  the  stock  is  all 
subscribed  for.  The  capital  stock  is  the  fund  upon  which 
the  corporation  does  business,  and  is  the  sole  basis  of  its 
credit.  Therefore,  no  corporation  can  issue  stock,  except 
for  money  paid,  labor  done,  or  property  actually  received, 
and  all  fictitious  increase  of  stock  is  declared  by  the  law 
to  be  void. 

Constitution   of   CaUfornia,     Article    12,     Section    11; 
Civil  Code,  Section  323. 

Section  771.— AMOUNT  OF  SUBSCRIBED  CAPI- 
TAL TO  BE  PAID  IN.— It  is  only  in  the  case  of  particular 
corporations  that  the  law  requires  a  certain  amount  of  the 


634  BUSINESS   LAWS   FOR   BUSINESS    MEN. 

subscribed  capital  stock  to  be  paid  in  when  the  corpora- 
tion is  formed.  As  a  general  rule  there  is  no  requirement 
on  the  subject.  Any  certificate  issued  prior  to  full  pay- 
ment must  show  on  its  face  what  amount  has  been  paid 
thereon. 

Section    772.— STOCKHOLDERS    AND    MEMBERS. 

Certain  corporations  are  not  required  to  have  any  capital 
stock,  and  a  person  associated  with  others  in  such  a  cor- 
poration is  called  a  member.  The  holder  of  shares  in  a 
corporation  having  a  capital  stock  is  called  a  stockholder. 

Section  773.— SHARES  OF  STOCK.— Whenever  the 
capital  stock  of  a  corporation  is  divided  into  shares,  and 
certificates  have  been  issued,  such  shares  of  stock  are  per- 
sonal property. 

Section      774.  — PREFERRED      AND       COMMON 

STOCK. — A  corporation  may  issue  two  classes  of  stock — 
preferred  stock  and  common  stock.  If  the  two  kinds  are 
to  be  issued,  the  Articles  of  Incorporation  must  provide 
for  the  classification,  and  must  contain  a  statement  of  the 
number  of  shares  of  preferred  stock,  and  the  number  of 
shares  to  which  no  preference  is  given.  The  Articles  of 
Incorporation  must  also  state,  clearly  and  without  evasion, 
the  nature  and  extent  of  the  preference  granted  to  one 
class  of  the  stock,  and  except  as  so  declared  there  shall  be 
no  preference;  and  there  can  be  no  distinction  between 
owners  of  the  two  classes  of  stock  as  to  voting  power 
and  liability  of  stockholders. 

Section  775.— BONDED  INDEBTEDNESS.— A  cor- 
poration may  create  a  bonded  indebtedness  by  a  vote  of  the 
stockholders  representing  at  least  two-thirds  of  the  sub- 
scribed or  issued  capital  stock,  at  a  meeting  called  by  the 
Board  of  Directors,  and  after  giving  the  same  notice  re- 
quired for  increase  of  capital  stock;  or,  a  bonded  indebted- 
ness may  be  created  by  the  unanimous  vote  of  the  Board 
of  Directors,  approved  by  the  written  assent  of  the  stock- 
holders holding  two-thirds  of  the  subscribed  or  issued 
capital   stock,  in  the  same   manner  as   is  provided   for   de- 


CORPORATIONS   IN    CALIFORNIA.  635 

creasing  capital  stock.  The  law  does  not  limit  the  amount 
to  which  a  bonded  indebtedness  may  go,  but  merely  pro- 
vides that  a  corporation  may  create  or  increase  its  bonded 
indebtedness  in  the  manner  stated. 

Act  of  the  Legislature,  in  effect  May  18,  1907. 

(a) — Creation  of  Bonded  Indebtedness — Meeting  of 
Stockholders. — Section  359  of  the  Civil  Code  authorizes  the 
creation  of  a  bonded  debt  by  a  corporation  by  the  unanimous 
vote  of  all  the  directors  and  the  written  consent  of  the 
holders  of  two-thirds  of  the  subscribed  or  issued  stock,  with- 
out the  formality  of  a  meeting  of  the  stockholders  called  for 
that  purpose  upon  sixty  days'  notice. 

(b) — Creation  Without  Meeting. — The  provision  of 
section  11  of  article  XII  of  the  constitution  forbidding  the 
"increase"  of  a  bonded  debt  of  a  corporation  without  the 
consent  of  the  holders  of  a  majority  of  the  stock,  at  a  meet- 
ing duly  called  upon  sixty  days'  notice,  does  not  require  that 
such  meeting  be  held  or  that  such  notice  be  given,  in  order 
to  "create"  an  original  bonded  debt. 

(c) — Proposed  Debt  in  Excess  of  Subscribed  Stock — 
Refusal  of  Secretary  of  State  to  File  Certificate  Un- 
justified.— The  secretary  of  state  is  not  justified  in  refusing 
to  file  the  certified  copy  of  the  certificate  showing  the  adop- 
tion of  a  resolution  to  create  a  bonded  debt,  on  the  ground 
that  the  subscribed  capital  stock  of  the  corporation  is  less 
than  the  amount  of  the  proposed  debt,  as  such  debt  is  not 
"created"  at  such  time.  The  debt  represented  by  any  bond 
is  not  "created"  until  the  bond  is  issued. 

(d) — Subscription  of  Required  Amount  at  Time  of 
Issuance  of  Bonds. — The  statute  forbidding  creation  of 
bonded  debts  beyond  subscribed  capital  stock  is  not  violated, 
if  a  sufficient  amount  is  subscribed  as  the  bonds  are  sold  and 
delivered. 

(Decided  by  the  Supreme  Court  of  California,  in  the  case 
of  Mannix  vs.  Superior  Court,  which  decision  is  printed  in 
volume  39  of  California  Decisions,  page  467.) 


BUSINESS  LAWS   FOR  BUSINESS  MEN. 

Section  776.--SUBSCRIPTION  FOR  STOCK.— When 

a  corporation  is  formed,  and  a  person  subscribes  for  a 
certain  number  of  shares,  by  such  subscription  he  becomes 
the  owner  of  the  stock;  and  it  is  not  essential  to  create  his 
rights  as  owner  that  the  certificate  should  actually  be  issued 
to  him.  The  other  incorporators  or  promoters  cannot,  after 
a  person  has  become  a  subscriber  for  stock,  arbitrarily  say, 
"We  will  not  issue  the  stock  to  him,"  and  thus  avoid  the 
binding  force  of  the  subscription;  nor  can  the  subscriber 
himself  say,  where  the  parties  have  acted  in  good  faith,  "I 
have  changed  my  mind;  I  will  not  take  the  stock."  By  the 
subscription  merely,  the  subscriber  becomes  bound  to  ac- 
cept and  pay  for  the  shares  he  has  subscribed  for.  And 
to  guard  against  any  imposition  upon  those  who  have  sub- 
scribed for  stock,  the  law  provides  that  a  subscription  for 
capital  stock  cannot  be  rescinded  or  canceled,  except  for 
fraud  or  mistake,  without  the  unanimous  consent  of  all  the 
stockholders.  What  mistakes,  or  what  acts  of  fraud  in  the 
organization  of  a  corporation,  would  entitle  any  party  to 
demand  that  a  subscription  for  stock  be  canceled,  must 
depend  upon  the  peculiar  facts  of  each  case.  If  a  party 
were  induced  by  false  statements  or  intentional  misrep- 
resentations, concerning  material  matters  connected  with 
the  proposed  corporation,  to  subscribe  for  its  stock,  this 
would  be  a  fraud  upon  him  for  which  he  could  demand 
that  his  subscription  be  canceled.  But,  whatever  the  rights 
of  the  subscriber  might  be  in  the  courts,  the  corporation 
itself  can  never  cancel  a  subscription  for  stock  without  first 
having  the  unanimous  consent  of  all  the  stockholders. 
(Decided  by  the  Supreme  Court  in  the  case  of  Pacific  Fruit 
Company  vs.  Coon,  which  decision  is  printed  in  Volume  107 
of  the  California  Reports,  page  447.) 

Section  777.— COMPROMISE  WITH  SUBSCRIBER 
FOR  STOCK.— Where  subscribers  to  the  capital  stock  of 
a  corporation  by  reason  of  great  financial  loss  and  damage 
are  unable  to  take  and  pay  for  the  whole  amount  of  their 
subscription,  the  board  of  directors  of  the  corporation  have 


CORPORATIONS   IN    CALIFORNIA.  637 

authority  to  compromise  the  matter  by  releasing  them  from 
their  subscription  to  the  extent  of  one-half  of  the  number 
of  shares  subscribed  for,  in  consideration  of  their  acceptance 
and  payment  for  the  remainder.  The  general  rule  is,  that 
a  subscriber  to  stock  of  a  corporation  cannot  be  released 
from  the  obligation  of  his  contract  without  the  consent  of 
his  fellow  stockholders  and  the  creditors  of  the  corporation. 
The  reason  for  the  rule  is  found  in  the  doctrine,  which  views 
the  subscribed  capital  stock  of  a  corporation,  both  paid  and 
unpaid,  as  a  trust  fund  which  the  stockholders  and  creditors 
have  the  right  to  insist  shall  not  be  reduced  or  diminished 
or  impaired  except  with  their  consent.  In  considering  the 
application  of  the  rule,  however,  it  must  be  kept  in  mind 
that  the  creditor  of  a  corporation  is  not  a  direct  party  to  the 
contractual  relation  entered  into  between  the  corporation  and 
a  subscriber  to  its  capital  stock,  and  the  creditor's  rights  do 
not  extend  so  far  as  to  permit  him  to  interfere  and  prevent 
a  stockholder  from  altering  his  relation  toward  the  corpor- 
ation with  respect  to  his  membership  therein  as  a  holder  of 
its  shares. 

A  solvent  stockholder  may  make  a  valid  agreement .  with 
the  corporation,  securing  first  the  consent  of  all  the  other 
stockholders  thereto,  for  his  release  from  his  subscription 
contract.  Such  an  agreement  will  not  prevent  existing 
creditors  from  having  recourse  against  the  retiring  stock- 
holder upon  his  statutory  liability.  Express  authority  given 
by  the  charter  or  by-laws  of  the  corporation,  is  essential, 
however,  to  the  execution  of  such  an  agreement  by  the 
board  of  directors  of  a  corporation. 

(a)  Insolvent  and  Irresponsible  Subscriber — Power  of 
Board  of  Directors. — While  the  power  in  the  stockholders 
of  a  corporation  to  accept  a  surrender  of  the  shares  of  a 
subscriber  may  not  be  exercised  by  the  board  of  directors 
in  the  absence  of  express  authority  given  them  by  the  charter 
or  by-laws,  an  exception  is  recognized  to  the  extent  that 
the  directors  may  make  compromises  with  insolvent  or  irre- 
sponsible  subscribers.      Such    compromises   usually    take    the 


638  BUSINESS  LAWS  FOR  BUSINESS  MEN. 

form,  that  in  consideration  of  the  subscriber  paying  for  a 
portion  of  the  shares  agreed  to  be  taken,  he  is  released,  so 
far  as  the  corporation  is  concerned,  as  to  liabiHty  for  the 
remainder.  (Decided  by  the  District  Court  of  Appeals  in 
the  case  of  Thomas  vs.  Wentworth  Hotel  Company,  which 
decision  is  printed  in  Volume  12,  California  Appellate  De- 
cisions, page  834.) 

Section  778.— TRANSFER  OF  SHARES  OF  STOCK. 

— Shares  of  stock  in  a  corporation  are  transferred  by  in- 
dorsement and  the  delivery  of  the  certificate.  The  indorse- 
ment is  made  by  the  signature  of  the  owner,  his  agent, 
attorney,  administrator,  or  executor.  The  transfer  thus 
made,  by  indorsement  and  delivery,  and  nothing  more,  is 
valid  between  the  parties  to  it.  But  to  make  such  a  trans- 
fer good  as  to  third  parties,  something  more  is  required; 
the  transfer  must  be  entered  upon  the  books  of  the  cor- 
poration, so  as  to  show  the  names  of  the  parties  by  whom 
and  to  whom  transferred,  the  number  of  the  certificate,  the 
number  of  shares,  and  the  date  of  the  transfer. 
Civil  Code,  Section  324. 

Section  779.— TRANSFER  OF  STOCK  HELD  BY 
NON-RESIDENT.— The  officers  of  a  corporation  are  not 
bound  to  enter  on  its  books  any  transfer  of  its  shares  owned 
by  parties  residing  out  of  the  State,  and  are  not  bound  to 
issue  a  certificate  to  the  transferee,  unless  the  person  claim- 
ing under  the  transfer,  or  the  attorney  or  agent  of  the  non- 
resident, makes  an  affidavit  or  produces  other  satisfactory 
evidence  that  the  non-resident  owner  was  alive  at  the  date 
of  the  transfer;  and  if  this  affidavit  is  not  made  or  evidence 
of  such  fact  produced,  the  corporation  may  require  an  in- 
demnity bond,  with  two  sureties,  conditioned  to  protect  the 
corporation  against  any  liability  to  the  estate  of  the  owner  of 
the  shares,  in  case  of  his  being  in  fact  dead  before  the 
transfer;  and  if  neither  the  affidavit  nor  other  evidence,  nor 
the  indemnity  bond,  is  furnished  when  required,  the  corpor- 


CORPORATIONS   IN   CALIFORNIA,  639 

ation  and  its  officers  will  not  be  liable  for  refusing  to  enter 
the  transfer  on  the  books. 

Civil  Code,  Section  326. 

Section  780.— TRANSFER  OF  STOCK  HELD  BY 
MARRIED  WOMAN. — Shares  of  stock  in  corporations 
held  by  or  owned  by  a  married  woman  may  be  transferred 
by  her,  or  her  agent  or  attorney,  without  the  signature  of 
her  husband,  by  indorsement  and  delivery  of  the  stock. 
Civil  Code,  Section  325. 

Section  781.— VOID  CERTIFICATES.— It  is  unlawful 
for  any  corporation  in  California  to  issue  stock  except  for 
money  paid,  labor  done,  or  property  actually  received.  Stock 
cannot  be  lawfully  issued  without  such  consideration,  and 
all  certificates  issued  by  any  corporation  in  violation  of  this 
provision  of  the  law  are  void. 
Civil  Code,  Section  359. 

Section  782.— REMEDY  AGAINST  CORPORATION 
REFUSING  TO  REGISTER  TRANSFER  OF  STOCK. 

— If  the  officers  of  a  corporation  refuse  to  register  a  trans- 
fer of  stock  on  its  books,  the  person  to  whom  the  stock 
has  been  transferred  may  lawfully  treat  such  refusal  as  a 
conversion  of  the  shares  by  the  corporation.  He  may  then 
sue  the  corporation  and  obtain  a  judgment  for  the  value 
of  the  stock  at  the  time  of  the  refusal  to  register  the 
transfer,  with  interest  at  seven  per  cent  per  annum  from 
that  time. 

Civil  Code,  Section  3336, 

Section  783.— CERTIFICATES  OF  STOCK  ARE 
NOT  NEGOTIABLE. — Certificates  of  stock  in  a  corpor- 
ation are  not  negotiable,  in  a  commercial  sense.  They  are 
mere  evidences  of  the  holder's  title  to  a  given  share  in  the 
property  and  franchises  of  the  corporation  of  which  he 
is  a  member.  Consequently,  if  a  corporation  issues  to  an 
owner  of  shares  of  stock  a  certificate  transferable   on   the 


640  BUSINESS   LAWS    FOR   BUSINESS    MEN. 

books  of  the  company  by  indorsement  and  surrender  of 
the  certificate,  and  he  indorses  the  same  and  then  loses  it, 
and  it  comes  into  the  hands  of  a  bona  fide  purchaser  for 
value,  such  purchaser  acquires  no  right  to  the  stock.  (De- 
cided by  the  Supreme  Court  in  the  case  of  Sherwood  vs. 
Meadow  Valley  -Mining  Company,  which  decision  is  printed 
in  Volume  50  of  the  California  Reports,  page  412.)  In 
the  case  cited,  the  language  of  Parsons  on  Contracts  is 
referred  to,  where  he  says:  "The  result  would  seem  to  be 
that  all  corporation  bonds  and  government  stocks,  which 
pass  by  delivery,  or  indorsement  with  delivery,  are  nego- 
tiable; but  that  certificates  of  stock  in  a  corporation  are  not." 

Section  784.  — WHEN  CORPORATION  CANNOT 
CLAIM  ITS  OWN  STOCK  INVALID.— A  corporation 
is  precluded  from  setting  up  the  claim  that  its  own  stock  is 
invalid,  or  not  issued  according  to  law,  where  the  rights 
of  a  bona  fide  purchaser  are  involved.  So  it  has  been  held 
that,  where  a  corporation  issues  capital  stock,  and  repre- 
sents it  as  fully  paid  and  causes  it  to  be  so  listed  on  the 
stock  and  bond  exchange,  the  law  will  deny  it  the  right  to 
claim  that  the  stock  is  invalid,  as  against  a  bona  fide  pur- 
chaser, even  if  the  stock  was  in  fact  issued  without  con- 
sideration. (Decided  by  the  Supreme  Court  in  the  case  of 
Smith  vs.  Martin,  which  decision  is  printed  in  Volume  135 
of  the  California  Reports,  page  247.) 

Section  785.— REMEDY  AGAINST  CORPORATION 
FOR  REFUSING  TO  RECOGNIZE  STOCKHOLDER. 

— If  the  corporation  refuses  to  recognize  the  lawful  holder 
of  stock  as  a  stockholder,  or  refuses  to  deliver  to  him  a 
new  certificate,  or  to  register  him  on  its  books,  he  has  two 
remedies.  He  may  sue  in  the  Superior  Court  and  compel 
the  corporation  to  recognize  him  as  a  stockholder,  by  regis- 
tering him  upon  its  books  and  delivering  to  him  a  new 
certificate;  or,  he  may  sue  the  corporation  for  damages,  on 
the  ground  that  by  its  refusal  it  has  been  guilty  of  a  conver- 
sion of  his  stock.     These  remedies  are  given  not  only  to  the 


CORPORATIONS   IN    CALIFORNIA.  641 

real  owner  of  the  stock,  but  also  to  others,  as  the  pledgee, 
the  guardian,  or  the  administrator.  (Decided  by  the  Su- 
preme Court  in  the  case  of  Herbert  Kraft  Company  Bank 
vs.  Bank  of  Orland,  which  decision  is  printed  in  Volume  133 
of  the  California  Reports,  page  64.) 

Section  786.— MORTGAGE  OF  SHARES  OF  STOCK. 

— The  statute  law  declares  what  personal  property  may  be 
mortgaged  in  California.  Other  personal  property,  however, 
may  be  mortgaged,  and  the  mortgage  will  be  good  as  be- 
tween the  parties  to  it.  Shares  of  stock  in  a  corporation  are 
personal  property.  A  mortgage  of  shares  of  stock  may  be 
made,  which  is  valid  and  binding  between  the  parties,  and 
without  delivery  of  possession  of  the  certificate  of  stock. 
Such  a  mortgage  is  void  as  to  creditors  and  subsequent  pur- 
chasers in  good  faith  for  a  valuable  consideration ;  but  where 
no  such  persons  are  complaining,  the  mortgage  is  good  be- 
tween the  parties  to  it. 

Section    787.— SEAL     OF     CORPORATION.— Every 

corporation  must  have  a  seal,  but  it  need  not  be  used  upon 
every  occasion.  Corporations,  like  individuals,  may  appoint 
agents,  and  make  most  of  the  contracts  which  fall  within 
their  general  powers,  without  the  use  of  a  seal. 

Section  788.—  DEED  WITHOUT  CORPORATE 
SEAL. — In  a  suit  involving  the  validity  of  the  deed  of  a 
corporation,  executed  without  the  corporate  seal  by  persons 
signing  as  Directors,  one  who  claims  under  such  deed 
must  show  affirmatively  that  the  deed  was  authorized  by  a 
resolution  of  the  Directors  entered  on  the  records  of  the 
corporation,  or  that  it  was  ratified  by  such  resolution.  (De- 
cided by  the  Supreme  Court  in  the  case  of  Barney  vs,  Pforr, 
which  decision  is  printed  in  Volume  117  of  the  California 
Reports,  page  56.) 


642  BUSINESS   LAWS   FOR   BUSINESS    MEN. 

Section  789.  —  WHAT  REAL  ESTATE  MAY  BE 
HELD  BY  CORPORATION.  — A  corporation  may  hold 
indefinitely  any  real  estate  necessary  to  be  used  by  it  in  the 
conduct  of  its  legitimate  business;  but  the  Constitution  of 
California  provides  that  no  corporation  shall  hold  for  a  longer 
period  than  five  years  any  real  estate,  except  such  as  may 
be  necessary  for  carrying  on  its  business.  Therefore,  if  a 
corporation  acquires  any  real  estate,  in  any  manner,  which  is 
not  necessary  in  carrying  on  its  business,  it  must  sell  such 
real  estate  within  five  years  after  the  title  is  vested  in  it; 
and  if  it  does  not  do  so,  the  Attorney-General  may  bring  a 
suit  against  the  corporation,  in  the  name  of  the  people  of 
the  State,  to  compel  it  to  sell  the  land. 

Constitution  of  California,  Article  12,  Section  9. 

Section  790.— CORPORATION  MUST  KEEP  WITH- 
IN OBJECT  OF  ITS  CREATION.— It  is  one  of  the  car- 
dinal principles  governing  the  conduct  of  a  corporation  that 
it  must  keep  within  the  purposes  and  objects  for  which  it 
was  organized.  If  organized  to  carry  on  a  particular  busi- 
ness, it  cannot  engage  in  another.  So,  if  a  corporation 
formed  to  do  a  banking  business  should  engage  in  insurance, 
the  latter  business  would  be  outside  of  its  legitimate  object, 
and  its  acts  in  that  business  would  have  no  validity.  So  far 
has  this  principle  been  carried  in  California,  our  Supreme 
Court  has  said  that  a  contract  of  a  corporation,  outside  of 
the  object  of  its  creation  as  defined  by  the  law  of  its  orga- 
nization, and  therefore  beyond  the  powers  conferred  upon  it 
by  the  Legislature,  is  not  voidable  only,  but  wholly  void 
and  of  no  legal  effect.  The  objection  to  such  a  contract 
is  not  merely  that  the  corporation  ought  not  to  have  made  it, 
but  that  it  could  not  make  it. 

Section  791.—  VOID  CONTRACT  CANNOT  BE 
RATIFIED. — A  contract  which  is  absolutely  void,  because 
outside  of  the  objects  of  the  corporation,  cannot  be  ratified. 
The  contract  cannot  be  ratified  by  either  party  to  it,  because 
it  could  not  have  been  authorized  by  either.    No  performance 


CORPORATIONS   IN   CALIFORNIA,  643 

on  either  side  can  give  a  void  contract  any  validity,  or  be  the 
foundation  of  any  right  of  action  upon  it.  (Decided  by  the 
Supreme  Court  in  the  case  of  Chemical  National  Bank  vs. 
Havermal,  which  decision  is  printed  in  Volume  120  of  the 
California  Reports,  page  53.) 

Section  792.— WHEN  CORPORATION  BOUND  BY 
ITS  OWN  INVALID  ACT.— While  an  absolutely  void 
contract  cannot  be  ratified,  yet  corporations  are  often  bound 
by  their  own  invalid  acts,  as  where  the  Directors  have  done 
an  act  without  their  lawful  power,  but  the  corporation  has 
retained  the  benefits  and  still  enjoys  the  fruits  of  the  trans- 
action. In  such  a  case,  the  corporation  is  not  permitted  to 
deny  the  validity  of  its  own  act,  although  it  was  irregular 
or  invalid.  This  rule  is  illustrated  by  a  decision  of  the 
Supreme  Court,  where  a  promissory  note  was  irregularly 
executed  by  the  President  and  Secretary  of  a  corporation, 
and  upon  being  sued  on  the  note,  the  corporation,  without 
returning  or  offering  to  return  the  money  received  from  the 
lender,  denied  the  vaUdity  of  the  note  and  attempted  to  re- 
pudiate it.  The  Supreme  Court  said:  "Assuming  that  the 
contract  was  outside  its  power,  the  law  does  not  allow  a 
corporation  to  retain  the  benefits  which  it  has  received  from 
the  contract  and  escape  liability  upon  it.  The  invalidity  of  a 
contract  is  subject  to  the  equitable  exception  that,  although  a 
corporation  in  making  a  contract  acts  in  disagreement  with 
its  charter,  where  it  is  a  simple  question  of  capacity  or 
authority  to  contract,  arising  either  on  a  question  of  regularity 
of  organization,  or  of  power  conferred  by  the  charter,  a 
party  who  has  had  the  benefit  of  the  agreement  cannot  be 
permitted,  in  an  action  founded  upon  it,  to  question  its 
validity.  It  would  be  in  the  highest  degree  inequitable  and 
unjust  to  permit  the  defendant  to  repudiate  a  contract  the 
fruits  of  which  he  retains.  The  exception  referred  to  is 
founded  upon  the  fact  that  the  contract,  though  invalid,  has 
been  executed  in  the  interests  of  the  corporation,  and  for  its 
benefit  and  advantage.  Where,  therefore,  it  has  received  the 
fruits  of  such  a  contract,  it  cannot  refuse  payment  on  the 


644  BUSINESS   LAWS   FOR   BUSINESS    MEN. 

ground  that  it  had  no  power  to  contract.  It  would  be 
otherwise  if  the  contract  had  not  been  executed."  (Decided 
by  the  Supreme  Court  in  the  case  of  Main  vs.  Casserly, 
which  decision  is  printed  in  Volume  97  of  the  California 
Reports,  page  127.) 

Section  793.  — NOTICE    TO    CORPORATION.— The 

President  is  the  proper  person  to  whom  notice,  which  is 
to  aflfect  a  corporation,  is  to  be  given.  The  corporation  has 
no  eyes,  ears,  or  understanding,  save  through  its  agents. 
The  President  is  considered  the  head  of  the  corporation,  and 
it  is  his  duty  to  report  to  the  Directors  information  affecting 
the  interests  of  the  Corporation.  Therefore,  notice  of  any 
matter,  given  to  the  President,  is  notice  to  the  corporation. 

Section    794.— LEASE     OF     FRANCHISE.— Where    a 

corporation  secures  a  franchise,  by  municipal  grant,  to  operate 
gas  and  electric  works,  and  to  supply  the  inhabitants  of  the 
city  with  the  product,  it  cannot  lawfully  lease  its  works  and 
privileges  to  another,  and  such  a  lease,  when  made,  is  against 
public  policy  and  void.  The  reason  for  this  is,  a  franchise  is 
a  personal  privilege,  and  can  never  be  assigned  without  the 
consent  of  the  grantor.  (Decided  by  the  Supreme  Court  in 
the  case  of  Visalia  Gas  and  Electric  Light  Company  vs.  Sims, 
which  decision  is  printed  in  Volume  104  of  the  California 
Reports,  page  326.) 

Section  795.—  MORTGAGE  OF  CORPORATION 
PROPERTY.— The  President  has  not  the  power  by  virtue 
of  his  office  to  mortgage  the  property  of  the  corporation. 
Nor  has  the  Secretary  such  power  by  virtue  of  his  office. 
Nor  have  both  together  the  power  which  neither  has  sepa- 
rately, nor  have  the  stockholders  such  power.  The  powers 
of  a  corporation  must  be  exercised,  and  its  property  con- 
trolled, by  its  Board  of  Directors,  the  decision  of  a  majority 
of  the  Directors,  when  lawfully  assembled,  being  valid  as  a 
corporate  act.  A  mortgage  of  the  corporation  property  can 
only  be  made  by  authority  of  a  resolution  of  the  Board  of 


CORPORATIONS   IN   CALIFORNIA.  645 

Directors,  adopted  by  a  majority  vote,  at  a  meeting  lawfully 
held,  and  the  transaction  recorded  in  its  minutes.  If  there 
is  no  resolution  of  the  Board  of  Directors  authorizing  it, 
a  mortgage  of  the  corporation's  property,  though  executed  by 
the  proper  officers,  is  illegal  and  invalid. 

Section  796.  — ASSIGNMENT    OF    ACCOUNTS.— In 

the  conveyance  of  real  estate,  and  the  encumbrance  of  cor- 
poration property  by  mortgage,  corporations  are  held  to 
much  narrower  rules  than  apply  to  the  transaction  of  its 
ordinary  business  affairs.  It  is  not  contemplated  that  the 
Board  of  Directors  shall  meet  upon  every  occasion  when  a 
contract  is  to  be  made,  or  other  act  done,  in  the  ordinary 
conduct  of  the  business  of  the  company.  Therefore,  the 
President  or  General  Manager  of  a  corporation  has  power  to 
assign  its  book  accounts  for  collection,  where  the  assignment 
is  in  the  ordinary  course  of  its  business,  and  known  to  and 
acquiesced  in  by  the  Directors,  and  such  a  transaction  as  the 
officers  have  been  in  the  habit  of  doing;  and  such  assign- 
ment under  such  circumstances  will  be  valid  without  previous 
authorization  by  resolution  of  the  Board.  The  President  or 
General  Manager  may  also  have  like  authority  to  make 
assignments  of  notes  held  by  the  corporation,  to  its  creditors, 
either  in  payment  of  or  as  security  for  the  payment  of  the 
debt  of  the  corporation,  without  express  authority  of  the 
Board  of  Directors.  (Decided  by  the  Supreme  Court  in  the 
case  of  Greig  vs.  Riordan,  which  decision  is  printed  in 
Volume  99  of  the  California  Reports,  page  316.) 

Section  797.  — LIABILITY     OF     PROMOTERS.— A 

promoter  is  one  who  brings  about  the  incorporation  and 
organization  of  a  corporation;  who  brings  together  the  per- 
sons who  become  interested  in  the  enterprise,  aids  in  procur- 
ing subscriptions,  and  sets  in  motion  the  machinery  which 
results  in  the  formation  of  the  corporation.  A  promoter 
occupies  a  position  of  confidence  towards  those  whom  he 
induces   to   enter   into   the   enterprise.      And   if   a    promoter 


646  BUSINESS   LAWS   FOR   BUSINESS    MEN. 

obtains  property  for  the  corporation,  and  transfers  the  prop- 
erty to  the  corporation  for  a  sum  which  he  falsely  represents 
to  be  the  cost  price,  but  which  is  really  much  more,  he  will 
be  liable  to  the  stockholders  for  the  profit  made  by  him 
through  his  deceit.  And  in  all  other  matters  a  promoter 
must  deal  fairly  and  openly  with  his  associates  in  the  forma- 
tion of  a  corporation. 

Section    798.— WHAT    IS    A    CORPORATION    DE 

FACTO. — It  sometimes  happens  that,  in  the  formation  of  a 
corporation,  many  of  the  acts  required  to  be  performed  in 
order  to  make  a  complete  organization  may  have  been 
irregularly  performed,  or  some  of  them  may  have  been  en- 
tirely omitted ;  yet,  if  the  company  has  proceeded,  claiming 
in  good  faith  to  be  a  corporation  under  the  laws  of  Cali- 
fornia, and  is  doing  business  as  such  corporation,  a  party 
with  whom  it  transacts  business,  and  who  accepts  the  ben- 
efit of  its  acts,  cannot  deny  the  validity  of  its  incorporation. 
For  it  is  termed  a  corporation  de  facto,  a  company  in  fact 
doing  the  business  in  good  faith  for  which  it  was  designed, 
although  not  organized  strictly  in  accordance  with  law. 

Section  799.— WHO  MAY  QUESTION  THE  VALID- 
ITY OF  A  CORPORATION.— The  question  of  the  due 
incorporation  of  any  company  claiming  in  good  faith  to  be 
a  corporation  under  the  laws  of  this  State,  and  doing  busi- 
ness as  such  corporation,  or  of  its  right  to  exercise  corporate 
powers,  cannot  be  inquired  into,  collaterally,  in  any  private 
suit  to  which  such  de  facto  corporation  may  be  a  party. 
The  State  alone,  through  its  Attorney-General,  has  power 
to  bring  a  suit  to  test  the  right  of  such  a  corporation  to 
exercise  corporate  powers. 

Section  800.— DENIAL  THAT  A  CORPORATION 
EXISTS. — It  does  not  follow,  because  the  State  alone  can 
question  the  validity  of  a  corporation  or  its  right  to  exer- 
cise corporate  powers,  when  the  company  claims  in  good 
faith  to  be  a  corporation  and  is  doing  business  as  such, 
that  an  individual  is  never  permitted  to  deny  the  corporate 


CORPORATIONS    IN    CALIFORNIA.  647 

existence.  For  it  is  true  that,  whenever  a  corporation  brings 
a  suit  in  the  courts  of  this  State,  it  must  allege  that  it  is  a 
corporation,  and  the  defendant  may  deny  the  fact,  and  then 
the  corporation  must  prove  it.  And  if  it  should  appear  that 
a  body  of  men  had  met  and  declared  that  they  constituted 
themselves  a  corporation,  but  neither  subscribed  to  the  capital 
stock,  nor  adopted  Articles  of  Incorporation,  nor  appointed 
the  officers,  nor  performed  any  act  in  the  organization  of 
the  corporation  required  by  law,  nor  transacted  any  business 
as  a  corporation — in  such  a  case  the  court  would  declare, 
even  in  a  suit  between  private  parties,  that  there  was  no 
incorporation  and  no  right  to  exercise  corporate  powers. 

Section  801.— STOCKHOLDER'S  RIGHT  TO  IN- 
SPECT BOOKS  AND  RECORDS.— The  stockholder  is 
interested  in  all  the  affairs  and  management  of  the  corpora- 
tion. He  is,  in  one  sense,  a  part  owner  of  the  assets,  his 
part  being  represented  by  the  number  of  shares  owned  by 
him.  The  law  of  California,  recognizing  the  necessity  for 
an  inspection  by  the  stockholder  of  the  books  and  records, 
whenever  he  desires  to  do  so,  has  provided  that  all  corpora- 
tions for  profit  must  keep  a  record,  among  other  things,  of 
all  their  business  transactions;  and  that  such  records  shall 
always  be  open  to  the  inspection  of  any  Director,  member,  or 
stockholder.  It  is  the  legal  right  of  the  stockholder  to  in- 
spect, and  the  duty  of  the  officers  to  allow  him  to  inspect, 
at  all  times,  the  books  and  records  of  the  corporation. 

Constitution    of    California,    Article    12,    Section    14; 
Civil  Code,  Section  Z77 . 

Section  802.— MOTIVES  OF  STOCKHOLDER  IN 
MAKING  EXAMINATION  OF  BOOKS.— The  motives 
of  the  stockholder  in  demanding  the  right  to  make  an  exam- 
ination of  the  books  of  the  corporation  will  make  no  differ- 
ence. He  may  not  really  have  any  specific  interest  at  stake, 
rendering  his  inspection  necessary;  there  may  be  no  beneficial 
purpose  on  his  part  for  which  the  examination  Is  desired; 
he  may  wish  to  enforce  a  mere  naked  right,  or  to  gratify 


648  BUSINESS  LAWS  FOR  BUSINESS   MEN. 

mere  idle  curiosity;  his  motives  may  in  fact  be  improper, 
and  he  may  be  seeking  to  gain  information  of  a  secret  nature 
with  the  object  of  furnishing  it  to  a  rival  company  or  cor- 
poration, to  the  injury  and  damage  of  the  corporation  whose 
books  he  examines;  but  none  of  these  facts,  if  they  exist, 
will  be  a  legal  excuse  for  refusing  to  allow  a  shareholder, 
however  small  his  interest,  to  examine  the  books  and  records 
of  the  corporation.  The  shareholder  is  not  required  to 
show  any  reason  or  occasion  for  making  the  examination, 
nor  can  he  be  met  with  the  defense  that  his  motives  are 
improper.  (Decided  by  the  Supreme  Court  in  the  case  of 
Johnson  vs.  Langdon,  which  decision  is  printed  in  Volume 
135  of  the  California  Reports,  page  624.) 

Section  803.— LIABILITY  OF  STOCKHOLDER  FOR 
FURNISHING  INFORMATION  TO  RIVAL  COR- 
PORATION.— When  it  becomes  known  to  the  officers  of 
a  corporation  that  a  stockholder  has  made  an  examination 
of  the  books  with  an  improper  motive,  and  that  he  has 
furnished  information  thus  obtained  to  a  rival  corporation 
or  company,  the  corporation  he  has  so  injured  and  dam- 
aged is  not  left  by  the  law  without  a  remedy.  The  guilty 
stockholder  cannot  be  enjoined  from  inspecting  the  books, 
nor  can  the  books  be  lawfully  closed  to  him.  But,  by  thus 
obtaining  and  disclosing  information,,  he  becomes  liable  in 
damages  to  the  corporation,  and  the  corporation  can  re- 
cover a  judgment  against  him  for  all  the  damages  which 
are  occasioned  to  it  by  his  conduct.  True,  he  may  not  be 
financially  able  to  pay  the  amount  recovered,  and  the  judg- 
ment, when  obtained,  may  be  worthless;  but  the  law  does  not 
take  these  matters  into  account;  and  a  suit  for  damages  is 
the  only  remedy  a  corporation  has  against  its  own  stock- 
holder who  examines  its  books  with  an  improper  motive  and 
for  the  purpose  of  injuring  it. 

Section  804.—  REMEDY  OF  STOCKHOLDER 
WHEN   INSPECTION   OF   BOOKS   IS   REFUSED.— 

If  a  stockholder  applies  to  the  proper  officer,  generally  the 


CORPORATIONS   IN    CALIFORNIA.  649 

secretary,  in  charge  of  the  books,  and  demands  the  right  to 
make  an  examination,  his  remedy  upon  refusal  is  to  apply 
to  the  Superior  Court  of  the  county  for  a  writ  -.  of  mandate. 
The  shareholder  has  a  right  to  be  fully  informed  as  to  the 
conditions  of  the  corporation,  the  manner  in  which  its  affairs 
are  conducted,  and  how  the  capital  to  which  he  has  contrib- 
uted is  employed  and  managed.  And  if  an  examination  of 
the  books  is  refused  him,  upon  showing  this  fact  in  a  petition 
to  the  Superior  Court,  together  with  the  fact  that  he  is  a 
stockholder,  the  law  requires  the  court  to  issue  a  writ  com- 
manding the  officers  of  the  corporation  to  open  its  books, 
records,  and  journals  to  his  examination  and  inspection.    . 

Section  805.—  LIABILITY  OF  STOCKHOLDER 
FOR  CORPORATION  DEBTS.— The  law  of  California 
imposes  upon  each  stockholder  the  burden  of  paying  the  debts 
of  the  corporation.  Each  stockholder  is  individually  and 
personally  liable  for  such  proportion  of  the  debts  of  the 
corporation  as  the  amount  of  stock  owned  by  him  bears  to 
the  whole  of  the  subscribed  capital  stock.  That  is,  if  a  per- 
son owns  shares  of  stock  to  the  amount  of  $10,000,  and  the 
subscribed  capital  stock  is  $100,000,  he  will  be  individually 
and  personally  liable  for  the  one-tenth  part  of  the  debts  of 
the  corporation.  It  will  make  no  difference  in  his  liability 
whether  the  subscriptions  have  been  paid  in  or  not;  for  his 
proportion  is  measured,  not  by  the  capital  actually  paid  in, 
but  by  the  capital  stock  subscribed.  If  debts  or  claims  are 
owing  by  or  presented  to  a  corporation,  the  stockholder  is 
liable  only  for  his  proportion  of  such  debts  or  claims.  It 
will  make  no  difference,  either,  whether  the  corporation  is 
a  domestic  or  foreign  corporation ;  the  liability  of  their  stock- 
holders in  California  is  the  same.  The  liability  of  a  stock- 
holder is  not  released  by  any.  subsequent  transfer  of  stock, 
and  such  transfer  will  not  free  him  from  responsibility  on 
account  of  a  debt  incurred  by  the  corporation  while  he  was 
a  stockholder. 

Civil  Code,  Section  322;  Statutes  of  1905,  page  396. 


660  BUSINESS   LAWS   FOR   BUSINESS    MEN. 

Section  806.— LIABILITY  OF  MEMBER  WHERE 
THERE  IS  NO  CAPITAL  STOCK.— In  corporations 
having  no  capital  stock,  each  member  is  individually  and 
personally  liable  for  his  proportion  of  its  debts  and  liabilities. 
His  liability  is  to  be  measured  by  a  comparison  of  the  amount 
of  the  debt  with  the  number  of  members;  and,  therefore,  if 
the  corporation  owes  $10,000,  and  there  are  ten  members, 
each  will  be  liable  for  the  one-tenth  part  of  the  debt,  or 
$1,000. 

Civil  Code,  Section  322. 

Section  807.— PLEDGEE  OR  TRUSTEE  NOT  LIA- 
BLE FOR  DEBTS.— A  person  who  holds  stock  as  col- 
lateral security  does  not  become,  by  reason  of  the  pledge, 
liable  for  the  debts  of  the  corporation;  but  the  pledgor  re- 
mains liable,  as  before  the  pledge.  A  person  holding  stock 
merely  as  a  trustee  does  not  become,  in  such  representative 
capacity,  liable  for  the  debts  of  the  corporation ;  but  the 
person  he  represents  as  trustee  is  deemed  the  stockholder, 
as  respects  such  liability. 

Civil  Code,  Section  322. 

Section  808.— WHEN  LIABILITY  OF  STOCK- 
HOLDER BEGINS.— The  liability  of  a  stockholder  for 
the  debts  of  the  corporation  begins  when  he  acquires  his 
stock.  He  is  not  liable  for  the  debts  of  the  corporation 
incurred  before  he  acquired  his  stock.  For  instance,  to 
make  a  stockholder  liable  to  pay  his  proportion  of  the 
amount  due  on  a  note  made  by  the  corporation,  it  must 
appear  that  the  debt  for  which  the  note  was  given  was 
incurred  since  he  became  a  stockholder.  For  if  a  corpora- 
tion buys  goods,  before  the  stockholder  acquires  his  stock, 
and  afterwards  makes  its  note  for  the  amount,  that  stock- 
holder is  not  liable  on  the  note,  because  it  was  made  for  a 
debt  incurred  prior  to  the  time  when  he  became  a  stock- 
holder. The  stockholder's  liability  begins  with  the  creation 
of  the  original  debt,  and  the  debt  must  be  incurred  while  he 
is  a  stockholder,  and  not  before;  for  otherwise,  he  is  not 


CORPORATIONS    IN    CALIFORNIA.  651 

liable  at  all.  (Decided  by  the  Supreme  Court  in  the  case  of 
Winona  Wagon  Company  vs.  Bull,  which  decision  is  printed 
in  Volume  108  of  the  California  Reports,  page  1.) 

Section    809.—  FRAUDULENT     TRANSFER.  — The 

question  sometimes  arises  whether,  when  a  corporation  be- 
comes insolvent,  and  unable  to  pay  its  debts  as  they  become 
due  in  the  ordinary  course  of  business,  a  stockholder  can 
transfer  his  shares  to  another  and  thus  be  rid  of  liability  for 
the  debts  of  the  concern.  The  Supreme  Court,  in  the  case 
of  Welch  vs.  Sargent,  said  on  this  point:  "Generally  speak- 
ing, the  law  places  no  restriction  upon  the  right  of  a  stock- 
holder of  a  corporation  to  transfer  his  stock,  so  long  as  the 
corporation  is  solvent.  But  after  the  corporation  has  be- 
come insolvent,  and  the  stockholder  knows  this,  a  shareholder 
cannot  transfer  his  stock  to  irresponsible  parties  so  as  to 
relieve  himself  from  liability  to  the  creditors."  It  matters 
not  what  his  intention  was,  for  he  may  have  transferred  the 
stock  in  good  faith,  yet  the  law  will  still  protect  the  creditors 
of  an  insolvent  corporation  by  holding  such  a  transfer  void 
as  to  them.  (Decided  by  the  Supreme  Court  in  the  case  of 
Welch  vs.  Sargent,  which  decision  is  printed  in  Volume  127 
of  the  California  Reports,  page  72.) 

Section  810.— STOCKHOLDER  MAY  SUE  OTHER 
STOCKHOLDERS.— A  stockholder  may  sue  other  stock- 
holders in  the  same  corporation  for  their  pro  rata  of  a  debt 
due  him  by  the  corporation.  (Decided  by  the  Supreme 
Court  in  the  case  of  Brown  vs.  Merrill,  which  decision  is 
printed  in  Volume  107  of  the  California  Reports,  page  446.) 

Section  811.— ASSIGNEE  OF  CREDITOR  MAY  SUE 
STOCKHOLDERS.— The  creditor  of  a  corporation  may 
assign  his  account  for  collection,  and  the  assignee  will  have 
the  right  to  sue  the  stockholders  in  his  own  name.  It  is 
no  defense,  in  a  suit  against  stockholders,  that  the  assignee, 
instead  of  the  original  creditor,  brings  the  suit  to  collect 
the  amount  of  the  debt. 


652  BUSINESS  LAWS  FOR  BUSINESS   MEN. 

Section  812.— CREDITOR'S  RIGHT  TO  UNPAID 
SUBSCRIPTIONS.— Debts  due  to  a  corporation  constitute 
a  portion  of  its  assets,  and  may  be  reached  by  creditors. 
Among  these  are  unpaid  subscriptions  to  stock.  As  to 
creditors,  the  corporation  is  presumed  to  have  sought  credit 
based  on  its  supposed  capital,  actually  paid  in  or  due  from 
its  stockholders.  As  the  supposed  capital  is  the  sole  basis 
of  credit,  the  stockholders,  who  are  the  real  parties  carrying 
on  the  business,  must  make  the  representation  as  to  its  capital 
good;  and  a  corporation  cannot  release  the  obligations  of 
stockholders  to  pay  up  its  unpaid  subscriptions,  and  thus 
evade  the  payment  of  creditors.  And  the  creditors  may  bring 
a  suit  to  collect  the  unpaid  balance  due  on  stock  of  a  corpora- 
tion which  has  become  insolvent. 

Section  813.—  WITHIN  WHAT  TIME  SUIT 
AGAINST  STOCKHOLDER  MUST  BE  COM- 
MENCED.— A  suit  against  a  stockholder  by  a  creditor  of 
a  corporation  must  be  commenced  within  three  years  after 
the  cause  of  action  accrues.  If  a  corporation  owes  a  debt, 
and  the  creditor  wishes  to  sue  a  stockholder  for  his  pro- 
portion of  the  amount  due,  he  must  sue  within  three  years 
after  the  debt  was  created,  or  the  liability  of  the  stock- 
holder will  be  barred.  And  in  this  connection  it  has  been 
decided  that  the  liability  of  the  stockholder  cannot  be  re- 
newed or  extended  by  any  renewal  or  extension  of  the  in- 
debtedness which  the  creditor  may  make  with  the  corporation. 
(Decided  by  the  Supreme  Court  in  the  case  of  Hyman  vs. 
Coleman,  which  decision  is  printed  in  Volume  82  of  the 
California  Reports,  page  650.)  The  liability  of  the  stock- 
holder is  created  and  exists  by  statute.  The  liability  arises 
when  a  debt  is  contracted  by  the  corporation.  The  liability 
is  limited  to  three  years  from  the  time  it  arises,  and  the 
corporation  has  no  power  to  extend  that  limitation  without 
direct  authority  from  the  stockholders.  Therefore,  if  a  debt 
is  owing  to  a  corporation,  and  the  corporation  afterwards 
takes  a  note  from  the  debtor,  the  liability  of  the  stockholder 
does  not  begin  when  the  note  is  given,  but  dates  back  to 


CORPORATIONS   IN    CALIFORNIA.  653 

the  time  when  the  debt  was  created.     (Decided  by  the  Su- 
preme Court  in  the  case  of  Hunt  vs.  Ward,  which  decision 
is  printed  in  Volume  99  of  the  California  Reports,  page  612.) 
Code  of  Civil  Procedure,  Section  359. 

Section  814.  — WHEN  LIABILITY  OF  STOCK- 
HOLDER IS  SATISFIED.  — Each  stockholder  has  a 
several  liability,  and  that  liability  is  proportionate  to  the 
amount  of  his  stock;  and  when  he  has  paid  his  portion  of 
any  debt,  or  of  all  the  debts  of  the  corporation,  he  is  freed 
from  all  liability  on  that  account. 

Section  815.— LIABILITY  OF  STOCKHOLDERS  IN 
DISTILLERY  FOR  FEDERAL  TAXES.— Every  stock- 
holder in  a  corporation  possessing  a  still,  distillery,  or  dis- 
tilling apparatus,  is  individually  and  personally  liable  to  the 
United  States  for  the  taxes  imposed  on  the  liquors  distilled. 
His  individual  property,  although  in  no  way  connected  with 
the  business  of  such  corporation,  may  be  seized  and  distrained 
for  Federal  taxes  due  on  spirits  produced  by  it.  (Decided 
by  the  Supreme  Court  in  the  case  of  Richter  vs.  Blasingame, 
which  decision  is  printed  in  Volume  1 10  of  the  California 
Reports,  page  530.) 

Section  816.— HOLDING  PROPERTY  IN  OTHER 
COUNTIES. — A  corporation  acquiring  or  holding  property 
in  a  county  other  than  its  principal  place  of  business  must 
file  in  the  office  of  the  County  Clerk  of  such  county  a  certified 
copy  of  its  Articles  of  Incorporation.  The  copy  must  be 
certified  by  the  Secretary  of  State. 
Civil  Code,  Section  299. 

Section  817.— WITHIN  WHAT  TIME  CORPORA- 
TION MUST  COMMENCE  BUSINESS.— A  corporation 
must  organize,  by  the  election  of  a  Board  of  Directors,  and 
must  commence  business,  within  one  year  from  the  date  of 
its  certificate  of  incorporation.  If  it  does  not  do  so,  or,  if 
organized   for  the  construction  of  any  particular  works,   it 


654  BUSINESS   LAWS   FOR   BUSINESS    MEN. 

fails  to  commence  the  construction  of  its  works  within 
one  year,  any  creditor  may  complain  to  the  Attorney-General, 
who  will  begin  a  suit  in  the  name  of  the  State  and  have 
the  Court  declare  the  corporate  existence  forfeited  and  at 
an  end. 

Statutes  of  1901,  page  632. 

Section  818.— LIABILITY  OF  PURCHASER  OF 
SUBSCRIPTION  STOCK.— A  purchaser  of  stock  of  a 
corporation,  in  good  faith  and  for  a  valuable  consideration, 
from  an  original  subscriber,  who  has  not  paid  the  full  sub- 
scription price  thereof,  is  liable  for  the  unpaid  subscription, 
where  such  non-payment  appears  from  the  books  of  the 
corporation,  notwithstanding  that  he  has  no  actual  notice  or 
knowledge  of  the  same  and  it  is  represented  to  him  by  the 
president  of  the  corporation  and  other  sellers  of  stock  that 
the  same  was  fully  paid  for  and  it  so  appears  on  the 
face  of  the  certificates.  Such  representation  made  by  the 
president  of  a  corporation  are  not  binding  upon  it,  without 
proof  of  express  authority  to  make  them,  nor  is  the  right  of 
the  corporation  to  require  full  payment  of  the  subscription 
price  aflFected  by  such  representations  made  by  the  other 
original  subscribers. 

When  the  transferees  of  subscription  stock  cause  the  trans- 
fer to  be  recorded  on  the  books  of  the  corporation,  they  be- 
come liable  for  the  unpaid  subscription  price  thereof,  and 
no  express  promise  on  their  part  to  assume  or  pay  the  same 
is  necessary. 

In  this  State  certificates  of  stock  are  not  negotiable  instru- 
ments, but  mere  evidence  of  the  holder's  right  to  a  given 
share  in  the  franchise  and  property  of  the  corporation,  and 
a  purchaser  takes  them  subject  to  all  equities  in  favor  of  the 
corporation. 

Unpaid  subscriptions  for  stock  are  assets  in  bankruptcy, 
in  the  event  of  the  insolvency  of  the  corporation,  and  re- 
coverable by  the  trustees. 

The  amount  due  from  stockholders  for  subscribed  stock 
is  a  trust  fund  for  the  creditors  of  the  corporation,  and  such 


CORPORATIONS   IN    CALIFORNIA.  655 

unpaid  subscriptions  are  a  part  of  its   assets,   and  may  be 
collected  by  its  creditors. 

(Decided  by  the  Supreme  Court  of  California,  in  the  case 
of  Perkins  vs.  Cowles,  which  decision  is  printed  in  Volume 
XXXIX  of  California  Decisions,  page  397.) 

Section  819.— FAILURE  TO  ELECT  OFFICERS.— If 

a  corporation  does  organize  within  one  year,  but  neglects  and 
fails,  for  two  years  thereafter,  to  elect  a  President,  Secretary, 
Cashier,  or  any  necessary  officers,  and  to  transact  in  regular 
order  the  business  for  which  it  was  incorporated,  its  corporate 
powers  cease  and  it  will  be  dissolved. 
Statutes  of  1901,  page  632. 

Section  820.— INCREASE  OF  CAPITAL  STOCK.— A 

corporation  may  increase  its  capital  stock,  at  any  time,  and 
the  law  provides  what  must  be  done  when  an  increase  of 
stock  is  desired.  To  increase  the  capital  stock,  a  meeting 
of  the  stockholders  must  be  called  for  that  purpose  by  a 
resolution  of  the  Directors.  A  notice  must  be  published  in 
a  newspaper,  once  a  week,  for  at  least  sixty  days,  stating 
that  the  object  of  the  meeting  is  to  vote  on  the  question  of 
increasing  the  capital  stock;  the  amount  to  which  it  is  pro- 
posed to  increase  the  capital ;  and  the  time  and  place  of 
holding  the  meeting.  The  meeting  must  be  held  at  the 
principal  place  of  business  of  the  corporation  and  in  the 
building  where  the  Directors  usually  meet.  In  addition  to 
the  notice  by  publication,  the  Secretary  must  also  address 
a  copy  of  the  notice  to  each  of  the  stockholders  whose 
names  appear  on  the  company's  books,  at  his  place  of  resi- 
dence, if  known;  and  if  the  residence  of  the  stockholder 
is  not  known,  the  notice  must  be  addressed  to  him  at  the 
place  where  the  company  has  its  principal  place  of  business; 
and  the  notice  must  be  mailed  to  each  stockholder  at  least 
thirty  days  before  the  day  appointed  for  the  meeting.  When 
the  meeting  takes  place,  two-thirds  of  the  subscribed  or  issued 
stock  must  be  voted  in  favor  of  the  proposition  to  increase 
the  capital  stock,  in  order  to  carry  it. 
Statutes  of  1903,  page  347. 


656  BUSINESS   LAWS   FOR   BUSINESS    MEN. 

Section  821.— DECREASE  OF  CAPITAL  STOCK.— 

The  capital  stock  of  a  corporation  may  be  decreased  in  either 
one  of  two  ways.  It  may  be  decreased  by  a  vote  of  the 
stockholders,  at  a  meeting  for  the  purpose,  held  in  the  same 
manner  and  after  similar  notice  as  a  meeting  for  increase 
of  stock.  The  notice  must  state  the  amount  of  the  decrease 
proposed,  and  the  proposed  decrease  must  be  carried  by  a 
vote  representing  at  least  two-thirds  of  the  subscribed  or 
issued  capital  stock.  The  law  provides  a  second  mode  of  de- 
creasing the  capital  stock,  A  corporation  may  diminish  its 
capital  stock  by  the  unanimous  vote  of  its  Board  of  Directors, 
at  a  regular  meeting,  or  at  a  special  meeting  called  for  that 
purpose,  and  approved  by  the  written  assent  of  stockholders 
holding  two-thirds  of  the  subscribed  or  issued  capital  stock. 
The  written  assent  of  the  stockholders  must  be  filed  with  the 
Secretary.  The  Secretary,  as  soon  as  the  resolution  of  the 
Directors  is  passed  providing  for  the  decrease,  must  send  a 
copy  of  the  resolution  to  each  stockholder  whose  name  ap- 
pears on  the  company's  books ;  he  must  send  by  mail,  postage 
prepaid,  addressed  to  the  known  place  of  residence  of  the 
stockholder,  or  to  the  principal  place  of  business  of  the  cor- 
poration, if  the  residence  of  the  stockholder  is  not  known ; 
and  the  copy  of  the  resolution  must  be  mailed  to  each  stock- 
holder at  least  thirty  days  before  the  certificate  mentioned 
in  the  following  section  is  made  and  filed.  Within  the  thirty 
days  any  stockholder  may  file  with  the  Secretary  his  dissent 
in  writing.  The  capital  stock  cannot  be  decreased  to  an 
amount  less  than  the  indebtedness  of  the  corporation. 
Statutes  of  1903,  page  348. 

Section  822.— CERTIFICATE  OF  INCREASE  OR 
DECREASE  OF  CAPITAL  STOCK.— If  capital  stock  is 
increased  or  decreased  by  a  vote  of  the  stockholders,  a  certi- 
ficate, signed  and  verified  by  the  President  and  Secretary  and 
a  majority  of  the  Directors,  and  with  the  corporate  seal 
attached,  must  be  filed  in  the  office  of  the  County  Clerk, 
and  a  certified  copy  must  be  filed  in  the  office  of  the  Secretary 
of  State.    The  certificate  must  show  that  all  the  requirements 


CORPORATIONS   IN    CALIFORNIA,  657 

of  the  law  have  been  compHed  with;  also,  the  amount  to 
which  the  capital  stock  has  been  increased  or  diminished; 
the  amount  of  stock  represented  at  the  meeting,  and  the 
total  vote  in  the  affirmative,  and  the  total  vote  in  the 
negative;  and  the  total  number  of  subscribed  or  issued 
shares  of  capital  stock  of  the  corporation.  If  the  stock 
is  decreased  by  a  vote  of  the  Directors,  a  similar  certi- 
ficate must  be  filed,  which  must  show,  also,  the  total  amount 
of  stock  represented  by  the  written  assents  and  the  written 
dissents  filed  with  the  Secretary. 
Statutes  of  1903,  page  349. 

Section  823.— PAPER  IN  WHICH  NOTICES  MUST 
BE  PUBLISHED.— When  the  by-laws  of  a  corporation 
prescribe  the  paper  in  which  notices  of  meetings  of  Directors 
or  stockholders  are  to  be  published,  such  notices  must  be 
published  in  that  paper.  If  the  by-laws  do  not  prescribe  any 
particular  paper,  the  Directors  may  select  the  paper  in  which 
the  notices  may  be  published. 

Section  824.— ASSESSMENT  OF  STOCK.— The  Direc- 
tors of  any  corporation  in  California,  after  one-fourth  of  its 
capital  stock  has  been  subscribed,  may,  for  the  purpose  of 
paying  expenses,  conducting  business,  or  paying  debts,  levy 
and  collect  assessments  upon  the  subscribed  capital  stock. 
Civil  Code,  Section  331. 

Section   825.  — AMOUNT    OF    ASSESSMENT.— The 

law  provides  generally  that  no  one  assessment  must  exceed  ten 
per  cent  of  the  capital  stock  named  in  the  Articles  of  Incor- 
poration. To  this  general  provision  there  are  three  excep- 
tions, viz:  (1)  If  the  whole  capital  of  a  corporation  has 
not  been  paid  up,  and  the  corporation  is  unable  to  meet  its 
liabilities  or  to  satisfy  the  claims  of  its  creditors,  the  assess- 
ment may  be  for  the  full  amount  unpaid  upon  the  capital 
stock;  or  if  a  less  amount  is  sufficient,  then  it  may  be  for 
such  a  percentage  as  will  raise  that  amount;  (2)  The  Direc- 
tors of  railroad  corporations  may  assess  the  capital  stock  in 


658  BUSINESS   LAWS   FOR   BUSINESS   MEN. 

installments  of  not  more  than  ten  per  cent  per  month,  unless 
their  Articles  of  Incorporation  provide  otherwise;  and  (3) 
the  Directors  of  fire  or  marine  insurance  corporations  may 
assess  such  a  percentage  of  the  capital  stock  as  they  deem 
proper. 

Civil  Code,  Section  332. 

Section   826.— ORDER  LEVYING  ASSESSMENT.— 

The  assessment  must  be  levied  by  an  order  of  the  Board  of 
Directors.  Every  order  levying  an  assessment  must  specify 
the  amount  thereof,  to  whom,  and  where  payable;  fix  a 
day,  subsequent  to  the  full  term  of  publication  of  the  assess- 
ment notice,  on  which  the  unpaid  assessments  shall  be  de- 
linquent, not  less  than  thirty  nor  more  than  sixty  days  from 
the  time  of  making  the  order  levying  the  assessment;  and  a 
day  for  the  sale  of  delinquent  stock,  not  less  than  fifteen 
nor  more  than  sixty  days  from  the  day  the  stock  is  declared 
delinquent. 

Civil  Code,  Section  334. 

Section  827.— LEVY  OF  ASSESSMENT.— The  right 
to  levy  an  assessment  upon  the  capital  stock  of  a  corporation 
can  only  be  legally  exercised  in  the  manner  provided  by  law 
or  by  the  charter  of  the  corporation. 

(a)  Levy  Must  Be  Made  at  Regular  or  Specially  Called 
Meeting. — An  assessment  upon  the  capital  stock  of  a  cor- 
poration can  be  levied  only  at  a  regular  meeting  or  at  a 
special  meeting  regularly  called. 

(b)  Adjournment  of  Time  of  Holding  Regular  Meet- 
ing by  Minority  of  Directors  to  Future  Day  Not  a 
Regular  Meeting — Assessment  Levied  at  Such  Meeting 
Void. — ^An  assessment  levied  by  a  majority  of  a  board  of 
directors  of  a  corporation  in  the  absence  and  without  the 
knowledge  of  the  minority  of  the  board,  at  a  time  to  which 
the  regular  monthly  meeting  of  the  board  had  been  adjourned 
by  a  minority  of  the  board  present  on  the  day  of  the  regular 
meeting,  on  account  of  the  absence  of  a  quorum,  is  void,  as 


CORPORATIONS   IN    CALIFORNIA.  659 

such  meeting  is  neither  a  regular  meeting  nor   a  specially 
called  meeting. 

(c)  Directors'  Meetings  —  Adjournment  by  Minority 
Unauthorized. — There  is  no  provision  of  the  Code  author- 
izing a  meeting  of  the  directors  of  a  corporation  to  be  ad- 
journed by  a  minority,  and  such  act  is  invalid  under  the 
express  provision  of  Section  305  of  the  Civil  Code. 

(Decided  by  the  California  District  Court  of  Appeals,  in 
the  case  of  Raisch  vs.  M.  K.  &  T.  Oil  Co.,  which  decision 
is  printed  in  California  Appellate  Decisions,  Volume  6,  No. 
284,  page  403.) 

Section  828.— NOTICE  OF  ASSESSMENT.— A  notice 
of  the  assessment  must  be  published  by  the  Secretary,  once 
a  week  for  four  successive  weeks,  in  a  newspaper  published 
at  the  principal  place  of  business,  if  there  be  one,  or,  if 
there  is  none,  then  the  notice  must  be  published  in  some  other 
newspaper  in  the  county.  If  the  principal  place  of  business 
is  in  one  county,  and  the  works  of  the  company  in  another, 
the  notice  must  be  published  in  both  counties  for  the  same 
length  of  time.  Also,  the  notice  must  either  be  personally 
served  upon  each  stockholder,  or  sent  through  the  mail  ad- 
dressed to  him.  If  the  stockholder's  address  is  known,  the 
notice  must  be  mailed  there;  but  if  the  address  is  not  known, 
it  is  sufficient  to  mail  the  notice  to  him  at  the  principal  place 
of  business  of  the  corporation. 
Civil  Code,  Section  336. 

Section  829.— FORM  OF  NOTICE  OF  ASSESS- 
MENT.— The  notice  of  assessment,  mentioned  in  the  pre- 
ceding section,  must  be  substantially  in  the  following  form : 

NOTICE   OF   ASSESSMENT. 

WILLITS  STATE  BANK.— Location  of  principal  place 
of  business,  Willits,  Mendocino  County,  State  of  California. 
Notice  is  hereby  given,  that  at  a  meeting  of  the  Directors, 

held  on  the day  of ,   191 . . , 

an  assessment  of per  share  was 


660  BUSINESS   LAWS   FOR  BUSINESS   MEN. 

levied  upon  the  capital  stock  of  the  corporation,  payable 
on  the day  of ,  191. .,  to  the  Secre- 
tary of  said  Willits  State  Bank,  at  his  office  in  said  bank  in 
Willits,  Mendocino  County,  State  of  California.  Any  stock 
upon    which    this    assessment    shall    remain    unpaid    on    the 

day  of ,  191 .. ,  will  be  delinquent  and 

advertised   for  sale   at  public   auction,   and,   unless   payment 

is  made  before,  will  be  sold  on  the day  of 

,  19.  . . .,  to  pay  the  delinquent  assessment, 

together  with  costs  of  advertising  and  expenses  of  sale. 


Secretary. 
Office  at  Willits  State  Bank,  Main  Street, 

Willits,  California. 

Section  830.— HOW  ASSESSMENT  MAY  BE  EN- 
FORCED.— The  law  provides  two  methods  for  the  enforce- 
ment of  the  liabilities  of  stockholders  to  the  corporation, 
by  reason  of  assessment  levied  upon  the  capital  stock — one 
by  a  sale  of  the  stock,  for  the  delinquent  assessment;  the 
other  by  a  suit  against  the  stockholder  to  recover  from 
him  the  amount  of  the  assessment.  The  Board  of  Directors 
has  the  option  to  adopt  one  or  the  other  method  of  enforcing 
the  payment  of  an  assessment  on  stock  lawfully  levied. 
Civil  Code,  Section  349. 

Section  831.— NOTICE  OF  SALE.— If  any  portion  of 
the  assessment  remains  unpaid,  on  the  day  named  in  the 
notice  for  declaring  the  stock  delinquent,  the  Secretary  must, 
if  the  Directors  elect  to  have  the  stock  sold,  publish  a  notice 
of  sale  in  the  same  paper  in  which  the  delinquent  notice  was 
published.  The  notice,  when  published  in  a  daily  paper, 
must  be  published  for  ten  days,  excluding  Sundays  and  holi- 
days, previous  to  the  day  of  sale.  When  published  in  a 
weekly  paper,  it  must  be  published  in  each  issue  for  two 
weeks  previous  to  the  day  of  sale.  The  first  publication  of 
all  delinquent  sales  must  be  at  least  fifteen  days  prior  to  the 
day  of  sale.  The  notice  must  specify  every  certificate  of 
stock,  the  number  of  shares  it  represents,  and  the  amount 
due  thereon,   except  where  certificates   may  not  have   been 


CORPORATIONS   IN    CALIFORNIA.  661 

issued  to  parties  entitled  thereto,  in  which  case  the  number 
of  shares  and  amount  due  thereon,  together  with  the  fact 
that  the  certificates  for  such  shares  have  not  been  issued, 
must  be  stated. 

Civil  Code,  Sections  338,  339. 

Section  832.— FORM   OF   NOTICE   OF   SALE.— The 

following  is  a  form  of  the  notice  of  sale  mentioned  in  the 
preceding  section: 

NOTICE  OF   SALE  OF   STOCK  FOR   DELINQUENT 
ASSESSMENT. 

WILLITS  STATE  BANK.— Location  of  principal  place 
of  business,  Willits,  Mendocino  County,  State  of  California. 
Notice  is  hereby  given,  that  there  is  delinquent  upon  the 
following  described  stock  of  the  corporation,  on  account  of 

assessment  levied  on  the day  of 

191..,  the  several  amounts  set  opposite  the  names  of  the 
respective  shareholders,  as  follows:  (Here  insert  names, 
number  of  certificate,  number  of  shares,  and  amount.)  And 
in  accordance  with  law,  and  an  order  of  the  Board  of  Direc- 
tors  made   on   the day   of ,    191 .. ,    so 

many  shares  of  each  parcel  of  such  stock  as  may  be  neces- 
sary will  be  sold,  at  public  auction,  at  the  office  of  the  Secre- 
tary of  said  corporation,  at  the  Willits  State  Bank,  Main 
Street,  Willits,   Mendocino   County,    State   of   California,   on 

the day  of ,  191..,  at  10  o'clock  A.  M. 

of  that  day,  to  pay  delinquent  assessments  thereon,  together 
with  costs  of  advertising  and  expenses  of  the  sale. 


Secretary. 
Office  at  Willits   State  Bank,  Main  Street,  Willits,   Mendo- 
cino County,  State  of  California. 

Section  833.— WHO  ARE  LIABLE  ON  ASSESS- 
MENTS.— For  the  purpose  of  ascertaining  those  who  are 
liable  to  it  for  the  amount  of  an  assessment,  a  corporation 
can  only  look  to  the  list  of  stockholders  as  their  names  are 
registered  upon  its  books.  Where  an  assignment  of  stock 
is  made  after  the  levy  of  an  assessment,  but  no  formal 
transfer  is  made  on  the  books  of  the  company,  the  assignor 


662  BUSINESS  LAWS  FOR  BUSINESS   MEN. 

is  Still  liable  on  the  assessment.  Where  stock  has  been 
assigned,  and  a  transfer  of  the  stock  has  been  duly  made  on 
the  books  of  the  company,  the  assignee  becomes  liable  on 
assessments. 

Section  834.— EXTENSION  OF  TIME  FOR  PAY- 
MENT AND  SALE.— The  dates  fixed  in  any  notice  of 
assessment  or  notice  of  delinquent  sale  may  be  extended 
from  time  to  time  for  not  more  than  thirty  days,  by  order 
of  the  Directors,  entered  on  the  records  of  the  corporation; 
but  no  order  extending  the  time  for  the  performance  of 
any  acts  specified  in  any  notice  is  eflfectual  unless  notice  of 
such  extension  or  postponement  is  appended  to  and  published 
with  the  notice  to  which  the  order  relates. 
Civil  Code,  Section  345. 

Section  835.— SALE  OF  STOCK  FOR  ASSESS- 
MENT.— By  the  publication  of  the  notice,  the  corporation 
acquires  jurisdiction  to  sell  and  convey  a  perfect  title  to  all 
of  the  stock  described  in  the  notice  of  sale  upon  which  any 
portion  of  the  assessment  or  cost  of  advertising  remains 
unpaid  at  the  hour  appointed  for  the  sale,  but  must  sell 
no  more  of  such  stock  than  is  necessary  to  pay  the  assess- 
ments due  and  costs  of  sale.  On  the  day,  at  the  place,  and 
at  the  time  appointed  in  the  notice  of  sale,  the  Secretary 
must,  unless  otherwise  ordered  by  the  Directors,  sell  or 
cause  to  be  sold  at  public  auction,  to  the  highest  bidder  for 
cash,  so  many  shares  of  each  parcel  of  the  described  stock 
as  may  be  necessary  to  pay  the  assessments  and  charges 
thereon,  according  to  the  terms  of  sale;  if  payment  is 
made  before  the  time  fixed  for  sale,  the  party  paying  is 
only  required  to  pay  the  actual  cost  of  advertising,  in  addition 
to  the  assessments.  The  person  offering  at  such  sale  to 
pay  the  assessment  and  costs  for  the  smallest  number  of 
shares  or  fraction  of  a  share  is  the  highest  bidder,  and  the 
stock  purchased  must  be  transferred  to  him  on  the  stock 
books  of  the  corporation,  on  payment  of  the  assessment 
and  costs. 

Civil  Code,  Sections  340,  341,  342. 


CORPORATIONS   IN    CALIFORNIA.  663 

Section  836.—  PURCHASE  OF  DELINQUENT 
STOCK  BY  THE  CORPORATION.— If,  at  the  sale  of 
stock,  no  bidder  offers  the  amount  of  the  assessments  and 
charges  due,  the  same  may  be  bid  in  and  purchased  by  the 
corporation,  through  the  Secretary,  President,  or  any  Direc- 
tor, at  the  amount  of  the  assessments,  costs,  and  charges 
due;  and  the  amount  of  the  assessments,  costs,  and  charges 
must  be  credited  as  paid  in  full  on  the  books  of  the  cor- 
poration, and  entry  of  the  transfer  of  the  stock  of  the 
corporation  must  be  made  on  the  books.  While  the  stock 
remains  the  property  of  the  corporation,  it  is  not  assessable, 
nor  must  any  dividends  be  declared  thereon ;  but  all  assess- 
ments and  dividends  must  be  apportioned  upon  the  stock 
held  by  the  stockholders  of  the  corporation.  All  purchases 
of  its  own  stock  made  by  any  corporation  vest  the  legal 
title  to  the  stock  in  the  corporation;  and  the  stock  so  pur- 
chased is  held  subject  to  the  control  of  the  stockholders, 
who  may  make  such  disposition  of  the  same  as  they  deem 
fit,  in  accordance  with  the  by-laws  of  the  corporation  or 
the  vote  of  a  majority  of  all  the  remaining  shares.  When-- 
ever  any  portion  of  the  capital  stock  of  a  corporation  is 
held  by  the  corporation  by  purchase,  a  majority  of  the  re- 
maining shares  is  a  majority  of  the  stock,  for  all  purposes 
of  election,  or  voting  on  any  question  at  a  stockholders' 
meeting. 

Civil  Code,  Sections  343,  344. 

Section  837.— SUIT  TO  RECOVER  AMOUNT  OF 
ASSESSMENT. — On  the  day  specified  for  declaring  the 
stock  delinquent,  or  at  any  subsequent  time  before  the  sale 
of  the  delinquent  stock,  the  Board  of  Directors  may  order 
all  such  proceedings  stopped,  and  may  elect  to  sue  the  delin- 
quent stockholders  for  their  assessments.  The  stockholder  is 
liable  in  the  suit  for  the  amount  of  the  assessment,  and  for 
the  costs  and  expenses  incurred  by  the  corporation  in  trying 
to  collect  it. 

Civil  Code,  Section  349. 


664  BUSINESS   LAWS   FOR   BUSINESS    MEN. 

Section  838.— LIEN  FOR  ASSESSMENT.— After  an 
assessment  has  been  made,  a  corporation  has  a  lien  for  the 
payment  of  the  assessment,  which  is  not  affected  by  the  issu- 
ance of  a  new  certificate  and  a  transfer  of  the  shares.  The 
Hen  is  upon  the  shares,  and  not  upon  the  certificate.  When 
an  old  certificate  is  surrendered,  and  a  new  certificate  is 
issued,  the  new  certificate  represents  the  same  shares;  but 
the  shares  themselves  remain  subject  to  any  lien  the  corpora- 
tion may  have  upon  them,  and  the  new  owner  takes  subject 
to  such  lien.  The  identity  of  the  stock  is  not  affected  by 
the  transfer.  The  keeping  of  a  stock  book,  in  which  the 
original  issue  and  all  subsequent  transfers  must  be  entered, 
enables  the  holder  or  purchaser  to  trace  his  shares  back 
to  the  original  issue  by  the  numbers  of  the  different  certi- 
ficates, and  thus  identify  the  shares  upon  which  any  assess- 
ment has  been  made,  and  enables  him  to  ascertain  with 
certainty,  in  connection  with  the  other  records  of  the  cor- 
poration relating  to  assessments  and  delinquent  sales,  whether 
his  shares  are  free  from  liens  or  liability  in  favor  of  the 
corporation ;  and  in  the  same  manner  enables  the  corpora- 
tion to  enforce  its  delinquent  assessment  upon  the  shares 
liable  therefor,  no  matter  how  many  transfers  have  been 
made  subsequent  to  the  assessment;  each  transferee  taking 
the  legal  title,  but  subject  to  the  assessment,  just  as  the 
grantee  of  the  legal  title  to  land  takes  it  subject  to  all 
valid  recorded  liens.  (Decided  by  the  Supreme  Court  in 
the  case  of  Craig  vs.  Hesperia  Land  and  Water  Company, 
which  decision  is  printed  in  Volume  113  of  the  California 
Reports,  page  7.) 

Section   839.—  BY-LAWS    OF    CORPORATION.— 

Every  corporation  formed  under  the  laws  of  California  must, 
within  one  month  after  filing  Articles  of  Incorporation,  adopt 
By-Laws  for  the  government  of  the  corporation.  The  By- 
Laws  adopted  must  not  be  inconsistent  with  the  Constitution 
and  laws  of  the  State. 


CORPORATIONS    IN    CALIFORNIA.  665 

Section  840.— HOW  BY-LAWS  ADOPTED.— The  as- 
sent of  stockholders,  representing  a  majority  of  all  the 
subscribed  capital  stock,  or  a  majority  of  the  members, 
if  there  be  no  capital  stock,  is  necessary  to  adopt  By-Laws, 
if  they  are  adopted  at  a  meeting  called  for  that  purpose. 
By-Laws  may  also  be  adopted,  without  a  meeting  for  that 
purpose,  by  the  written  assent  of  the  holders  of  two-thirds 
of  the  stock,  or  by  the  written  assent  of  two-thirds  of  the 
members,  if  there  is  no  capital  stock.  If  a  meeting  of 
stockholders  is  called  for  the  purpose  of  adopting  By-Laws, 
notice  must  be  given  by  publication  m  a  newspaper  for 
two  weeks,  by  order  of  the  acting  President. 
Civil  Code,  Section  30L 

Section    841.— WHAT    BY-LAWS    MAY    PROVIDE 

FOR. — A  corporation  may,  by  its  By-Laws,  provide  for  the 
following  things :  ( 1 )  The  time,  place,  and  manner  of  calling 
and  conducting  its  meetings,  and  may  dispense  with  notice 
of  all  regular  meetings  of  the  stockholders  or  Directors ; 
(2)  The  number  of  stockholders  or  members  constituting 
a  quorum;  (3)  The  mode  of  voting  by  proxy;  (4)  The 
qualifications  and  duties  of  Directors,  the  time  of  their 
annual  election,  and  the  mode  and  manner  of  giving  notice 
of  such  election;  (5)  The  compensation  and  duties  of  of- 
ficers; (6)  The  manner  of  election  and  the  term  of  office 
of  all  officers  other  than  the  Directors;  (7)  Suitable  pen- 
alties may  be  provided  for  the  violation  of  the  By-Laws, 
not  exceeding  $100  for  any  one  offense;  (8)  The  amount 
of  stock  to  be  owned  by  a  Director;  (9)  For  the  filling 
of  vacancies  on  the  Board  of  Directors;  (10)  For  the  issu- 
ing of  certificates  of  stock  before  full  payment  therefor; 
(11)  For  the  disposal  of  stock  owned  by  the  corporation; 
and,  (12)  The  By-Laws  may  specify  the  newspaper  in 
which  all  notices  of  the  meetings  of  stockholders  or 
Directors,  when  notice  is  necessary,  shall  be  published. 
Civil  Code,  Sections  301,  305,  308,  323,  344. 


666  BUSINESS   LAWS   FOR   BUSINESS    MEN. 

Section  842.— BOOK  OF  BY-LAWS.— The  law  provides 
that  all  By-Laws  adopted  must  be  certified  by  a  majority 
of  the  Directors  and  Secretary  of  the  corporation,  and  copied 
in  a  legible  hand,  in  a  book  kept  in  the  office  of  the  cor- 
poration, to  be  known  as  the  "Book  of  By-Laws,"  and  no 
By-Law  shall  take  eflfect  until  so  copied,  and  the  book  shall 
then  be  opened  to  the  inspection  of  the  public  during  office 
hours  of  each  day  except  holidays. 
Civil  Code,  Section  304. 

Section    843.— AMENDMENT    OF    BY-LAWS.— The 

By-Laws  can  be  amended  by  a  vote  of  the  stockholders 
at  the  annual  meeting,  or  at  a  special  meeting  called  for 
that  purpose.  There  must  be  a  vote  representing  two- 
thirds  of  the  subscribed  stock.  The  By-Laws  may  also  be 
amended,  without  a  meeting,  by  the  written  assent  of  the 
holders  of  two-thirds  of  the  stock,  or  two-thirds  of  the  mem- 
bers if  there  is  no  capital  stock. 

Civil  Code,  Section  304;  Statutes  of  1905,  page  557. 

Section  844.— REPEALING  OLD  AND  ADOPTING 
NEW  BY-LAWS.— Old  By-Laws  may  be  repealed  abso- 
lutely, and  new  By-Laws  adopted  in  their  place,  in  the 
same  manner  as  amendments  are  made,  stated  in  Section 
843. 

Section    845.— RECORD    OF    AMENDMENTS.— The 

law  provides  that,  "whenever  any  amendrnent  or  new  By- 
Law  is  adopted,  it  shall  be  copied  in  the  Book  of  By-Laws 
with  the  original  By-Laws,  and  immediately  after  them, 
and  shall  not  take  effect  until  so  copied.  If  any  By-Law 
be  repealed,  the  fact  of  repeal,  with  the  date  of  the  meeting 
at  which  the  repeal  was  enacted,  or  written  assent  was 
filed,  shall  be  stated  in  said  book,  and  until  so  stated  the 
repeal  shall  not  take  effect." 

Civil  Code,  Section  304. 


CORPORATIONS   IN   CALIFORNIA.  667 

Section  846.— THE  BOARD  OF  DIRECTORS.— The 

corporate  powers,  business,  and  property  of  corporations 
must  be  exercised,  conducted,  and  controlled  by  a  Board  of 
Directors. 

Section  847.— NUMBER  OF   DIRECTORS.— The  law 

is,  that  the  number  of  Directors  cannot  be  less  than  three, 
but  may  be  any  number  more  than  three.  The  number  of 
Directors  may  be  increased  to  more  than  three  without 
limit,  to  as  many  as  may  be  desired  at  any  time  after  articles 
of  incorporation  have  been  filed,  by  a  vote  of  the  majority 
of  the  stockholders  of  the  corporation.;  and  if  the  corpora- 
tion has  been  formed  with  more  than  three  Directors,  a 
majority  of  the  stockholders  may  vote  to  decrease  the  di- 
rectors to  any  number  not  less  than  three.  The  increase  or 
decrease  of  the  number  of  Directors  must  be  at  a  meeting 
of  the  stockholders  called  for  that  purpose.  When  the 
number  of  Directors  has  been  increased  or  decreased,  a  cer- 
tificate stating  that  fact  must  be  filed  in  the  same  manner  as 
articles  of  incorporation  were  filed. 

Act  of  the  Legislature,  in  effect  May  18,  1907. 

Section   848.— QUALIFICATION    OF    DIRECTORS. 

— A  majority  of  the  Directors  must  be  citizens  of  California. 
Directors  of  corporations  for  profit  must  be  holders  of  its 
stock  to  an  amount  fixed  by  the  By-Laws  of  the  corpora- 
tion; Directors  of  all  other  corporations  must  be  members 
thereof. 

Statutes  of  1901,  page  308. 

Section  849.— DIRECTORS  FOR  THE  FIRST  YEAR. 

• — The  Directors  to  serve  for  the  first  year,  or  until  the 
time  fixed  for  the  election  of  Directors,  are  designated  in 
the  Articles  of  Incorporation;  and  the  persons  named  in 
the  Articles  of  Incorporation,  upon  the  organization  of  a 
corporation,  will  serve  until  their  successors  are  regularly 
elected. 


006  BUSINESS   LAWS  FOR  BUSINESS   MEN. 

Section    850.— ELECTION    OF    DIRECTORS.— The 

Directors  of  a  corporation  must  be  elected  annually  by 
the  stockholders  or  members,  and  if  no  provision  is  made 
in  the  By-Laws  for  the  time  of  election,  the  election  must 
be  held  on  the  first  Tuesday  in  June.  There  must  be  a 
majority  of  the  subscribed  capital  stock,  or  of  the  members 
where  there  is  no  capital  stock  represented  at  the  meeting 
for  the  election  of  Directors,  either  in  person  or  by  proxy 
in  writing.  The  election  must  be  by  ballot,  and  every 
stockholder  has  the  right  to  vote  in  person  or  by  proxy 
the  number  of  shares  standing  in  his  name,  for  as  many 
persons  as  there  are  Directors  to  be  elected,  or  he  may 
cumulate  his  shares  and  give  one  candidate  as  many  votes 
as  the  number  of  Directors  multiplied  by  the  number  of  his 
shares  of  stock  shall  equal;  or  the  stockholder  may  dis- 
tribute his  shares  on  the  same  principle  among  as  many 
candidates  as  he  shall  think  fit.  These  provisions  of  the 
law  apply  to  all  corporations  doing  business  in  this  State, 
domestic  or  foreign.  The  Director  receiving  the  highest 
number  of  votes  shall  be  declared  elected.  In  corporations 
having  no  capital  stock,  each  member  of  the  corporation 
may  cast  as  many  votes  for  one  Director  as  there  are 
Directors  to  be  elected,  or  he  may  distribute  them  among 
any  or  all  the  candidates. 

Civil    Code,    Sections    302,    312;    Statutes    of    1903, 
page  253. 

Section    851.— NOTICE    OF    MEETINGS.— Notice    of 

meetings  of  the  stockholders  to  elect  Directors  must  be  given, 
by  the  Secretary,  unless  all  of  the  stockholders  waive  such 
notice  in  writing.  When  all  the  stockholders  or  members 
of  a  corporation  are  present  at  any  meeting,  however  called 
or  notified,  and  sign  a  written  consent  thereto  on  the  records 
of  such  meeting,  or  if  those  not  present  sign  in  writing  a 
waiver  of  notice  of  such  meeting,  which  waiver  is  presented 
and  made  a  part  of  the  records  of  such  meeting,  the  doings 


CORPORATIONS   IN    CALIFORNIA.  669 

of  such  meeting  are  as  valid  as  if  had  at  a  meeting  legally 
called  and  noticed. 

Act  of  the  Legislature,  approved  February  22,   1909. 

Section  852.— WHO  MAY  VOTE  AT  ELECTION 
OF  DIRECTORS.— To  entitle  a  person  to  vote  at  the  elec- 
tion of  Directors,  he  must  be  a  bona  fide  stockholder,  having 
stock  in  his  own  name  on  the  stock  books  of  the  corpora- 
tion at  least  ten  days  before  the  election.  It  is  made  a 
requisite  of  the  right  to  vote  that  the  voter  shall  not  only 
be  registered  as  a  stockholder,  but  that  he  shall  have  been 
so  registered  for  at  least  ten  days  prior  to  the  election,  and 
that  he  shall  also  be  a  bona  fide  stockholder  at  the  time 
of  the  election.  The  voter  must  be  either  the  owner  of 
the  stock,  or  have  some  other  interest  in  it,  in  order  to 
be  a  bona  fide  stockholder.  Therefore,  one  in  whose  name 
stock  has  been  registered  upon  the  books  of  the  corpora- 
tion, but  who  has  never  had  any  interest  in  the  stock,  and 
is  only  a  dummy  for  the  real  owner,  and  when  the  change 
on  the  books  was  made  for  the  purpose  of  enabling  the 
real  owner  to  avoid  his  liabilities,  is  not  a  bona  fide  stock- 
holder, within  the  meaning  of  the  law,  and  should  not  be 
allowed  to  vote  at  an  election  of  Directors.  (Decided  by 
the  Supreme  Court  in  the  case  of  Smith  vs.  S.  F.  and  N.  P. 
Railway  Company,  which  decision  is  printed  in  Volume  115 
of  the  California  Reports,  page  584.) 
Civil  Code,  Sections  307,  312. 

Section  853.--WHO  MAY  VOTE  STOCK  IN  HANDS 
OF  PLEDGEE  OR  TRUSTEE.— All  shares  of  stocks 
standing  on  the  books  of  a  corporation  in  the  name  of  any 
person  as  pledgee  or  trustee,  may  be  represented  or  voted  by 
such  pledgee  or  trustee,  but  only  in  case  the  pledgor  or 
beneficial  owner  fails  to  represent  and  vote  the  same.  It 
may  be  agreed,  however,  that  the  stock  shall  be  voted  in  a 
different  manner. 

Act  of  the  Legislature,  approved  March  9,  1911. 


670  BUSINESS  LAWS  FOR  BUSINESS   MEN. 

Section  854.— WHO  MAY  VOTE  STOCK  IN  HANDS 
OF  ADMINISTRATOR  OR   EXECUTOR.— When   the 

owner  or  pledgee  is  dead,  he  must  be  succeeded  by  his 
personal  representative,  that  is,  by  his  executor  or  adminis- 
trator. In  such  case,  the  administrator  or  executor  will 
have  the  right  to  have  the  stock  transferred  on  the  books 
of  the  corporation  to  him,  and  will  be  entitled  to  vote  the 
stock.  In  the  case  of  a  Trustee  who  dies,  the  law  will 
not  allow  the  trust  to  die  with  him,  but  will  proceed  to 
appoint  another  Trustee  to  succeed  him,  and  in  this  case 
the  succeeding  Trustee  will  be  entitled  to  have  the  stock 
transferred  to  him,  and  may  vote  it. 

Section  855.— WHO  MAY  VOTE  STOCK  BELONG- 
ING TO  MINOR. — The  guardian  of  a  minor,  the  owner 
of  stock  in  a  corporation,  is  entitled  to  vote  it. 

Section  856.— WHO  MAY  VOTE  STOCK  BELONG- 
ING TO  INSANE  PERSON.— The  guardian  of  the  estate 
of  an  insane  person,  the  owner  of  stock  in  a  corporation, 
is  entitled  to  vote  it. 

Section  857.— VOTING  BY  PROXY.— A  stockholder 
may  be  represented  at  all  elections  by  proxy.  He  may 
select  any  one  he  pleases  as  his  proxy,  to  vote  his  stock, 
and  the  person  selected  by  him  need  not  himself  be  a  stock- 
holder. A  corporation  has  no  power  to  restrict  the  right 
of  voting  by  proxy  to  certain  persons,  or  to  control  their 
selection  by  the  stockholder  in  any  way,  or  to  curtail  in  any 
other  respect  the  right  to  vote  by  proxy.  There  was  for  a 
long  time  in  California  a  custom  among  banking  corpora- 
tions to  have  a  By-Law  providing  that  no  person  not  a 
stockholder  would  be  allowed  to  vote  as  a  proxy,  but  the 
Supreme  Court  has  declared  such  a  By-Law  invalid,  upon 
the  ground  that  a  corporation  has  no  power  to  make  or 
enforce  it.  The  law  places  no  restriction  whatever  upon 
the  stockholder  as  to  the  person  he  shall  be  at  liberty  to 
select  to   act   under  his  proxy;   and   a   corporation   has   no 


CORPORATIONS   IN    CALIFORNIA.  671 

power  to  either  qualify  or  limit  the  right  to  vote  by  proxy. 
(Decided  by  the  Supreme  Court  in  the  case  of  People's 
Home  Savings  Bank  vs.  Superior  Court,  which  decision  is 
printed  in  Volume  104  of  California  Reports,  page  649.) 
A  new  section  has  been  added  to  the  Civil  Code  (in  force 
April  27,  1905),  regulating  the  giving  and  use  of  proxies. 
The  law  provides  that  every  proxy  must  be  executed  in 
writing  by  the  stockholder  himself,  or  by  his  duly  author- 
ized attorney.  No  proxy  given  or  made  prior  to  February 
27,  1905,  will  be  valid  after  the  expiration  of  eleven  months 
from  said  date,  unless  the  length  of  time  for  which  it  is  to 
continue  is  specified  in  the  proxy  itself;  and  the  time,  when 
specified,  must  be  for  some  limited  period,  in  no  case  to 
exceed  seven  years  from  the  date  of  the  proxy.  A  proxy 
hereafter  given  is  valid  for  eleven  months  after  its  date, 
unless  the  time,  not  exceeding  seven  years,  is  specified  in  it. 
Every  proxy  is  revocable  at  the  pleasure  of  the  person 
executing  it.  (Act  of  the  Legislature,  approved  February 
27,   1905.) 

Civil  Code,   Section  312;   Statutes  of   1905,  page  22. 

Section  858.— ORGANIZATION  OF  BOARD  OF  DI- 
RECTORS.— Immediately  after  their  election,  the  Directors 
must  organize  by  the  election  of  a  President,  a  Secretary, 
and  a  Treasurer. 

Civil  Code,  Section  308. 

Section  859.— DUTIES  OF  PRESIDENT,  SECRE- 
TARY, AND  TREASURER.— The  duties  of  the  Presi- 
dent, the  Secretary,  and  the  Treasurer  may  be  prescribed 
by  the  corporation  in  its  By-Laws.  They  may  be  required 
to  perform  any  duty  consistent  with  the  objects  of  the  cor- 
poration and  not  inconsistent  with  the  laws  of  the  State.. 

Section  860.— OTHER  OFFICERS.— A  corporation  may 
appoint  other  officers  than  those  named  by  the  law,  and 
prescribe  what  their  duties  shall  be.  Such  officers  may  be 
provided  for  in  the  By-Laws,  and  appointed  by  the  Board 
of  Directors. 


672  BUSINESS   LAWS   FOR   BUSINESS    MEN. 

Section  861.— QUORUM  OF  DIRECTORS.— A  major- 
ity of  the  Board  of  Directors  constitutes  a  quorum  for  the 
transaction  of  business.  Unless  a  quorum  is  present  and 
acting,  no  business  performed,  or  act  done,  is  vaUd,  as 
against  the  corporation.  No  legal  quorum  of  a  Board  of 
Directors  is  present  when  action  is  attempted  to  be  taken 
on  a  matter  as  to  which  one  of  the  Directors  necessary  to 
make  the  quorum  is  interested;  and  resolutions  passed  at 
such  a  meeting  cannot  be  ratified  by  the  stockholders. 
Civil  Code,  Section  305. 

Section  862.— VOTE  OF  DIRECTOR  ON  MATTER 
IN  WHICH  HE  IS  INTERESTED.— A  Director  of  a 
corporation  cannot  legally  vote  or  act  upon  any  matter 
in  which  he  is  financially  interested  adversely  to  the  cor- 
poration. By  virtue  of  his  position,  he  is  disqualified 
from  voting  or  in  any  mode  acting  in  his  official  capacity  as 
a  Director,  for  the  purpose  of  creating  an  obligation  in 
his  own  favor.  So  strictly  is  this  principle  adhered  to 
by  the  courts,  that  no  question  is  allowed  to  be  raised 
as  to  the  fairness  or  unfairness  of  the  contract  so  entered 
into.  A  Director  must  not  participate  in  any  act  in  which 
his  personal  interest  is  antagonistic  to  that  of  the  corpora- 
tion. Being  interested  in  the  subject-matter,  the  law  does 
not  allow  him,  as  a  Director,  to  deal  with  himself,  and 
thus  be  subjected  to  the  temptation  to  advance  his  own 
interests.  The  Supreme  Court  of  California  had  under 
consideration  a  case  where  a  Director  named  Wells  formed 
a  part  of  a  quorum,  at  a  meeting  of  the  Board,  which 
voted  the  execution  of  a  mortgage  on  the  property  of  the 
corporation  to  him;  and  the  Court  held  that  the  mortgage 
was  invalid,  saying:  "The  same  rules  which  preclude  an 
interested  Director  from  uniting  with  other  Directors  in 
the  creation  of  an  obligation  in  favor  of  himself  by  his 
vote,  forbid  him  from  uniting  with  them  in  creating  such 
obligation  by  any  act  or  exercise  of  his  official  position; 
and  a  meeting  at  which  there  is  not  a  majority  of  the 
Directors,    exclusive   of   such    interested    Director,    is    not   a 


CORPORATIONS   IN    CALIFORNIA.  673 

competent  Board  for  the  transaction  of  any  corporate  business. 
By  reason  of  the  disqualification  of  Wells  from  taking  any 
part  in  passing  the  resolution  for  executing  the  note  and 
mortgage  to  himself,  he  could  neither  vote  in  favor  of  the 
resolution,  nor  by  his  presence  help  to  create  a  quorum  by 
which  the  other  two  Directors  could  adopt  it.  For  the  pur- 
pose of  any  action  upon  this  resolution,  he  was  as  much  a 
stranger  to  the  Board  as  if  he  had  never  been  elected  a  Di- 
rector; and,  although  he  may  have  been  physically  present 
in  the  room  with  the  other  two  Directors,  he  was  not  for 
that  purpose  a  competent  part  of  the  Board,  any  more  than 
would  have  been  any  other  bystander,  and  there  was  not, 
therefore,  a  quorum  of  the  Board  'present  and  acting'  at 
the  time  the  resolution  was  adopted."  (Decided  by  the 
Supreme  Court  in  the  case  of  Curtin  vs.  Salmon  River  Hy- 
draulic Gold  Mining  Company,  which  decision  is  printed  in 
Volume  130  of  the  California  Reports,  page  345.) 

Section  863.— REGULAR  AND  SPECIAL  MEET- 
INGS.— The  time  of  holding  the  meetings  of  the  Board 
of  Directors  may  be  fixed  in  the  By-Laws,  and  the  By- 
Laws  may  provide  that  no  notice  be  given  of  regular 
meetings.  Where  a  special  meeting  is  called,  for  any  pur- 
pose, all  of  the  Directors  must  be  notified  by  the  Secretary 
in  the  proper  manner.  If  the  meeting  is  special,  and  the 
Directors  are  not  all  notified,  the  meeting  is  not  duly  as- 
sembled, and  its  action  does  not  bind  the  corporation  as  a 
valid  corporate  act. 

Section  864.— PUBLICITY  CANNOT  MAKE  ILLE- 
GAL ACT  OF  DIRECTORS  VALID.— The  publicity 
alone  of  an  illegal  and  unauthorized  act  of  the  Directors 
of  a  corporation  does  not  make  it  valid;  and  Directors 
charged  with  doing  an  illegal  act  cannot  defend  it  by  saying 
that  their  act  was  open,  and  not  secret. 

Section  865.— VACANCY  IN  BOARD  OF  DIREC- 
TORS.— The  By-Laws  of  a  corporation  may  provide  the 
manner  in  which  a  vacancy  in  the  Board  of  Directors  shall 


674  BUSINESS   LAWS   FOR   BUSINESS   MEN. 

be  filled.  If  the  By-Laws  make  no  provision  for  filling  a 
vacancy,  the  Board  of  Directors  must  appoint  a  member 
to  fill  the  vacancy. 

Civil  Code,  Section  305. 

Section  866.— CAN  A  CORPORATION  PERFORM 
CORPORATE  ACTS,  SUCH  AS  THE  MORTGAGING 
OF  ITS  REAL  PROPERTY,  WHILE  THERE  IS  A 
VACANCY  IN  ITS  BOARD  OF  DIRECTORS?— This 

question  was  a  new  one  in  the  United  States  prior  to  the 
year  1899.  In  that  year  the  Supreme  Court  of  California 
made  a  decision  in  a  case  where  this  question  was  directly 
raised,  (where  there  was  a  vacancy  in  a  Board  of  five,  and 
the  remaining  four  members,  without  filling  the  vacancy, 
undertook  to  authorize  a  mortgage  of  the  corporation's  real 
estate),  holding  that  a  vacancy  in  the  Board  does  not  pre- 
vent it  from  acting  so  as  to  bind  the  corporation,  if  there 
is  a  majority  of  a  full  Board  remaining.  Chief  Justice 
Beatty,  giving  the  decision  of  the  Court,  said  on  this  sub- 
ject: 'The  By-Laws  of  this  corporation,  and,  I  suppose, 
its  Articles  of  Incorporation,  provided  for  a  Board  of  five 
Directors,  and  the  question  is  whether  during  a  vacancy 
in  one  of  these  directorships  the  four  remaining  Directors 
could  lawfully  assemble  for  the  transaction  of  any  business 
except  the  filling  of  such  vacancy.  Counsel  have  not  cited 
any  case  decided  in  this  State  or  any  other  in  the  United 
States  in  which  this  ques'tion  has  been  directly  decided. 
It  is  no  doubt  true  that  Directors  owe  to  their  constituents 
the  duty  of  keeping  the  Board  full,  by  promptly  filling 
vacancies  as  they  occur;  and  this  for  the  reason  that  share- 
holders are  entitled  to  the  benefit  of  the  experience  and 
advice  of  all  the  members  of  a  full  Board  in  the  trans- 
action of  all  its  business.  When  the  Directors  violate  this 
duty,  there  may  be  sound  reasons  for  holding  that  they 
should  not  be  allowed  to  take  any  advantage,  as  against 
the  shareholders,  of  acts  or  resolutions  passed  when  a  full 
Board  was  not  in  existence.  But  when  the  corporation  is 
dealing  with  a  stranger,   who,  acting  in  good  faith  and  in 


CORPORATIONS   IN   CALIFORNIA.  675 

ignorance  of  the  existence  of  a  vacancy  in  the  Board  of 
Directors,  parts  with  his  property  on  the  faith  of  what  he 
is  induced  to  beHeve  is  a  vaHd  corporate  obUgation,  the 
case  is  certainly  very  different  in  its  substantial  merits. 
The  votes  of  a  majority  of  a  full  Board  may  authorize  a 
corporate  act,  although  there  may  be  a  vacancy  in  the 
Board."  (Decided  by  the  Supreme  Court  in  the  case  of 
Porter  vs.  Lassen  County  Land  and  Cattle  Company,  which 
decision  is  printed  in  Volume  127  of  the  California  Reports, 
page  66L) 

Section  867.— SERVICES  OF  DIRECTOR  OUTSIDE 
OF  HIS  DUTIES  AS  SUCH.— Where  a  Director  of  a 
corporation  performs  services  as  its  manager,  or  in  any  other 
legitimate  way,  not  pertaining  to  his  duties  as  Director, 
he  is  entitled  to  recover  from  the  corporation  the  reasonable 
value  of  such  services,  though  no  rate  of  compensation  was 
fixed  by  the  Board  of  Directors  prior  to  performance  of  the 
services.  (Decided  by  the  Supreme  Court  in  the  case  of 
Bassett  vs.  Fairchild,  which  decision  is  printed  in  Volume 
132  of  the  California  Reports,  page  631.) 

Section  868.— LIABILITY  OF  DIRECTORS  FOR 
MONEY  EMBEZZLED. — The  Directors  of  a  corporation 
are  individually  and  personally  liable  to  its  creditors  for 
money  embezzled  by  any  of  the  officers  of  the  corporation. 
This  the  Constitution  of  the  State  declares.  But  they  are 
liable  only  to  all  the  creditors,  and  one  creditor  cannot  sue 
alone  to  recover  his  debt  by  reason  of  failure  to  pay  when 
the  funds  of  a  corporation  have  been  embezzled.  All  the 
creditors  must  be  joined  in  such  a  suit,  and  the  money 
recovered  to  the  corporation  from  the  Directors  will  con- 
stitute a  trust  fund  to  be  paid  to  all  the  creditors. 

Section  869.— ADVANCES  OF  MONEY  BY  DIREC- 
TOR.— Where  money  is  advanced  to  a  corporation  by  a 
Director,    when   the    corporation    is    in    debt   and   unable   to 


676  BUSINESS   LAWS  FOR  BUSINESS   MEN. 

obtain  money  from  other  sources,  and  such  money  is  re- 
ceived and  made  use  of  in  the  business  of  the  corpora- 
tion, it  will  be  liable  to  him  for  the  repayment  of  the  sum 
advanced. 


Section  870.— DIRECTORS  IN  TWO  CORPORA- 
TIONS.— The  fact  that  two  corporations  have  the  same 
Directors,  or  that  some  of  the  Directors  in  one  are  also 
Directors  in  the  other,  does  not  prevent  the  two  corpora- 
tions from  dealing  with  each  other.  Where  two  corpora- 
tions, through  their  Boards  of  Directors,  make  a  contract 
with  each  other,  the  Directors  who  are  common  to  both 
are  not  within  the  rule  which  prohibits  one  who  acts  in 
a  fiduciary  capacity  from  dealing  with  himself.  Two  cor- 
porations have  the  right,  within  the  scope  of  their  chartered 
powers,  to  deal  with  each  other;  and  this  right  is  not 
destroyed  by  the  fact  that  some,  or  even  a  majority,  of  the. 
Directors  are  common  to  both.  Of  course,  if  such  Directors 
should  wrongfully  use  their  powers  to  the  prejudice  of  one 
of  the  corporations,  their  action  could  be  set  aside  for 
fraud.  But  common  Directors  owe  the  same  fidelity  to  both 
corporations,  and  there  is  no  presumption  that  they  will 
deal  unfairly  with  either;  and  therefore  their  acts  as  such 
common  Directors  are  not  void. 


Section  871.— AUTHORITY  OF   PRESIDENT.— The 

President  of  a  corporation  may  have  more  extensive  powers 
conferred  upon  him  than  a  strict  interpretation  of  the  law 
would  show.  The  Directors  of  a  business  corporation  have 
power,  by  resolution,  to  give  the  President  general  authority 
to  incur  debts,  negotiate  loans,  enter  into  contracts,  and 
otherwise  act  as  the  agent  of  the  corporation;  and  where 
a  resolution  of  this  kind  is  passed  at  a  meeting  of  the 
Directors,  unless  it  is  in  direct  conflict  with  the  By-Laws, 
the  President  will  have  authority  to  do  all  such  acts  on 
behalf  of  the  corporation  as  are  mentioned  in  the  resolution. 
(Decided  by  the  Supreme  Court  in  the  case  of  McCormick 


CORPORATIONS   IN    CALIFORNIA.  677 

VS.  Stockton  and  Tuolumne  County  R.  R.  Company,  which 
decision  is  printed  in  Volume  130  of  the  California  Reports, 
page  100.) 

Section  872.— PRESIDENT  MAY  EMPLOY  ATTOR- 
NEY.— The  President  of  a  corporation  has  power  to  employ 
an  attorney,  when  the  exigencies  of  his  company  require  it. 
He  need  not  obtain  the  consent  of  the  Directors  or  stock- 
holders to  do  this.  By  virtue  of  his  position  as  official  head 
of  the  corporation  he  has  the  power  to  do  so. 

Section  873.— DIVIDENDS.— The  Directors  of  a  cor- 
poration cannot  make  dividends,  except  from  the  surplus 
profits  arising  from  the  business.  The  Directors  cannot 
withdraw,  divide,  or  pay  to  the  stockholders,  or  any  of 
them,  any  part  of  the  capital  stock,  while  the  corporation 
is  a  going  concern. 

Civil  Code,  Section  309. 

Section  874.— AGREEMENT  TO  DIVIDE  CAPITAL 
STOCK  AMONG  STOCKHOLDERS  VOID.— An  agree- 
ment upon  the  part  of  a  corporation  to  divide  its  whole  capi- 
tal stock  among  its  stockholders,  prior  to  its  dissolution,  is 
void. 

Where  a  corporation  wrongfully  pays  to  some  of  its 
stockholders  their  proportionate  share  of  the  money  re- 
ceived from  the  sale  of  the  entire  property  of  th**  corpora- 
tion, the  remedy  of  a  stockholder  who  has  not  been  paid  is 
to  compel  the  restoration  of  the  funds  illegally  distributed. 

(Decided  by  the  Supreme  Court  of  California,  in  the  case 
of  Tapscott  vs.  Mexican  Colorado  River  Land  Company, 
which  decision  is  printed  in  California  Decisions,  Volume 
35,  page  598.) 

Section  875.— EXTENT  OF  DEBTS  TO  BE  CRE- 
ATED.— The  Directors  of  a  corporation  have  no  power 
to  create  debts  beyond  the  amount  of  the  subscribed  capital 
stock.  If  they  create  debts  beyond  the  capital  stock,  the 
Directors    are    individually,    jointly,    and    severally    liable    to 


678  BUSINESS   LAWS   FOR  BUSINESS    MEN. 

the   corporation   and  the  creditors   for   such   debts.     A   Di- 
rector,  however,   who  is   not   present   at   the   meeting   when 
the  debt  is  created,  or  who  has  his  dissent  to  the  Board's 
action  entered  on  the  minutes,  will  not  be  liable. 
Civil  Code,  Section  309. 

Section   876.— RECORDS    OF   CORPORATION.— All 

corporations  for  profit  in  California  are  required  by  the 
law  to  keep  a  record  of  all  their  business  transactions;  a 
journal  of  all  meetings  of  their  Directors,  members,  or 
stockholders,  with  the  time  and  place  of  holding  the  same, 
whether  regular  or  special,  and  if  special,  its  object,  how 
authorized,  and  the  notice  thereof  given.  The  record  must 
embrace  every  act  done  or  ordered  to  be  done;  who  were 
present,  and  who  absent;  and,  if  requested  by  any  Director, 
member,  or  stockholder,  the  time  shall  be  noted  when  he 
entered  the  meeting  or  obtained  leave  of  absence  therefrom. 
On  a  similar  request,  the  ayes  and  noes  must  be  taken  on 
any  proposition,  and  a  record  thereof  made.  On  similar 
request,  the  protest  of  any  Director,  member,  or  stock- 
holder, to  any  action  or  proposed  action,  must  be  entered 
in  full.  All  such  records  must  be  open  to  the  inspection 
of  any  Director,  member,  stockholder,  or  creditor  of  the 
corporation.  Corporations  for  profit  must  also  keep  a  book, 
to  be  known  as  the  "Stock  and  Transfer  Book,"  in  which 
must  be  kept  a  record  of  all  stock;  the  names  of  the  stock- 
holders, or  members,  alphabetically  arranged;  installments 
paid  or  unpaid;  assessments  levied  and  paid  or  unpaid; 
a  statement  of  every  alienation,  sale,  or  transfer  of  stock 
made,  the  date  thereof,  and  by  and  to  whom;  and  all  such 
other  records  as  the  By-Laws  prescribe.  Such  "Stock  and 
Transfer  Book"  must  be  kept  open  to  the  inspection  of  any 
stockholder,  member,  or  creditor. 

Civil  Code,  Sections  377,  378. 

Section  877.— REMOVAL  OF  DIRECTORS  FROM 
OFFICE. — No  Director  can  be  removed  from  office,  unless 
by  a  vote  of  two-thirds  of  the  members,  or  of  stockholders 


CORPORATIONS   IN    CALIFORNIA.  679 

holding  two-thirds  of  the  capital  stock,  at  a  general  meeting 
held  after  previous  notice  of  the  time  and  place,  and  of  the 
intention  to  propose  such  removal.  Meetings  of  stock- 
holders for  this  purpose  may  be  called  by  the  President 
or  by  a  majority  of  the  Directors,  or  by  members  or  stock- 
holders holding  at  least  one-half  of  the  votes.  Such  calls 
must  be  in  writing,  and  addressed  to  the  Secretary,  who 
must  thereupon  give  notice  of  the  time,  place,  and  object 
of  the  meeting,  and  by  whose  order  it  is  called.  If  the 
Secretary  refuse  to  give  the  notice,  or  if  there  is  no  Sec- 
retary, the  call  may  be  addressed  directly  to  the  members  or 
stockholders,  and  be  served  as  a  notice,  in  which  case  it 
must  specify  the  time  and  place  of  meeting. 

Section  878.— EXAMINATION  OF  CORPORA- 
TIONS.— As  the  right  of  corporations  to  exist  and  do  busi- 
ness comes  from  the  State,  it  follows  logically  that  the  State 
retains  the  power  to  examine  into  the  affairs  of  all  cor- 
porations at  any  time.  The  law  provides  that  the  Governor 
may  require  the  Attorney-General,  or  the  District  Attor- 
ney of  any  county,  to  make  an  examination  into  the  affairs 
of  a  corporation  and  report  to  the  Governor.  The  Legis- 
lature may  also  examine  into  the  condition  and  affairs  of  a 
corporation,  by  a  committee  appointed  by  either  the  Senate 
or  Assembly.  And  the  Legislature  may  dissolve  all  cor- 
porations by  repealing  the  laws  under  which  they  were 
created. 

Civil  Code,  Sections  382,  383,  384. 

Section  879.— DISSOLUTION   OF   CORPORATION. 

— The  dissolution  of  a  corporation  may  be  voluntary,  or 
involuntary.  It  is  voluntary,  when  the  dissolution  is 
effected  by  consent  of  the  stockholders  or  members.  It 
is  involuntary,  when  the  dissolution  is  compelled  against 
or  without  the  consent  of  the  stockholders  or  members. 
If  voluntary,  an  application  is  made  to  the  Superior  Court 
of  the  county  where  the  principal  place  of  business  of  the 
corporation    is.      This    application    to    the    Court    must    first 


680  BUSINESS   LAWS   FOR   BUSINESS    MEN. 

be  authorized  by  a  resolution  of  the  members  or  stock, 
holders,  adopted  by  a  two-thirds  vote  of  the  members,  where 
there  is  no  capital  stock,  or  by  a  vote  of  the  holders  of  two- 
thirds  of  the  subscribed  capital  stock;  and  it  must  also 
appear  that  all  claims  and  demands  against  the  corporation 
have  been  paid  and  discharged.  A  corporation  may  also 
be  dissolved  against  the  consent  of  the  stockholders  by  a 
judgment  of  dissolution  in  a  suit  brought  by  the  Attorney- 
General.  'In  such  a  suit,  if  it  appears  that  the  corporation 
is  doing  a  business  not  provided  for  by  its  charter,  or  has 
ceased  to  do  business  at  all,  or  its  term  of  existence  has 
expired,  or  is  in  such  a  condition  that  it  can  no  longer  hope 
to  carry  out  the  ends  and  purposes  of  the  corporation,  the 
corporation  will  be  declared  dissolved  by  judgment  of  the 
Court. 

Code   of   Civil    Procedure,    Sections   803,    1227,    1228. 

Act  of  the  Legislature,  in  effect  May  17,  1907. 

Section  880.— DISPOSITION  TO  BE  MADE  OF 
PROPERTY  UPON  DISSOLUTION.— Upon  the  disso- 
lution of  a  corporation,  the  capital  stock,  and  all  property 
belonging  to  the  corporation,  will  be  divided  among  the 
stockholders  in  proportion  to  the  number  of  shares  held  by 
each.  But  before  any  such  division  can  be  made,  it  must 
appear  that  all  debts  of  the  corporation  have  been  paid. 
The  Directors  of  a  dissolved  corporation  have  authority  to 
go  on  and  make  final  settlement  of  its  affairs,  and  have 
power  to  make  a  division  of  the  property  left  over  after 
the  payment  of  the  debts. 

Civil  Code,  Section  309. 

Section  881.— FALSE  REPORTS.— Any  officer  of  a 
corporation  who  wilfully  gives  a  certificate,  or  wilfully  makes 
an  official  report,  public  notice,  or  entry  in  any  of  the  rec- 
ords or  books  of  the  corporation,  concerning  the  corpora- 
tion or  its  business,  which  is  false  in  any  material  repre- 
sentation, is  liable  for  all  the  damages  resulting  therefrom 
to  any  person  injured  thereby ;  and  if  two  or  more  officers 


CORPORATIONS    IN    CALIFORNIA.  681 

unite  or  participate  in  the  commission  of  any  of  such  acts, 
they  are  jointly  and  severally  liable. 
Civil  Code,   Section  316. 

Section     882.— TRANSFER     OF     FRANCHISE.— No 

sale,  lease,  assignment,  transfer,  or  conveyance  of  the  busi- 
ness, franchise,  and  property,  as  a  whole,  of  any  corporation 
is  valid  without  the  consent  of  stockholders  holding  of  rec- 
ord at  least  two-thirds  of  the  issued  capital  stock  of  the 
corporation;  such  consent  to  be  either  expressed  in  writing, 
executed  and  acknowledged  by  such  stockholders,  and  at- 
tached to  such  sale,  lease,  assignment,  transfer,  or  convey- 
ance, or  by  a  vote  at  a  stockholders'  meeting  called  for  that 
purpose;  but  with  such  assent  so  expressed,  such  sale,  lease, 
assignment,  transfer,  or  conveyance  is  valid. 
Statutes  of  1903,  page  396. 

Section  883.— TRANSFER  OF  FOREIGN  CONCES- 
SIONS.— A  corporation  owning  grants,  concessions,  fran- 
chises, and  property,  in  a  foreign  country,  has  the  right 
under  our  laws  to  sell  and  convey  the  same;  but  such  sale 
and  conveyance  can  only  be  made  by  a  resolution  adopted 
by  the  vote  of  a  majority  of  the  Board  of  Directors,  and 
the  written  consent  of  the  holders  of  two-thirds  of  the 
capital  stock. 

Statutes  of  1899,  page  95. 

Section  884.— GENERAL  POWERS  OF  CORPORA- 
TION.— The  law  provides  what  shall  be  the  general  powers 
of  a  corporation  in  California.  Every  corporation  in  Cali- 
fornia has  power,  (1)  To  sue  and  be  sued  in  any  court; 
(2)  To  make  and  use  a  common  seal,  and  alter  the  same 
at  pleasure;  (3)  To  purchase,  hold,  and  convey  such  real 
and  personal  estate  as  the  purpose  of  the  corporation  may 
require;  (4)  To  appoint  such  subordinate  officers  or  agents 
as  the  business  of  the  corporation  may  require,  and  to  allow 
them  suitable  compensation;  (5)  To  make  By-Laws,  not 
inconsistent  with  any  existing  law,  for  the  management  of 


682  BUSINESS  LAWS   FOR  BUSINESS   MEN. 

its  property,  the  regulation  of  its  affairs,  and  for  the  transfer 
of  its  stock;  (6)  To  admit  stockholders  or  members,  and 
to  sell  their  stock  or  shares  for  the  payment  of  assessments 
or  installments;  (7)  To  enter  into  any  obligations  or  con- 
tracts essential  to  the  transaction  of  its  ordinary  affairs, 
or  for  the  purpose  of  the  corporation.  The  manner  of  the 
exercise  of  these  general  powers  has  already  been  stated  in 
preceding   sections. 

Civil  Code,  Section  354. 

Section  885.— TAXATION   OF  CORPORATIONS.— 

Shares  of  stock  in  corporations  possess  no  intrinsic  value 
over  and  above  the  actual  value  of  the  property  of  the  cor- 
poration which  they  stand  for  and  represent;  and  the  assess- 
ment and  taxation  of  such  shares,  and  also  all  the  corporate 
property,  would  be  double  taxation.  Therefore,  all  prop- 
erty belonging  to  corporations  (except  the  property  of 
national  banking  associations  not  assessable  by  Federal 
statute)  can  be  assessed  and  taxed.  But  no  assessment  can 
be  made  of  shares  of  stock  in  any  corporation  (except  in 
national  banking  associations,  whose  property,  other  than 
real  estate,  is  exempt  from  assessment  by  Federal  statute.) 
Statutes  of  1899,  page  96. 

Section  886.— LIABILITY  OF  FOREIGN  CORPO- 
RATION FAILING  TO  FILE  CERTIFIED  COPY 
OF  ARTICLES  OF  INCORPORATION.— Every  for- 
eign corporation,  organized  outside  of  California,  must  file 
with  the  Secretary  of  State,  and  with  the  County  Clerk 
of  the  county  in  which  its  principal  place  of  business  is 
situated  in  this  State,  and  also  with  the  County  Clerk  of 
any  county  in  this  State  where  such  corporation  owns 
property,  a  certified  copy  of  its  charter  or  Articles  of  Incor- 
poration. For  a  failure  to  do  this,  the  corporation  will  be 
subject  to  a  fine  of  not  less  than  $500;  and  no  foreign  cor- 
poration can  maintain  any  suit  or  action  in  any  of  the 
courts  of  this   State,   or   acquire  or  convey   any  legal   title 


CORPORATIONS   IN    CALIFORNIA.  683 

to  any  real  property  within  this  State,  until  it  has  complied 
with  the  law. 

Civil  Code,  Sections  408,  410. 

Act  of  the  Legislature,  approved  April  26,  1911. 

Section    887.— DUTY    OF    CORPORATIONS    SUP- 
PLYING GAS,   ELECTRICITY,   STEAM   OR   HEAT. 

— Upon  the  application  in  writing  of  the  owner  or  occu- 
pant of  any  building  or  premises  distant  not  more  than  one 
hundred  feet  from  any  gas  or  steam  main,  or  direct  or  pri- 
mary wire  of  the  corporation,  and  payment  by  the  applicant 
of  all  money  due  from  him,  the  corporation  must  supply  gas, 
electricity,  steam  or  heat  as  required  for  such  building  or 
premises,  and  cannot  refuse  on  the  ground  of  any  indebted- 
ness of  any  former  owner  or  occupant  thereof,  unless  the 
applicant  has  undertaken  to  pay  the  same.  If,  for  the  space 
of  ten  days  after  such  application,  the  corporation  refuses  or 
neglects  to  supply  the  gas,  electricity,  steam  or  heat  required, 
it  must  pay  to  the  applicant,  the  sum  of  fifty  dollars  as 
liquidated  damages  and  five  dollars  per  day,  as  liquidated 
damages  for  every  day  such  refusal  or  neglect  continues 
thereafter. 

Act  of  the  Legislature,  approved  April  12,  1911. 


PART  VII. 

BANK    LAWS    OF    CALIFORNIA. 

Section     888.  — DIVISION      OF     BANKS      INTO 

CLASSES.— The  word  "bank"  as  used  in  this  act  includes 
every  person,  firm,  company,  co-partnership  or  corporation 
which  conducts  the  business  of  receiving  money  on  deposit. 
Banks  are  divided  into  the  following  classes: 

(a)  Savings  banks; 

(b)  Commercial  banks;  and 

(c)  Trust  companies. 

The  term  "savings  bank,"  when  used  in  this  act,  means  a 
bank  organized  for  the  purpose  of  accumulating  and  loan- 
ing the  funds  of  its  members,  stockholders,  and  depositors, 
and  which  may  loan  and  invest  the  funds  thereof,  receive  de- 
posits of  money;  loan,  invest  and  collect  the  same  with  in- 
terest;  and  may  repay  depositors  with  or  without  interest, 
and  having  power  to  invest  said  funds  in  such  property, 
securities  and  obligations  as  may  be  prescribed  by  this  act; 
and  to  declare  and  pay  dividends  on  its  general  deposits, 
and  a  stipulated  rate  of  interest  on  deposits  made  for  a  stated 
period  or  upon  special  terms. 

The  term  "commercial  bank,"  when  used  in  this  act, 
means  any  bank  authorized  by  law  to  receive  deposits  of 
money,  deal  in  commercial  paper  or  to  make  loans  thereon, 
and  to  lend  money  on  real  or  personal  property,  and  to  dis- 
count bills,  notes,  or  other  commercial  paper,  and  to  buy 
and  sell  securities,  gold  and  silver  bullion,  or  foreign  coins 
or  bills  of  exchange. 

The  term  "trust  company,"  when  used  in  this  act,  means 
any  company  which  is  incorporated  for  the  purpose  of  con- 
ducting the   business   of   acting   as   executor,   administrator, 
guardian  of  estates,  assignee,  receiver,  depositary  or  trustee. 
Act  of  the  Legislature,  approved  March  1,  1909. 
(684) 


BANK    LAWS   OF   CALIFORNIA.  685 

Section  889.— FOREIGN  CORPORATIONS.— No  for- 
eign corporation  shall  transact  a  banking  business  in  this 
State  without  first  complying  with  all  the  requirements  of 
the  laws  of  this  State  relative  to  banks  as  defined  in  this  act, 
and  without  having  the  capital  paid  up  in  this  State  as  re- 
quired by  this  act.  And  no  such  foreign  corporation  shall 
transact  any  banking  business  in  this  State  until  it  has  exe- 
cuted and  filed  with  the  Superintendent  of  Banks  a  written 
instrument  appointing  such  superintendent,  or  his  successor 
in  office,  its  true  and  lawful  attorney,  upon  whom  all  pro- 
cess in  any  action  or  proceeding  by  any  resident  of  the  State 
against  it  may  be  served,  with  the  same  effect  as  if  such 
corporation  was  formed  under  the  laws  of  this  State  and 
had  been  lawfully  served  with  process  therein.  Service  in 
favor  of  a  resident  of  this  State  upon  such  attorney  shall  be 
deemed  personal  service  on  such  corporation.  The  Superin- 
tendent of  Banks  shall  forthwith  forward  by  mail  a  copy  of 
every  process  served  upon  him  under  the  provisions  of  this 
section,  postage  prepaid,  and  directed  to  the  Secretary  of 
such  corporation,  at  its  last  known  post  office  address.  For 
each  copy  of  process,  the  Superintendent  of  Banks  shall  col- 
lect the  sum  of  two  dollars,  which  shall  be  paid  by  the  plain- 
tiff or  moving  party  at  the  time  of  such  service,  to  be  re- 
covered by  him  as  part  of  his  taxable  costs  if  he  succeed 
in  the  suit  or  proceeding. 

Every  corporation,  at  the  time  it  applies  for  a  certificate 
to  do  a  banking  business,  must  file  with  the  Superintendent 
of  Banks  a  certified  copy  of  its  articles  of  incorporation,  or 
of  the  statute  chartering  such  corporation,  also  all  instru- 
ments amending  or  altering  such  articles  of  incorporation  or 
charter.  Thereafter  all  amendments  and  certificates  shall 
likewise  be  so  filed  before  such  instruments  take  effect.  In 
like  manner  all  co-partnerships  shall  file  certified  copies  of 
their  articles  of  co-partnership  and  all  amendments  thereto. 
Act  of  the  Legislature,  approved  March  1,  1909. 

Section  890.— BRANCH  BANKS.— No  bank  in  this 
State,  or  any  officer  or  director  thereof,  shall  hereafter  open 


686  BUSINESS   LAWS   FOR   BUSINESS    MEN. 

or  keep  an  office  other  than  its  principal  place  of  business, 
without  first  having  obtained  the  written  approval  of  the 
Superintendent  of  Banks  to  the  opening  of  such  branch  office, 
which  written  approval  may  be  given  or  withheld  in  his  dis- 
cretion, and  shall  not  be  given  by  him  until  he  has  ascer- 
tained to  his  satisfaction  that  the  public  convenience  and 
advantage  will  be  promoted  by  the  opening  of  such  branch 
office;  and,  provided  further,  that  no  bank  or  any  officer  or 
director  thereof,  shall  open  or  maintain  such  branch  unless 
the  capital  of  such  bank,  actually  paid  in  cash,  shall  exceed 
the  amount  required  by  this  act  by  the  sum  of  twenty-fivfe 
thousand  dollars  for  each  branch  office  opened  and  main- 
tained. Every  bank,  and  every  such  officer  or  director  vio- 
lating the  provisions  of  this  section  shall  be  guilty  of  a  mis- 
demeanor. 

Act  of  the  Legislature,  approved  March  1,  1909. 

Section  891.— BANK  DIRECTORS.— No  person  shall 
be  eligible  for  election  as  a  director  of  a  bank  unless  he  is  a 
stockholder  of  the  bank,  owning,  in  his  own  right,  shares 
thereof  of  the  actual  market  value  of  at  least  five  hundred 
dollars;  and  every  person  elected  to  be  director  who,  after 
such  election,  shall  cease  to  be  the  owner  in  his  own  right 
of  the  amount  of  stock  aforesaid,  shall  then  cease  to  be  a 
director  of  the  bank,  and  his  office  shall  then  become  vacant. 
If  a  bank  be  organized  without  capital  stock,  no  person 
shall  be  eligible  as  a  director  thereof  unless  he  ij  both  a 
member  and  a  depositor  of  such  bank. 

Act  of  the  Legislature,  approved  March  1,  1909. 

Section  892.— MEETINGS  OF  BANK  DIRECTORS. 

—The  Board  of  Directors  of  a  bank  must  hold  a  meeting  at 
least  once  a  month. 

Act  of  the  Legislature,  approved  April  21,   1911. 

Section  893.— OATH  OF  DIRECTORS.— Each  direc- 
tor, when  appointed  or  elected,  shall  take  an  oath  that  he  will, 
so  far  as  the  duty  devolves  on  him,  diligently  and  honestly 


BANK    LAWS   OF   CALIFORNIA.  687 

administer  the  affairs  of  such  bank,  and  will  not  knowingly 
violate  or  wilfully  permit  to  be  violated  any  of  the  provi- 
sions of  law  applicable  to  such  bank,  and  that  he  is  the 
owner  in  good  faith  and  in  his  own  right  of  the  shares  of 
stock  of  the  actual  market  value  required  by  this  act,  sub- 
scribed by  him  or  standing  in  his  name  on  the  books  of  the 
bank,  and  that  the  same  is  not  hypothecated  or  in  any  way 
pledged  as  security  for  any  loan  or  debt;  and,  in  case  of 
re-election  or  re-appointment,  that  such  stock  was  not  hy- 
pothecated or  in  any  way  pledged  as  security  for  any  loats 
or  debt  during  his  previous  term.  Such  oath  shall  be  sub- 
scribed by  the  director  making  it,  and  certified  by  the  officer 
before  whom  it  is  taken;  and  shall  be  immediately  transmit- 
ted to  the  Superintendent  of  Banks,  and  filed  and  pre- 
served in  his  office. 

Act  of  the  Legislature,  approved  April  21,  1911. 

Section     894.— ADVERTISING     BY     BANK.— Every 

person,  firm,  company,  co-partnership  or  corporation  adver- 
tising that  he  or  it  is  transacting  the  business  of  a  bank, 
savings  bank,  or  trust  company,  or  making  use  of  any  office 
sign  at  the  place  where  such  business  is  transacted,  having 
thereon  any  artificial  or  corporate  name,  or,  in  other 
words,  indicating  that  such  place  or  office  is  the  place  or  office 
of  a  bank,  or  that  deposits  are  received  there  or  payments 
made  on  check,  or  that  interest  is  paid  on  deposits,  or  that 
certificates  of  deposit,  either  with  or  without  interest,  are 
being  issued,  or  that  any  other  form  of  banking  business  is 
transacted,  and  every  person,  firm,  company,  co-partnership  or 
corporation  making  use  of  or  circulating  any  letter-heads, 
bill-heads,  blank  notes,  blank  receipts,  certificates  or  circulars, 
or  any  written  or  printed,  or  partly  written  and  partly 
printed,  paper,  whatever,  having  thereon  any  artificial  or 
corporate  name,  or  advertising  that  such  business  is  the 
business  of  a  bank,  savings  bank  or  trust  company,  must 
have  the  proper  capital  stock  paid  in  and  set  aside  for  the 
purpose  of  transacting  such  business,  as  provided  for  in  this 
act.     And   every   person,   firm,    company,    co-partnership   or 


bob  BUSINESS   LAWS   FOR   BUSINESS   MEN. 

corporation  doing-  any  of  the  things  or  transacting  any  of 
the  business  defined  in  this  section,  must  transact  such  busi- 
ness according  to  the  provisions  of  the  bank  act. 

Nothing  in  this  section  contained  shall  prohibit  building 
and  loan  associations  from  receiving  deposits  of  money  and 
executing  certificates  therefor  in  accordance  with  the  laws 
governing  such  associations,  but  all  such  certificates  other 
than  certificates  of  stock  must  designate  on  the  face  thereof 
the  terms  under  which  such  certificates  are  issued. 

Any  violation  of  this  law  is  a  misdemeanor. 

Act  of  the  Legislature,  approved  April  21,  1911. 

No  bank,  or  any  officer  thereof,  shall  advertise  in  any 
manner,  or  publish  any  statement  of  the  capital  authorized  or 
subscribed,  unless  it  or  he  advertise  and  publish,  in  connec- 
tion therewith,  the  amount  of  capital  actually  paid  up.  Any 
bank,  or  any  officer  thereof,  advertising  in  any  manner,  or 
publishing  any  statement  of  such  capital,  authorized  or 
subscribed,  without  a  statement  in  connection  therewith  of 
the  capital  actually  paid  up,  shall  be  guilty  of  a  misde- 
meanor. 

Act  of  the  Legislature,  approved  March  1,  1909. 

Section    895.— DEPOSITS    OF    DEAD    PERSONS.— 

The  President  or  managing  officer  of  every  bank  must,  within 
fifteen  days  after  the  first  day  of  January  of  every  odd  num- 
bered year,  return  to  the  Superintendent  of  Banks  a  sworn 
statement  showing  the  names  of  depositors  known  to  be  dead, 
or  who  have  not  made  further  deposits,  or  withdrawn  any 
moneys  during  the  preceding  ten  years.  Such  statements 
shall  show  the  amount  of  the  account,  the  depositor's  last 
known  place  of  residence  or  post  office  address,  and  the 
fact  of  death,  if  known  to  such  President  or  managing 
officer.  Such  President  or  managing  officer  must  give 
notice  of  these  deposits  in  one  or  more  newspapers  pub- 
lished in  or  nearest  to  the  town  or  city  where  such  bank  has 
its  principal  place  of  business,  at  least  once  a  week  for 
four  consecutive  weeks,  the  cost  of  such  publication  to  be 


BANK   LAWS   OF   CALIFORNIA.  689 

paid  pro  rata  out  of  such  unclaimed  deposits.  This  section 
does  not  apply  to  any  deposit  made  by  or  in  the  name  of  a 
person  known  to  the  President  or  managing  officer  to  be 
living,  or  which,  with  the  accumulation  thereon,  is  less 
than  fifty  dollars.  The  Superintendent  of  Banks  must  in- 
corporate in  his  subsequent  report  such  returns  made  to 
him  as  provided  in  this  section.  Any  President  or  man- 
aging officer  of  any  bank  who  neglects  or  refuses  to  make 
the  sworn  statement  required  by  this  section  shall  be  guilty 
of  a  misdemeanor. 

Act  of  the  Legislature,  approved  March  1,  1909. 

Section  896.— DEPOSITS  OF  MARRIED  WOMEN 
OR  MINORS. — When  any  deposit  with  a  bank  shall  be  made 
by  or  in  the  name  of  any  married  woman  or  minor,  the 
same  shall  be  held  for  the  exclusive  right  and  benefit  of  such 
depositor,  and  free  from  the  control  or  lien  of  all  other  per- 
sons, except  creditors,  and  shall  be  paid,  together  with  the 
dividends,  if  any,  and  interest,  if  any,  thereon  to  the  person 
in  whose  name  deposits  shall  have  been  made,  and  the 
receipt  or  acquittance  of  such  minor  shall  be  a  valid  and 
sufficient  release  and  discharge  for  such  deposit;^  or  any 
part  thereof,  to  the  bank.  When  any  deposit  with  a  bank 
shall  be  made  by  any  person  in  trust  for  another,  and  no 
other  or  further  notice  of  the  existence  and  terms  of  a 
legal  and  valid  trust  shall  have  been  given  in  writing  to 
such  bank,  in  the  event  of  the  death  of  the  trustee,  the  same 
or  any  part  thereof,  together  with  the  dividends  or  interest, 
if  any,  thereon,  may  be  paid  to  the  person  for  whom  the 
deposit  was  made.  When  a  deposit  with  a  bank  shall  be 
made  by  any  person  in  the  names  of  such  depositor  and 
another  person  or  persons,  and  in  form  to  be  paid  to  either 
or  the  survivor  or  survivors  of  them,  such  deposit  there- 
.  upon,  and  any  additions  thereto  made  by  either  of  such 
persons  upon  the  making  thereof,  shall  become  the  property 
of  such  persons  as  joint  tenants,  and  the  same,  together 
with  all  interest  thereon,  shall  be  held  for  the  exclusive  use  of 
the  persons  so  named,  and  may  be  paid  to  either  during  the 


690  BUSINESS   LAWS   FOR  BUSINESS    MEN. 

lifetime  of  all  or  any  or  to  the  survivor  or  survivors  after 
the  death  of  one  or  more  of  them,  and  such  payments  and  the 
receipt  or  acquittance  of  the  one  to  whom  such  payment  is 
made  shall  be  valid  and  sufficient  release  and  discharge  to 
said  bank  for  all  payments  made  on  account  of  such  deposit. 
The  surviving  husband  or  wife  of  any  deceased  person,  or, 
if  no  husband  or  wife  is  living,  then  the  children  of  said 
decedent,  or,  if  no  children  are  living,  then  the  father  or 
mother  of  such  decedent,  and  if  neither  the  father  or  mother 
is  living,  then  the  brothers  and  sisters  of  such  decedent,  may, 
without  procuring  letters  of  administration,  collect  of  any 
bank  any  sum  which  said  deceased  may  have  left  on  deposit 
in  such  bank  at  the  time  of  his  or  her  death;  provided,  such 
deposit  shall  not  exceed  the  sum  of  five  hundred  dollars.  Any 
bank,  upon  receiving  an  affidavit  stating  that  said  depositor 
is  dead,  and  that  affiant  is  the  surviving  husband  or  wife,  as 
the  case  may  be,  or  stating  that  decedent  left  no  husband  or 
wife,  and  that  affiant  is,  or  affiants  are,  the  children,  or  stat- 
ing that  decedent  left  neither  husband,  wife  or  children,  and 
that  affiant  is  the  father  or  mother,  as  the  case  may  be,  of 
said  decedent,  or  stating  that  the  decedent  left  neither  hus- 
band, wif§,  children,  father  or  mother,  and  that  affiants  are 
the  brothers  and  sisters,  as  the  case  may  be,  and  that  the 
whole  amount  that  decedent  left  on  deposit  in  any  and  all 
banks  of  deposit  in  this  State,  does  not  exceed  the  sum  of 
five  hundred  dollars,  may  pay  to  said  affiant  or  affiants,  any 
deposit  of  said  decedent,  if  the  same  does  not  exceed  the  sum 
of  five  hundred  dollars,  and  the  receipt  of  such  affiant  is 
sufficient  acquittance  therefor. 

Act  of  the  Legislature,  approved  April  21,  1911. 

Section    897.— LIST    OF    STOCKHOLDERS.— Every 

bank  now  in  existence  or  hereafter  organized  shall  keep  in 
its  offices,  in  a  place  accessible  to  the  stockholders,  depositors, 
and  creditors  thereof,  and  for  their  use,  a  book  containing 
a  list  of  stockholders  in  such  corporation,  and  the  number 
of  shares  of  stock  held  by  each;  and  every  such  bank  shall 
keep  posted  in  its  office,  in  a  conspicuous  place,  accessible  to 


BANK    LAWS   OF   CALIFORNIA.  691 

the   public   generally,   a   notice   signed   by   the    President   or 
Secretary,  showing: 

1.  The  names  of  the  directors  of  such  bank. 

2.  The  number  and  par  value  of  the  shares  of  stock  held 
by  each  director. 

The  entries  on  such  book  and  such  notice  shall  be  made 
and  posted  within  twenty-four  hours  after  any  transfer  of 
stock,  and  shall  be  prima  facie  evidence  against  each  director 
and  stockholder  of  the  number  of  shares  of  stock  held  by 
each. 

Act  of  the  Legislature,  approved  March  1,  1909. 

Section  898.— PARTNERSHIP  LIST.— Every  co-part- 
nership doing  a  banking  business  shall  keep  in  its  office,  in  a 
place  accessible  to  the  partners  and  depositors  and  the 
creditors  thereof,  a  list  of  the  partners  and  the  capital  paid 
into  the  co-partnership  of  each  partner. 

Act  of  the  Legislature,  approved  March   1,   1909. 

Section  899.— DEPOSIT  LIABILITIES.— The  aggre- 
gate of  paid-up  capital,  together  with  the  surplus,  of  every 
bank,  must  equal  ten  per  centum  of  its  deposit  liabilities; 
such  deposit  liabilities  shall  not  be  increased  when  such  pro- 
portion of  paid-up  capital  and  surplus  is  wanting,  and  in 
no  event  shall  said  paid-up  capital  be  less  than  the  minimum 
paid-up  capital  provided  by  this  act.  And,  provided  also, 
that  no  savings  bank  shall  be  required  to  have  a  paid-up 
capital  and  surplus  of  more  than  one  million  dollars,  or  if 
organized  without  a  capital  stock,  a  reserve  fund  of  more 
than  one  million  dollars. 

Act  of  the  Legislature,  approved  March  1,  1909. 

Section  900.— BANK  RESERVES.— Every  bank,  other 
than  a  savings  bank,  shall  have  at  all  times  as  lawful  reserve 
an  amount  equal  to  fifteen  per  centum  of  the  aggregate 
amount  of  its  deposits;  two-fifths  of  such  reserve  shall  be 
in  its  own  keeping  in  lawful  money  of  the  United  States; 
one-half    of    the    remainder    of    such    lawful    reserve    may 


692  BUSINESS   LAWS   FOR   BUSINESS    MEN. 

consist  of  moneys  on  deposit,  subject  to  call,  with  any  bank 
or  banks  in  this  State,  other  than  a  savings  bank;  and  the 
balance  of  such  reserve  may  consist  of  moneys  on  deposit, 
subject  to  call,  with  any  bank  or  banks  in  the  cities  of  New 
York,  Chicago  or  St.  Louis,  other  than  a  savings  bank; 
provided,  that  every  bank  receiving  deposits  as  a  reserve 
depository  bank  of  other  banks,  shall  maintain  as  a  lawful 
reserve  at  least  twenty  per  centum  of  the  aggregate  amount 
of  its  deposits;  two-fifths  of  such  lawful  reserve  of  such 
depository  bank  shall  be  in  lawful  money  of  the  United  States 
in  its  own  keeping;  one-half  of  the  remainder  of  such  law- 
ful reserve  of  such  depository  bank  may  consist  of  moneys 
on  deposit,  subject  to  call,  with  any  bank  or  banks  in  this 
State,  other  than  a  savings  bank;  and  the  balance  of  such 
reserve  may  consist  of  moneys  on  deposit,  subject  to  call, 
with  any  bank  or  banks  in  the  cities  of  New  York,  Chicago 
and  St.  Louis,  other  than  a  savings  bank. 

If  the  lawful  money  reserve  of  any  bank  shall  be  less  than 
the  amount  required  by  this  section,  such  bank  shall  not 
increase  its  liabilities  by  making  any  new  loans  or  discounts, 
otherwise  than  by  discounting  bills  of  exchange  on  sight,  or 
making  any  dividends  from  profits,  until  the  full  amount  of 
its  lawful  money  reserve  has  been  restored.  The  Superin- 
tendent of  Banks  may  notify  any  bank,  whose  lawful  money 
reserve  shall  be  below  the  amount  herein  required,  to  make 
good  such  reserve;  and,  if  it  shall  fail  for  thirty  days  there- 
after to  make  good  such  reserve,  such  bank  shall  be  deemed 
insolvent  and  may  be  proceeded  against  under  the  provisions 
of  this  act. 

Act  of  the  Legislature,  approved  April  21,  19n. 

Section    901.— DEPARTMENTAL     BANKING.— Any 

corporation  authorized  by  its  articles  of  incorporation  so  to 
do,  may  combine  the  business  of  a  commercial  bank,  savings 
bank  and  trust  company,  or  any  or  all  of  them. 

Act  of  the  Legislature,  approved  March  1,  1909. 

(a) — Consent  of  Superintendent. — When  a  bank  desires 
to  do  a  departmental  business,  it  shall  first  obtain  consent  of 


BANK   LAWS   OF   CALIFORNIA.  693 

the  Superintendent  of  Banks,  and  in  its  application  file  a 
statement  making  a  segregation  of  its  capital  and  surplus  for 
each  department.  Such  capital  and  surplus,  when  so  appor- 
tioned and  approved  by  the  Superintendent  of  Banks,  shall  be 
considered  and  treated  as  the  separate  capital  and  surplus  of 
such  department  as  if  each  department  was  a  separate  bank. 

(b) — Capital  Stock. — Every  bank  hereafter  organized 
doing  a  departmental  business  shall  have  paid  up  in  cash 
a  capital  stock  as  follows: 

(1)  In  any  city  or  town  in  which  the  population  does  not 
exceed  five  thousand  persons,  not  less  than  twenty-five  thou- 
sand dollars,  if  it  transacts  both  a  commercial  and  savings 
business;  or  not  less  than  two  hundred  and  twenty-five 
thousand  dollars  if  it  transacts  both  a  commercial  and  trust 
business ;  or  not  less  than  two  hundred  and  twenty-five 
thousand  dollars  if  it  transacts  both  a  savings  and  trust 
business;  and  not  less  than  two  hundred  and  twenty-five 
thousand  dollars  if  it  transacts  a  commercial,  savings  and 
trust  business. 

(2)  In  any  city  in  which  the  population  is  more  than  five 
thousand  persons  but  does  not  exceed  twenty-five  thousand 
persons,  not  less  than  fifty  thousand  dollars  if  it  transacts  both 
a  commercial  and  savings  business ;  or  not  less  than  two  hun- 
dred and  fifty  thousand  dollars  if  it  transacts  both  a  com- 
mercial and  trust  business ;  or  not  less  than  two  hundred 
and  fifty  thousand  dollars  if  it  transacts  both  a  savings  and 
trust  business ;  and  not  less  than  two  hundred  and  fifty 
thousand  dollars  if  it  transacts  a  commercial,  savings  and 
trust  business. 

(3)  In  any  city  in  which  the  population  is  more  than 
twenty-five  thousand  persons  but  does  not  exceed  one  hun- 
dred thousand  persons,  not  less  than  one  hundred  thousand 
dollars  if  it  transacts  both  a  commercial  and  savings  busi- 
ness; or  not  less  than  three  hundred  thousand  dollars  if  it 
transacts  both  a  commercial  and  trust  business;  or  not  less 
than  three  hundred  thousand  dollars  if  it  transacts  both  a 
savings  and  trust  business ;  and  not  less  than  three  hundred 


694  BUSINESS   LAWS   FOR   BUSINESS    MEN. 

thousand  dollars  if  it  transacts  a  commercial,   savings  and 
trust  business. 

(4)  In  any  city  in  which  the  population  is  more  than  one 
hundred  thousand  persons  but  does  not  exceed  two  hundred 
thousand  persons,  not  less  than  two  hundred  thousand  dollars 
if  it  transacts  both  a  commercial  and  savings  business;  or  not 
less  than  four  hundred  thousand  dollars  if  it  transacts  both  a 
commercial  and  trust  business;  or  not  less  than  four  hundred 
thousand  dollars  if  it  transacts  both  a  savings  and  trust  busi- 
ness ;  and  not  less  than  four  hundred  thousand  dollars  if  it 
transacts  a  commercial,  savings  and  trust  business. 

(5)  In  any  city  in  which  the  population  exceeds  two  hun- 
dred thousand  persons,  not  less  than  three  hundred  thousand 
dollars  if  it  transacts  both  a  commercial  and  savings  business ; 
or  not  less  than  five  hundred  thousand  dollars  if  it  transacts 
both  a  commercial  and  trust  business;  or  not  less  than  five 
hundred  thousand  dollars  if  it  transacts  both  a  savings  and 
trust  business;  and  not  less  than  five  hundred  thousand  dol- 
lars if  it  transacts  a  commercial,  savings  and  trust  business. 
The  foregoing  classification  shall  not  apply  to  any  bank 
already  in  existence  which  has  received  its  certificate  to  do  a 
banking  business  from  the  Superintendent  of  banks. 

Act  of  the  Legislature,  approved  April  21,  1911. 

(c) — Certificate  for  Each  Department  Required. — 
Every  bank,  before  it  commences  to  do  business  or  be- 
fore it  opens  a  new  department  and  commences  to  transact 
business  in  or  under  such  new  department,  shall  obtain  the 
certificate  of  the  Superintendent  of  Banks  for  the  opening 
of  each  of  the  departments  specified.  Each  certificate  herein 
provided  for  shall  be  given  when  the  Superintendent  shall, 
by  the  examination  required  by  this  act,  have  satisfied  him- 
self that  the  proper  amount  of  cash  has  been  paid  in  as 
capital  and  the  provisions  of  this  act  complied  with.  The 
applicant  shall  pay  for  such  certificate  a  fee  of  fifty  dollars. 
Act  of  the  Legislature,  approved  March  1,  1909. 


BANK   LAWS   OF   CALIFORNIA.  695 

(d) — Department  Money  Reserve. — Every  bank  shall 
maintain  for  each  department  a  lawful  money  reserve  equal 
in  amount  to  that  required  by  this  act  for  the  respective  busi- 
ness conducted,  and  shall  keep  separate  and  distinct  the  law- 
ful money  reserve  of  any  department  from  that  of  any  other 
department;  and  all  deposits  made  with  other  banks,  whether 
temporary  or  otherwise,  shall  be  assets  of  the  respective 
departments  by  which  they  were  made,  and  shall  be  so  carried 
on  the  books  of  such  other  banks,  and  shall  be  repaid  only 
upon  the  order  of  the  department  to  whose  credit  they  stand. 

No  department  shall  receive  deposits  of  any  other  depart- 
ment of  the  same  corporation;  provided,  however,  that  any 
bank  having  departments  shall  have  the  right  to  sell  and 
transfer  any  bonds,  securities  or  loans  from  one  department 
to  another  upon  receipt  of  the  actual  value  thereof,  if  such 
bonds,  securities  or  loans  are  a  legal  investment  for  the 
department  purchasing  the  same  under  the  provisions  of  this 
act. 

Act  of  the  Legislature,  approved  March  1,  1909. 

(e) — Books  of  Account  to  be  Kept  Separate. — Every 
bank  having  different  departments  shall  keep  separate  books 
of  account  for  each  department  of  its  business,  and  shall  be 
governed  as  to  all  deposits,  reserves,  investments  and  trans- 
actions relating  to  each  department  by  the  provisions  in  this 
act  specifically  provided  for  the  respective  kind  of  business. 

It  shall  keep  all  investments  relating  to  the  savings  de- 
partment entirely  separate  and  apart  from  the  investments 
of  its  other  department  or  departments. 

Every  bank  shall  conduct  the  business  of  all  its  depart- 
ments in  one  building,  or  in  adjoining  buildings,  and  shall 
keep  entirely  separate  and  apart  in  each  department  the 
cash,  securities  and  property  belonging  to  such  department, 
and  shall  not  mingle  the  cash,  securities  and  property  of  one 
department  with  that  of  another. 

Act  of  the  Legislature,  approved  March  1,  1909. 


696  BUSINESS  LAWS  FOR  BUSINESS   MEN. 

(f) — Security  for  Depositors. — All  moneys  belonging  to 
each  department,  whether  cash  on  hand  or  with  other  banks, 
and  the  investments  made,  shall  be  held  solely  for  the  repay- 
ment of  the  depositors  in  said  department,  until  all  depositors 
of  such  department  shall  have  been  paid,  and  the  overplus 
then  remaining  shall  be  applied  to  the  other  liabilities  of 
such  bank. 

Act  of  the  Legislature,  approved  March  1,  1909. 

(g) — Window-signs. — Every  individual,  firm  or  corpora- 
tion doing  a  banking  business  in  this  state  must,  on  all  its 
window-signs  and  in  advertising,  and  on  letter-heads  and 
other  stationery  on  which  its  business  is  transacted,  use  the 
word  "savings"  if  it  conducts  a  savings  business,  "trust"  if 
it  conducts  a  trust  department,  and  the  word  "commercial" 
if  it  conducts  a  commercial   department. 

Act  of  the  Legislature,  approved  March  1,  1909. 

Section    902.—  UNINCORPORATED    BANKERS.— 

Every  person  or  number  of  persons,  not  being  incorporated, 
engaged  in  the  business  of  banking  or  publicly  receiving 
money  on  deposit,  must  conduct  such  business  under  a  name 
which  shows  the  true  name  of  all  persons  engaged  therein, 
unless  such  person  or  persons  are  doing  business  as  a  special 
partnership. 

Act  of  the  Legislature,  approved  March  1,  1909. 

Section  903.— DIVIDENDS.— The  directors  of  banks 
having  a  capital  stock  may,  at  such  times  and  in  such  manner 
as  the  by-laws  prescribe,  declare  and  pay  dividends  to  deposi- 
tors and  stockholders  of  so  much  of  the  profits  of  the  bank, 
and  of  the  interest  arising  from  the  capital  and  deposits,  as 
may  be  appropriated  for  that  purpose  under  the  by-laws  or 
under  their  agreements  with  depositors,  but  every  such  bank 
shall,  before  the  declaration  of  such  dividend,  carry  at  least 
one-tenth  (Yio)  part  of  the  net  profits  of  the  stockholders 
for  the  preceding  half-year  to  its  surplus  or  reserve  fund 
until  the  same  shall  amount  to  twenty-five  per  centum  of  its 


BANK    LAWS   OF    CALIFORNIA.  697 

paid-up  capital  stock.  But  the  whole  or  any  part  of  such 
surplus  or  reserve  fund,  if  held  as  the  exclusive  property  of 
stockholders,  may  at  any  time  be  converted  into  paid-up 
capital  stock,  in  which  event  such  surplus  or  reserve  fund 
shall  be  restored  in  manner  as  above  provided  until  it  amounts 
to  twenty-five  per  centum  of  the  aggregate  paid-up  capital 
stock.  A  larger  surplus  or  reserve  fund  may  be  created,  and 
nothing  herein  contained  shall  be  construed  as  prohibitory 
thereof.  The  capital  and  the  assets  of  the  bank  are  a  security 
to  depositors  and  stockholders,  depositors  having  the  priority 
of  security  over  the  stockholders,  but  the  by-laws  may  provide 
that  the  same  security  shall  extend  to  deposits  made  by 
stockholders. 

Act  of  the  Legislature,  approved  March  1,  1909. 

Section    904.— CHANGE    TO    CAPITAL    STOCK.— 

Every  corporation  heretofore  created  under  the  laws  of  this 
State,  doing  a  banking  business  therein,  and  which  has  no 
capital  stock,  may  elect  to  have  a  capital  stock,  and  may 
issue  certificates  of  stock  therefor;  provided,  that  no  such 
corporation  shall  use  or  convert  any  moneys  or  funds  there- 
tofore belonging  to  it,  or  under  its  control,  into  capital 
stock;  but  such  funds  or  moneys  must  be  held  and  managed 
only  for  the  purposes  and  in  the  manner  for  which  they 
were  created.  Before  such  change  is  made,  a  majority  of 
the  members  of  such  corporation  present  at  a  meeting 
called  for  the  purpose  of  considering  the  proposition  whether 
it  is  best  to  have  a  capital  stock,  its  amount,  and  the 
number  of  shares  into  which  it  shall  be  divided,  must 
vote  in  favor  of  having  a  capital  stock,  fix  the  amount 
thereof,  and  the  number  of  shares  into  which  it  shall  be 
divided.  Notice  of  the  time  and  place  of  holding  such  meet- 
ing, and  its  object,  must  be  given  by  the  president  of  such 
corporation  by  mailing  notice  of  such  meeting  to  each  mem- 
ber of  such  corporation  at  his  last  known  post  office  address 
at  least  ten  days  prior  to  the  day  fixed  for  such  meeting, 
and  by  publication  in  some  newspaper  printed  and  pub- 
lished   in    the    county,    or    city    and    county,    in    which    the 


698  BUSINESS   LAWS   FOR  BUSINESS    MEN. 

principal  place  of  business  of  the  corporation  is  situated, 
at  least  once  a  week  for  three  successive  weeks  prior  to 
the  holding  of  such  meeting.  A  copy  of  the  proceedings 
of  this  meeting,  giving  the  number  of  persons  present, 
the  votes  taken,  the  notice  calling  the  meeting,  the  proof 
of  its  publication,  the  amount  of  capital  actually  subscribed, 
and  by  whom,  all  duly  certified  by  the  president  and  secretary 
of  the  corporation,  must  be  filed  in  the  office  of  the  Secretary 
of  State  and  clerk  of  the  county  where  the  articles  of  incor- 
poration are  filed.  Thereafter  such  corporation  is  possessed 
of  all  the  rights  and  powers,  and  is  subject  to  all  the  obliga- 
tions, restrictions,  and  limitations,  as  if  it  had  been  originally 
created  with  a  capital  stock. 

Act  of  the  Legislature,  approved  March  1,  1909. 

Section    905.— SAFE    DEPOSIT    DEPARTMENT.— 

Any  bank  may  conduct  a  safe  deposit  department,  but  shall 
not  invest  more  than  one-tenth  of  its  capital  and  surplus  in 
such  safe  deposit  department. 

Act  of  the  Legislature,  approved  March  1,  1909. 

Section  906.— SALE  OF  ASSETS.— Any  bank  may  sell 
the  whole  or  any  portion  of  its  assets  to  any  other  bank 
which  may  purchase  its  assets  after  obtaining  the  consent 
of  the  stockholders  of  the  selling  and  of  the  purchasing 
bank  holding  of  record  at  least  two-thirds  of  the  issued 
capital  stock  of  each  of  such  corporations ;  such  consent  to  be 
expressed  either  in  writing  executed  and  acknowledged  by 
such  stockholders  and  attached  to  the  instrument  of  sale,  or 
to  a  copy  thereof,  or  by  vote  at  a  stockholders'  meeting  of 
such  banks  called  for  that  purpose. 

The  selling  and  purchasing  banks  may  for  such  purposes 
enter  into  an  agreement  of  sale  and  purchase,  which  agree- 
ment shall  contain  all  the  terms  and  conditions  connected 
with  the  sale  and  purchase  of  its  assets. 

Such  agreement  shall  contain  proper  provision  for  the 
payment  of  liabilities  of  the  selling  bank,  and  in  this  par- 
ticular shall  be  subject  to  the  approval  of  the  Superintendent 


BANK   LAWS   OF   CALIFORNIA.  699 

of  banks;  and  shall  not  be  valid  until  such  approval  is 
obtained.  Such  agreement  may  contain  provisions  for  the 
transfer  of  all  deposits  to  the  purchasing  bank,  subject,  how- 
ever, to  the  right  of  every  depositor  of  the  selling  bank  to 
withdraw  his  deposit  in  full  on  demand  after  such  transfer, 
irrespective  of  the  terms  under  which  it  was  deposited  with 
the  selling  bank. 

Act  of  the  Legislature,  approved  March  1,  1909. 

Section  907.— TRUST  FUNDS.— Any  bank  receiving 
trust  funds  in  accordance  with  the  provisions  of  this  act 
relating  to  trust  companies  must  not  mingle  such  trust  funds 
with  the  other  assets  of  the  corporation,  and  such  funds  shall 
not  be  carried  nor  counted  as  any  part  of  the  lawful  reserve 
provided  for  in  this  act.  The  officers  of  any  bank  who 
knowingly  violate  or  consent  to  the  violation  of  this  pro- 
vision shall  be  guilty  of  a  felony. 

Act  of  the  Legislature,  approved  March  1,  1909. 

Section  908.  —  OFFICER  MAY  NOT  BORROW 
BANK  FUNDS. — No  officer  or  employee  of  any  bank  shall, 
directly  or  indirectly,  for  himself  or  as  the  partner  or  agent 
of  others,  borrow  any  of  the  deposits  or  other  funds  of  such 
bank,  nor  shall  he  nor  any  director  become  an  endorser  or 
surety  for  loans  to  others,  nor  in  any  manner  be  obligor  for 
moneys  borrowed  or  loaned  by  such  banks;  except  that  a 
commercial  bank  may  buy  from,  or  discount,  for  a  director 
of  said  bank,  bills  of  lading  and  bills  of  exchange  drawn  in 
good  faith  against  actually  existing  value  actually  owned  by 
the  director  negotiating  the  same.  The  office  of  any  officer  or 
employee  who  acts  in  contravention  of  the  provisions  of  this 
section  shall  immediately  become  vacant,  and  he  shall  be 
guilty  of  a  misdemeanor. 

Act  of  the  Legislature,  approved  April  21,  1911. 

Section  909.— PURCHASE  OF  CAPITAL  STOCK.— 

No  bank  shall  purchase  or  invest  its  capital  or  money  of  its 
depositors,  or  any  part  of  either,  in  the  shares  of  its  own 


700  BUSINESS   LAWS   FOR   BUSINESS    MEN. 

capital  stock;  nor  loan  its  capital  or  the  money  of  its  deposi- 
tors, or  any  part  of  either,  on  the  shares  of  its  own  capital 
stock,  unless  such  purchase  or  loan  shall  be  necessary  to  pre- 
vent loss  on  debts  previously  contracted  in  good  faith. 

Stock  thus  purchased  or  carried  shall,  within  six  months 
from  the  time  of  its  purchase,  be  sold  or  disposed  of  at  public 
or  private  sale. 

The  officers  of  any  bank  who  knowingly  violate  or  consent 
to  the  violation  of  this  provision  shall  be  guilty  of  a  felony. 
Act  of  the  Legislature,  approved  Marrch  1,  1909. 

Section  910.— OFFICER  MAY  NOT  SELL  MORT- 
GAGE ON  REAL  ESTATE  TO  BANK.— No  director, 
or  officer,  or  employee,  or  controlling  stockholder  of  any 
bank  shall,  directly  or  indirectly,  for  his  own  account,  for 
himself,  or  as  the  partner  or  agent  of  others,  sell  or  transfer, 
or  cause  to  be  sold  or  transferred  to  the  bank  of  which  he 
is  a  director,  officer,  employee,  or  controlling  stockholder, 
any  mortgage  on  real  estate  or  contract  arising  from  the  sale 
of  real  estate  made  by  any  corporation  or  syndicate  in  which 
such  director  or  officer,  or  employee,  or  controlling  stock- 
holder is  personally  or  financially  interested,  without  the  con- 
sent in  writing  of  the  superintendent  of  banks. 

Any  director,  or  officer,  or  employee,  or  controlling  stock- 
holder of  any  bank  who  knowingly  violates  or  consents  to 
the  violation  of  this  provision  shall  be  deemed  guilty  of  a 
felony. 

Act  of  the  Legislature,  approved  April  21,  1911. 

Section  911.— PURCHASE  OF  BONDS.— No  bank  re- 
ceiving deposits  of  money  shall  purchase,  agree  to  purchase, 
underwrite  or  guarantee  any  bond  issue  in  excess  of  five  per 
centum  of  its  assets,  except  bonds  of  the  United  States, 
of  the  State  of  California,  of  the  cities,  cities  and  counties, 
counties  or  school  districts  of  this  State. 

Act  of  the  Legislature,  approved  March  1,  1909. 


BANK    LAWS   OF    CALIFORNIA.  701 

Section  912.— SHARES    OF    CORPORATIONS.— No 

bank  shall  purchase,  or  invest  its  capital  or  money  of  its 
depositors,  or  any  part  of  either,  in  shares  of  corporations, 
unless  such  purchase  shall  be  necessary  to  prevent  loss  on 
debts  previously  contracted  in  good  faith,  and  stock  thus 
purchased  or  carried  shall,  within  six  months  from  the  time 
of  its  purchase,  be  sold  or  disposed  of  at  public  or  private 
sale,  unless  permission  to  hold  said  stock  for  a  longer  period 
shall  be  obtained  from  the  superintendent  of  banks. 

The  officers  of  any  bank  who  knowingly  violate  or  consent 
to  the  violation  of  this  provision  shall  be  deemed  guilty  of 
a  felony. 

Act  of  the  Legislature,  approved  March  1,  1909. 

Section  913.— PENAL  LIABILITIES  OF  DIREC- 
TORS AND  EMPLOYEES.— A  director,  officer,  agent  or 
employee  of  any  bank  who. 

First — Knowingly  receives  or  possesses  himself  of  any  of 
its  property  otherwise  than  in  payment  of  a  just  demand, 
and  with  intent  to  defraud,  omits  to  make  or  to  cause  or 
direct  to  be  made  a  full  and  true  entry  thereof  in  its  books 
and  accounts ;  or. 

Second — Concurs  in  omitting  to  make  any  material  entry 
thereof;  or. 

Third — Knowingly  concurs  in  making  or  publishing  any 
written  report,  exhibit  or  statement  of  its  affairs  or  pecuniary 
condition  containing  any  material  statement  which  is  false ;  or. 

Fourth — Having  the  custody  or  control  of  its  books,  wil- 
fully refuses  or  neglects  to  make  any  proper  entry  in  the 
books  of  such  corporation  as  required  by  law,  or  to  exhibit 
or  allow  the  same  to  be  inspected  and  extracts  to  be  taken 
therefrom  by  the  superintendent  of  b?lnks,  his  chief  deputy 
or  any  of  his  examiners,  shall  be  guilty  of  a  felonw. 

Act  of  the  Legislature,  approved  March  1,  1909. 

Section  914.—  OFFICER  OVERDRAWING  AC- 
COUNT.— Any  officer,  director,  agent,  teller,  clerk  or  em- 
ployee of  any  bank  who  either, 


702  BUSINESS   LAWS   FOR   BUSINESS    MEN. 

First.  Knowingly  overdraws  his  account  with  such  bank, 
and  thereby  obtains  the  money,  notes  or  funds  of  any  such 
bank;  or. 

Second.  Asks  or  receives  or  consents  or  agrees  to  receive 
any  commission,  emoUiment,  gratuity  or  reward,  or  any 
money,  property  or  thing  of  value,  for  his  own  personal 
benefit,  or  of  personal  advantage,  for  procuring  or  endeavor- 
ing to  procure  for  any  person,  firm  or  corporation  any  loan 
from,  or  the  purchase  or  discount  of  any  paper,  note,  draft, 
check  or  bill  of  exchange,  by  such  bank,  or  for  permitting 
any  person,  firm  or  corporation  to  overdraw  any  account 
with  such  bank,  is  guilty  of  a  felony. 

Act  of  the  Legislature,  approved  April  21,  1911. 

Section  915.— WAIVER  OF  STOCKHOLDERS'  LIA- 
BILITY.— No  bank  mentioned  in  this  act  shall  make  any 
contract  with  any  of  its  depositors  whereby  the  stockholders' 
liability  provided  for  by  the  constitution  of  this  State  is  in 
any  manner  waived,  and  if  any  such  contract  shall  be  so 
made,  such  contract  shall  be  void. 

Act  of  the  Legislature,  approved  March  1,  1909. 

Section  916.— PURCHASE  OF  OBLIGATIONS.— No 

director,  officer,  agent,  or  servant  of  any  bank  shall,  directly 
or  indirectly,  for  his  own  personal  benefit,  purchase  or  be 
interested  in  the  purchase  of  any  of  the  obligations  of  said 
bank  for  a  less  sum  than  shall  appear  upon  the  face  thereof. 
Act  of  the  Legislature,  approved  March  1,  1909. 

Section  917.— PURCHASE  OF  ASSETS.— No  director, 
officer,  agent,  or  servant  of  any  bank  shall,  directly  or  in- 
directly, for  his  own  personal  benefit,  purchase  or  be  inter- 
ested in  the  purchase  of  any  of  the  assets  of  said  bank,  for 
a  less  sum  than  the  current  market  value  thereof.  Every 
person  violating  the  provisions  of  this  subdivision  shall  be 
guilty  of  a  misdemeanor. 

Act  of  the  Legislature,  approved  March  1,  1909. 


BANK    LAWS   OF   CALIFORNIA.  703 

Section  918.— LOANS  ON  BANK  STOCK.— No  bank 
shall  hereafter  make  a  loan  secured  by  the  stock  of  another 
bank,  if  by  making  such  loan  the  total  stock  of  such  other 
bank  held  by  such  loaning  bank  as  collateral  will  exceed  in 
the  aggregate  ten  per  centum  of  the  capital  stock  of  such 
other  bank;  provided  that  no  loan  upon  the  capital  stock  of 
any  bank  shall  be  made  unless  such  bank  has  been  in  exist- 
ence for  two  or  more  years  and  has  earned  and  paid  a  divi- 
dend upon  its  capital  stock. 

Act  of  the  Legislature,  approved  March  1,  1909. 

Section  919.— INTEREST  UNPAID.— Interest  unpaid, 
although  due  and  accrued,  on  debts  owing  to  any  bank,  shall 
not  be  included  in  calculation  of  its  profits  previous  to  a 
dividend. 

Act  of  the  Legislature,  approved  March  1,  1909. 

Section  920.— LOANS  ON  BONDS.— No  bank  shall  in- 
vest nor  loan  more  than  five  per  centum  of  its  assets  in  any 
one  bond  issue,  except  bonds  of  the  United  States,  of  the 
State  of  California,  of  the  counties,  cities  and  counties,  cities 
or  school  districts  of  this  State. 

Act  of  the  Legislature,  approved  March  1,  1909. 

Section  921.— DEPOSITS   IN   OTHER  BANKS.— No 

bank  shall  deposit  any  of  its  funds  in  any  other  bank  unless 
such  other  bank  has  been  designated  as  a  depository  for  its 
funds  by  the  vote  of  a  majority  of  the  directors  or  trustees 
of  the  bank  making  the  deposit  exclusive  of  the  vote  of  any 
director  who  is  an  officer,  director  or  trustee  of  the  depository 
so  designated;  provided,  however,  that  any  bank  may  desig- 
nate any  other  bank  its  depository  by  a  vote  of  a  majority 
of  its  directors,  including  the  vote  of  any  director  or  trustee 
who  is  an  officer,  director  or  trustee  of  the  depository  so 
designated,  if  such  bank  has  secured  the  previous  approval 
of  the  superintendent  of  banks. 

Act  of  the  Legislature,  approved  April  21,  1911. 


704  BUSINESS   LAWS   FOR  BUSINESS   MEN. 

Section  922.— UNLAWFULLY  ADVERTISING  AS 
SAVINGS  BANK.^It  shall  not  be  lawful  for  any  com- 
mercial bank,  individual  banker,  trust  company,  association, 
firm,  stock  company  or  corporation,  to  advertise  or  put  forth 
a  sign  as  a  savings  bank,  either  directly  or  indirectly,  or  in 
any  way  to  solicit  or  receive  deposits  as  a  savings  bank, 
or  in  any  way  which  might  lead  the  public  to  believe  that 
such  deposits  are  received  or  invested  under  the  same  con- 
ditions or  in  the  same  manner  as  deposits  in  savings  banks, 
except  in  the  case  of  savings  banks  or  banks  having  a  sav- 
ings department,  subject  to  the  provisions  of  this  act. 

Act  of  the  Legislature,  approved  April  21,  191L 

Section  923.— DUTY  AS  TO  CERTIFIED  CHECKS. 

— Whenever  a  check  drawn  on  any  bank  is  certified  by  any 
officer  or  employee  of  such  bank,  the  amount  thereof  shall 
be  immediately  charged  against  the  account  of  the  person, 
firm  or  corporation  drawing  the  same. 

It  shall  be  unlawful  for  any  officer  or  employee  of  any 
bank  to  certify  any  check  drawn  upon  such  bank  unless  the 
person,  firm  or  corporation  drawing  the  check  has  on  de- 
posit with  the  bank  at  the  time  such  check  is  certified, 
an  amount  of  money  subject  to  the  payment  of  such  check, 
equal  to  the  amount  specified  in  such  check. 

Any  officer  or  employee  of  any  bank  who  shall  wilfully 
violate  the  provisions  of  this  section,  or  shall  resort  to  any 
device,  or  receive  any  fictitious  obligations,  directly  or  in- 
directly, in  order  io  evade  the  provisions  hereof,  or  who 
shall  certify  checks  before  the  amount  thereof  shall  have 
been  regularly  entered  to  the  credit  of  the  drawer,  shall  be 
guilty  of  a  felony. 

Act  of  the  Legislature,  approved  April  21,  1911. 

Section  924.— LOANS  ON  REALTY.— No  bank  shall 
make  any  loan  on  real  estate  except  it  be  a  first  lien,  but  this 
provision  shall  not  prevent  the  acceptance  of  a  second  lien 
to  secure  the  payment  of  a  debt  previously  contracted  in 
good  faith. 

Act  of  the  Legislature,  approved  March  1,  1909. 


BANK   LAWS   OF   CALIFORNIA.  705 

Section  925.—  EXAMINATION  OF  NATIONAL 
BANKS. — Any  national  bank  of  this  state  receiving  the  de- 
posits of  banks  organized  and  conducting  business  under  this 
act,  must,  at  the  request  of  the  superintendent  of  banks, 
submit  to  an  examination  by  him,  or  his  duly  appointed  ex- 
aminers, should  the  superintendent  of  banks  in  his  discretion 
deem  it  necessary  or  desirable  that  such  examination  be 
made;  and  the  expense  of  such  examination  shall  be  paid  by 
such  national  bank;  and  if  any  such  national  bank  shall  refuse 
to  permit  such  examination  to  be  made  by  the  superintendent 
of  banks,  then  the  superintendent  of  banks  shall  notify  in 
writing  any  and  all  banks  depositing  its  funds  with  such 
national  bank,  to  withdraw  its  deposits  therefrom,  and  such 
bank  shall  comply  with  such  order,  and  failure  so  to  do 
shall  be  a  misdemeanor. 

Act  of  the  Legislature,  approved  March  1,  1909. 

Section  926.— POSTING  OF  CERTIFICATE.— Every 

bank  shall  post  in  a  conspicuous  place  in  its  banking-room 
the  last  certificate  obtained  from  the  superintendent  of  banks. 
Every  bank  that  fails  to  comply  with  the  provisions  of  this 
section  is  guilty  of  a  misdemeanor. 

Act  of  the  Legislature,  approved  March  1,  1909. 

Section  927.— DEPOSITS  BY  ORDER  OF  COURT.— 

Any  court  having  appointed  and  having  jurisdiction  of  any 
executor,  administrator,  guardian,  assignee,  receiver,  deposi- 
tary or  trustee,  upon  the  application  of  such  executor,  ad- 
ministrator, guardian,  assignee,  receiver,  depositary  or  trustee, 
or  upon  the  application  of  any  person  having  an  interest  in 
the  estate  administered  upon  by  such  officer  or  trustee,  after 
notice  to  other  parties  in  interest  as  the  court  may  direct, 
and  after  a  hearing  upon  such  application,  may  authorize 
such  officer  or  trustee  to  deposit  any  money  then  in  his  hands 
as  such  officer  or  trustee  or  which  may  thereafter  come  into 
his  hands,  and  until  the  further  order  of  the  court,  in  any 
bank  organized  under  the  laws  of  the  State  of  California; 


706  BUSINESS   LAWS   FOR   BUSINESS   MEN. 

and  upon  such  deposit  being  made,  the  officer  or  trustee  so 
depositing  the  same  shall  thereafter  and  while  such  moneys 
remain  on  deposit  in  such  bank,  be  relieved  and  discharged 
from  all  liability  or  responsibility  therefor,  and  the  bond  re- 
quired of  such  officer  or  trustee  given  upon  his  appointment 
shall  be  thereupon  by  said  court  reduced  to  such  an  amount 
as  the  court  may  deem  reasonable;  such  deposit  shall  be 
repaid  only  upon  the  orders  of  said  court,  and  shall  be  a 
preferred  claim  against  such  bank  and  be  paid  in  full  before 
any  other  depositor  of  such  bank  shall  have  been  paid. 

Section  928.— SAVINGS  BANKS.— The  law  of  Cali- 
fornia regulating  the  organization  and  the  business  of  sav- 
ings banks  is  as  follows: 

(a)  Capital  Stock  of  Savings  Banks. — Every  savings 
bank  hereafter  organized  must  have  paid  up  in  cash  a  capital 
stock  of  not  less  than — 

(1)  Twenty-five  thousand  dollars,  if  it  transacts  business 
in  any  city  or  town  the  population  of  which  does  not  exceed 
five  thousand  persons; 

(2)  Fifty  thousand  dollars,  if  it  transacts  business  in  any 
city  the  population  of  which  is  more  than  five  thousand 
persons  but  does  not  exceed  twenty-five  thousand  persons; 

(3)  One  hundred  thousand  dollars,  if  it  transacts  business 
in  any  city  the  population  of  which  is  more  than  twenty-five 
thousand  persons  but  does  not  exceed  one  hundred  thousand 
persons ; 

(4)  Two  hundred  thousand  dollars,  if  it  transacts  business 
in  any  city  the  population  of  which  is  more  than  one  hundred 
thousand  persons  but  does  not  exceed  two  hundred  thousand 
persons ; 

(5)  Three  hundred  thousand  dollars,  if  it  transacts  business 
in  any  city  the  population  of  which  is  more  than  two  hundred 
thousand  persons. 

Excepting  that  any  savings  bank  organized  without  capital 
stock  must  have  a  reserve  fund  of  at  least  one  million 
dollars. 


BANK   LAWS   OF   CALIFORNIA.  707 

Until  the  capital  stock  or  reserve  fund  hereinbefore  re- 
quired shall  be  actually  paid  in,  the  superintendent  of  banks 
shall  refuse  to  issue  the  certificate  required  by  this  act. 

The  foregoing-  classification  shall  not  apply  to  any  savings 
bank  already  in  existence  which  has  received  its  certificate 
to  do  a  banking  business  from  the  superintendent  of  banks. 

Provided,  that  nothing  herein  shall  be  construed  to  affect 
the  provisions  of  this  act  relative  to  the  proportion  of  capital 
and  surplus  deposits  or  relative  to  the  capital  stock  required 
of  banks  doing  a  departmental  business. 

Act  of  the  Legislature,  approved  April  21,  1911. 

(b)  Savings  Banks  Not  to  Trade  in  Real  Property. — 

No  savings  bank  shall,  directly  or  indirectly,  deal  or  trade 
in  real  or  personal  property  in  any  other  case  or  for  any 
other  purpose  than  is  authorized  by  this  act,  and  shall  not 
contract  any  debt  or  liability  for  any  purpose  whatever  other 
than  for  deposits,  except  as  in  this  section  provided. 

Savings  banks  may  pay  regular  depositors,  when  requested 
by  them,  by  draft  upon  deposits  to  the  credit  with  their 
banks,  and  charge  current  rate  of  exchange  for  such  drafts. 

(c)  Savings  Banks  Borrowing  Money. — No  savings 
bank  shall  borrow  money,  or  pledge  or  hypothecate  any 
of  its  securities,  except  to  meet  the  immediate  demands 
of  its  own  depositors,  and  then  only  in  pursuance  of  a  resolu- 
tion adopted  by  a  vote  of  a  majority  of  its  board  of  directors, 
duly  entered  upon  their  minutes,  wherein  shall  be  recorded 
the  ayes  and  nays  upon  each  vote;  also  with  the  written 
approval  of  the  superintendent  of  banks,  and  he  shall  have 
the  authority  to  fix  the  amount  to  be  borrowed,  and  the 
term  and  rate  of  interest  thereon;  provided,  however,  that 
savings  banks  may,  in  the  manner  authorized  by  law,  and 
without  the  written  approval  of  the  superintendent  of  banks, 
borrow  the  public  moneys  of  the  state,  counties,  cities  and 
counties,  and  towns,  and  receive  .such  public  moneys  on 
deposit;  provided,  also,  that  savings  banks  may  in  the 
manner  authorized  by  law,  and  without  the  written  approval 
of    the    superintendent    of    banks,    borrow    postal    savings 


708  BUSINESS  LAWS  FOR  BUSINESS   MEN. 

moneys  of  the  United  States,  and  receive  such  postal  savings 
moneys  on  deposit. 

Act  of  the  Legislature,  approved  April  21,  1911. 

(d)  Personal  Property. — No  savings  bank  shall  purchase, 
own,  or  sell  personal  property,  except  such  as  may  be  requi- 
site for  its  immediate  accommodation  for  the  convenient 
transaction  of  its  business,  and  mortgages  on  real  estate, 
bonds,  securities  or  evidences  of  indebtedness,  public  or 
private,  gold  and  silver  bullion  and  United  States  mint  cer- 
tificates of  ascertained  value,  and  evidences  of  debt  issued 
by  the  United  States. 

(e)  Bonds  and  Securities. — No  savings  bank  shall  pur- 
chase, hold  or  convey  bonds,  securities  or  evidences  of  in- 
debtedness, public  or  private,  except  as  follows: 

(a)  Bonds  or  interest-bearing  notes  or  obligations  of  the 
United  States,  or  those  for  which  the  faith  of  the  United 
States  is  pledged  for  the  payment  of  interest  and  principal. 

(b)  Bonds  of  this  state. 

(c)  Bonds  of  any  state  in  the  United  States  that  have 
not,  within  five  years  previous  to  making  such  investment 
by  such  bank,  defaulted  in  the  payment  of  any  part  of  either 
principal  or  interest  thereof. 

(d)  Bonds  of  any  city,  county,  city  and  county,  town, 
township,  or  school  district  of  this  state;  bonds  of  the 
permanent  road  division  in  any  county  issued  in  pursuance 
of  the  provisions  of  part  three,  title  six,  article  nine  of  the 
Political  Code;  bonds  issued  by  irrigation  districts  which 
are  permitted  to  be  invested  in  as  provided  for  in  an  act 
of  the  thirty-ninth  session  of  the  legislature  entitled  "An  act 
relating  to  the  bonds  of  irrigation  districts  providing  under 
what  circumstances  such  bonds  may  become  legal  invest- 
ments for  the  funds  of  banks,  banking  associations,  trust 
companies,  insurance  companies,  and  for  the  state  school 
funds,  and  providing  that  such  bonds  may  be  deposited  as 
security,  and  providing  for  a  commission  for  approving  such 
bonds,  and  for  a  report  thereon,  for  the  filing  of  such  report 
and  for  the  registration  of  such  bonds  in  the  office  of  the 


BANK    LAWS   OF   CALIFORNIA.  709 

state  controller,"  approved  March  9,  1911;  bonds  of  any 
sewer  district,  drainage  district,  protection  district,  or  sanitary 
district,  in  any  county  in  this  state;  provided  that  the  total 
amount  of  bonds  of  any  sewer  district,  drainage  district, 
protection  district,  or  sanitary  district  so  issued  shall  not 
exceed  fifteen  per  cent  of  the  taxable  property  of  said  district 
as  shown  by  the  last  equalized  assessment  book  of  the  county. 

(e)  Bonds  of  any  city,  town  or  county  which  has  in 
each  case,  at  the  time  of  the  investment,  more  than  twenty 
thousand  inhabitants,  as  ascertained  by  the  United  States, 
or  state  census  made  next  preceding  such  investment,  in  any 
of  the  states  of  the  United  States,  other  than  in  the  State  of 
California,  issued  pursuant  to  the  authority  of  any  law  of 
such  states;  provided,  the  entire  bonded  indebtedness  of  such 
city  or  county  or  town  shall  not  exceed  fifteen  per  centum 
of  the  assessed  value  of  the  taxable  property  therein,  includ- 
ing the  issue  of  bonds  in  which  said  investment  is  made  as 
shown  by  the  last  assessment  preceding  the  investment;  and 
provided,  further,  that  such  city,  town  or  county  or  state 
in  which  it  is  situated  has  not  defaulted  in  payment  of  any 
part  of  either  principal  or  interest  thereon  within  five  years 
previous  to  making  such  investment. 

(f)  First  mortgage  or  underlying  bonds  of  any  steam 
railway,  the  income  of  which  is  sufficient  to  pay  all  operat- 
ing expenses  and  fixed  charges,  and  which  is  completed  and 
operated,  wholly  or  in  part,  in  any  of  the  states  of  the 
United  States. 

(g)  Bonds  of  street  railroads,  water,  light,  light  and  power, 
gas,  and  other  public  utility  and  industrial  corporations. 

All  bonds  authorized  for  investment  by  this  section  shall 
be  secured  by  a  mortgage  or  trust  deed,  which  is,  at  the 
time  of  making  such  investment,  (1)  a  first  or  underlying 
mortgage  or  trust  deed  of  the  corporation  issuing  said  bonds, 
or  (2)  a  refunding  mortgage  or  trust  deed  used  to  retire 
all  prior  lien  mortgage  debts  of  said  corporation  outstanding 
at  the  time  of  making  said  investment;  provided,  that  the 
income  of  such  corporation  is  sufficient  to  pay  all  operating 
expenses  and  fixed  charges,  including  interest  on  all  of  its 


710  BUSINESS   LAWS   FOR  BUSINESS    MEN. 

mortgage  indebtedness,  and  that  the  income  of  such  corpora- 
tion or  of  the  corporation  or  corporations  out  of  which  it 
shall  have  been  formed  through  consolidation  shall  have 
been  sufficient  to  pay  its  operating  expenses  and  fixed  charges 
including  interest  on  all  mortgage  indebtedness  for  a  period 
of  three  years  next  preceding  the  purchase  of  such  refunding 
bonds,  or  that  payments  of  its  said  bonds  have  been  guar- 
anteed by  a  corporation  that  has  paid  all  its  operating  ex- 
penses and  fixed  charges  for  a  period  of  three  years  prior 
to  guaranteeing  the  payment  of  such  bonds. 

(h)  First  mortgage  bonds  or  deeds  of  trust  issued  by 
real  estate  corporations;  provided,  that  said  bond  issue  shall 
not  exceed  sixty  per  centum  of  the  market  value  of  the  real 
estate  taken  as  security. 

No  savings  bank  shall  purchase  the  bonds  of  any  corpora- 
tion or  make  a  loan  on  the  bonds  of  any  corporation,  if  the 
main  or  principal  franchise  of  such  corporation  expires  prior 
to  the  maturity  of  its  bonds,  or  if  the  main  or  principal 
franchise  or  special  privilege  granted  to  such  corporation  by 
any  city,  county,  or  city  and  county,  expires  before  the 
maturity  of  such  bond  issue. 

(i)  Collateral  trust  bonds  when  secured  by  a  deposit  of 
an  equal  amount  of  bonds  which  are  authorized  for  invest- 
ment by  this  section  and  a  sufficient  amount  of  other  security 
so  that  the  bonds  shall  represent  not  more  than  ninety  per 
cent  (90%)  of  the  market  value  of  the  total  security  pledged 
therefor. 

Act  of  the  Legislature,  approved  April  21,  1911. 

(f)  Reserve  Fund. — Every  savings  bank  or  savings  bank 
department  of  a  bank,  shall  at  all  times  maintain  a  lawful 
money  reserve  equivalent  to  four  per  centum  of  the  aggregate 
amount  of  its  deposits;  one-half  of  such  reserve  shall  be 
kept  on  hand  in  lawful  money  of  the  United  States,  and 
one-half  may  consist  of  bonds  of  the  United  States  or  of 
lawful  money  of  the  United  States  on  hand  or  on  deposit 
subject  to  call  with  any  reserve  bank  provided  for  in  this 
act;  provided,  however,  that  no  savings  bank  or  department 


BANK   LAWS   OF   CALIFORNIA.  711 

shall  be  required  to  maintain  in  its  own  keeping  a  reserve 
in  lawful  money  of  the  United  States  in  excess  of  four 
hundred  thousand  dollars,  and  when  the  reserve  in  its 
own  keeping  reaches  that  amount,  the  balance  of  cash 
necessary  to  make  up  the  four  per  centum,  may  be  kept  on 
deposit  subject  to  call  with  any  reserve  bank  provided  for  in 
this  act. 

No  new  loan  shall  be  made  during  any  deficiency  in  the 
lawful  money  reserve. 

(g)  Commercial  Deposits. — Deposits  with  the  commercial 
banks,  or  commercial  departments,  on  open  account,  to 
facilitate  business  transactions,  as  provided  in  this  section, 
shall  be  permitted,  and  shall  not  be  construed  as  loans. 

Not  more  than  eight  per  centum  of  the  deposits  of  any 
savings  bank  shall  be  deposited  with  any  one  bank. 

No  savings  bank  or  savings  department  shall  receive  de- 
posits of  other  banks  other  than  savings  deposits,  and  such 
deposits  shall  not  be  treated  or  considered  as  a  part  of  the 
legal  reserve  of  such  depositing  bank,  and  provided  that  the 
sum  so  deposited  shall  not  exceed  the  sum  of  ten  thousand 
dollars  in  any  one  bank. 

(h)  Estate  Moneys. — Where  a  decedent,  at  the  time  of 
his  or  her  death,  left  moneys  on  deposit  with  a  savings  bank, 
it  shall  be  lawful  for  any  public  administrator,  who  shall 
become  the  administrator  of  the  estate,  to  allow  such  de- 
posit to  remain  in  said  savings  bank,  and  also,  it  shall  be 
lawful  for  him  to  deposit  therein  to  the  account  of  said 
decedent,  any  and  all  moneys  of  said  estate  not  required  for 
the  current  expenses  of  administration.  Such  deposit, 
whether  made  by  the  decedent  or  a  public  administrator, 
shall  relieve  the  public  administrator  from  depositing  the 
same  with  the  county  treasurer.  Moneys  so  deposited, 
whether  by  the  decedent  or  by  a  public  administrator,  may 
be  drawn  upon  demand  without  notice,  upon  the  order  of 
said  administrator,  countersigned  by  a  judge  of  a  superior 


712  BUSINESS   LAWS   FOR   BUSINESS    MEN. 

court,  when  required  for  the  purpose  of  administration  or 
otherwise. 

Act  of  the  Legislature,  approved  April  21,  1911. 

(i)  Certificates    of    Deposit    and    Time    Certificates. — 

Savings  banks  may  issue  general  certificates  of  deposit, 
which  are  transferable,  as  in  other  cases,  by  indorsement 
and  delivery;  may  issue,  when  requested  by  the  depositor, 
special  certificates,  acknowledging  the  deposit  by  the  person 
therein  named  of  a  specified  sum  of  money,  and  expressly 
providing  on  the  face  of  such  certificate  that  the  sum  so 
deposited  and  therein  named  may  be  transferred  only  on  the 
books  of  the  bank;  payment  thereafter  made  by  the  bank 
to  the  depositor  named  in  such  certificate,  or  to  his  assignee 
named  upon  the  books  of  the  bank,  or  in  case  of  death,  to 
the  legal  representative  of  such  person,  of  the  sum  for 
which  such  special  certificate  was  issued,  shall  discharge 
the  bank  from  all  further  liability  on  account  of  the  money 
so  paid. 

All  time  certificates  of  deposit  issued  by  a  savings  bank 
shall  be  subject  to  the  same  limitations  and  conditions  as 
applied  to  other  deposits,  and  notice  thereof  shall  be  given 
by  the  words  "Subject  to  conditions  of  agreement  with 
depositors"  printed  on  the  face  of  the  certificate  issued. 
Act  of  the  Legislature,  approved  March  1,  1909. 

(j)  Conditions  of  Payment  to  Depositors. — Savings 
banks  may  prescribe  by  their  by-laws,  or  by  contract  with 
depositors,  the  time  and  conditions  on  which  repayment  is  to 
be  made  to  depositors,  except  as  in  this  act  otherwise  pro- 
hibited; but  whenever  there  is  any  call  by  depositors  for 
repayment  of  a  greater  amount  than  the  bank  may  have 
disposable  for  that  purpose,  the  directors  or  officers  thereof 
must  not  make  any  new  loans  or  investments  of  the  funds 
of  the  depositors,  or  of  earnings  thereof,  until  such  excess 
of  call  has  ceased.  The  directors  of  any  such  bank,  having 
no  capital  stock,  must  retain,  on  each  dividend-day,  at  least 
ten  per  centum  of  the  net  profits  of  the  bank,  to  constitute 
a  reserve  fund,  which  must  be  invested  in  the  same  manner 


BANK    LAWS   OF   CALIFORNIA.  713 

as  Other  funds  of  the  bank,  and  must  be  used  toward  paying 
any  losses  which  the  bank  may  sustain  in  pursuing  its 
lawful  business.  The  bank  may  provide  by  its  by-laws  for 
the  disposal  of  any  excess  in  the  reserve  fund,  as  provided 
for  in  this  act,  and  the  final  disposal,  upon  the  dissolution 
of  the  bank,  of  the  reserve  fund,  or  of  the  remainder  thereof, 
after  payment  of  losses. 

Act  of  the  Legislature,  approved  March  1,  1909. 

(k)  Directors,  Borrowing  by,  Forbidden. — No  director, 
or  officer  of  any  savings  bank  must,  directly  or  indirectly, 
for  himself  or  as  the  partner  or  agent  of  others,  borrow  any 
of  the  deposits  or  other  funds  of  such  bank,  nor  must  he 
become  an  indorser  or  surety  for  loans  to  others,  nor  in  any 
manner  be  obligor  for  moneys  borrowed  of  or  loaned  by 
such  bank.  The  office  of  any  director  or  officer  who  acts 
in  contravention  of  the  provisions  of  this  section  immedi- 
ately thereupon  becomes  vacant,  and  every  director  or  officer 
authorizing  or  consenting  to  such  loan,  and  the  person  who 
receives  such  loan,  shall  severally  be  guilty  of  a  misde- 
meanor. 

Act  of  the  Legislature,  approved  March  1,  1909. 

(1)  "Creation  of  Debt." — Receiving  deposits,  issuing 
certificates  of  deposit,  checks,  and  bills  of  exchange,  and 
the  like,  in  the  transaction  of  the  business  of  savings 
banks,  must  not  be  construed  to  be  the  creation  of  debt 
within  the  meaning  of  the  phrase  "create  debt"  in  the  Civil 
Code. 

(m)  Limit  on  and  Security  for  Loans. — No  savings 
bank  shall  loan  money  except  on  adequate  security  of  real 
or  personal  property,  and  no  such  loan  shall  be  made  for 
a  period  longer  than  ten  years;  provided  that  no  loans  shall 
be  made  on  unsecured  notes. 

No  savings  bank  shall  invest  or  loan  more  than  five  per 
centum  of  its  assets  on  any  one  bond  issue,  except  bonds 
of  the   United    States,   of   the    State    of   California,    of   the 


714  BUSINESS   LAWS   FOR   BUSINESS    MEN. 

counties,  cities  and  counties,  cities  or  school  districts  of  this 
state. 

No  savings  bank  shall  loan  money  to  exceed  ninety  per 
centum  of  the  market  value  of  bonds  specified  in  subdivisions 
(a),  (b),  (c)  and  (d),  and  no  more  than  eighty-five  per 
centum  of  the  market  value  of  bonds  specified  in  subdivision 
(e)  and  no  more  than  seventy-five  per  centum  of  the  mar- 
ket value  of  bonds  specified  in  subdivisions  (f)  and  (g), 
and  no  more  than  sixty-five  per  centum  of  the  market  value 
of  personal  property  and  stocks  of  corporations  or  banks; 
provided,  however,  that  no  loan  shall  be  made  upon  the 
capital  stock  of  any  corporation  or  bank  unless  such  cor- 
poration or  bank  has  been  in  existence  for  two  or  more  years 
and  has  earned  and  paid  a  dividend  on  its  capital  stock. 

No  savings  bank  shall  make  any  loan  on  the  security  of 
real  estate  except  it  be  a  first  lien  and  in  no  event  to  exceed 
sixty  per  centum  of  the  market  value  of  any  piece  of  real 
estate  to  be  taken  as  security,  except  for  the  purpose  of 
facilitating  the  sale  of  property  owned  by  the  savings  bank; 
provided,  that  a  second  lien  may  be  accepted  to  secure 
the  repayment  of  a  debt  previously  contracted  in  good  faith. 

No  savings  bank  shall  purchase,  invest  or  loan  its  capital 
or  the  money  of  its  depositors,  or  any  part  of  either,  in 
mining  shares  or  stock. 

No  savings  bank  shall  hereafter  make  a  loan  secured  by 
the  stock  of  another  bank,  if  by  making  such  loan  the  total 
stock  of  such  other  bank  held  by  such  loaning  bank  as 
collateral  will  exceed  in  the  aggregate  ten  per  centum  of 
the  capital  stock  of  such  other  bank. 

Any  president  or  managing  officer  who  knowingly  con- 
sents to  a  violation  of  the  above  provisions  shall  be  deemed 
guilty  of  a  felony. 

Act  of  the  Legislature,  approved  March  1,  1909. 

(n)  What  Property  May  be  Held  by  Savings  Bank. — 

Savings    banks   may    purchase,    hold,    and    convey    real    and 
personal  property  as  follows: 


BANK  LAWS  OF   CALIFORNIA.  715 

1.  The  lot  and  building  in  which  the  business  of  the  bank 
is  carried  on;  such  a  lot  and  building  shall  not  cost  the  sav- 
ings bank  an  amount  exceeding  its  capital  and  surplus;  and 
the  authority  of  a  two-thirds  vote  of  a  full  board  of  direc- 
tors shall  be  necessary  to  authorize  the  purchase  or  con- 
struction thereof. 

2.  Such  as  may  have  been  mortgaged,  pledged,  or  con- 
veyed to  it  in  trust  for  its  benefit  in  good  faith,  for  money 
loaned  in  pursuance  of  the  regular  business  of  the  cor- 
poration. 

3.  Such  as  may  have  been  purchased  at  sales  under 
pledges,  mortgages  or  deeds  of  trust  made  for  its  benefit  for 
money  so  loaned,  and  such  as  may  be  conveyed  to  it  by  bor- 
rowers in  satisfaction  and  discharge  of  loans  made  thereon. 

No  savings  bank  shall  purchase,  hold,  or  convey  real 
estate  in  any  other  case  or  for  any  other  purpose ;  and  all  real 
estate  described  in  subdivision  three  of  this  section  must  be 
sold  by  the  bank  within  ten  years  after  the  title  thereto  is 
vested  in  it  by  purchase  or  otherwise,  unless  permission  to 
hold  said  real  estate  for  a  longer  period  be  given  by  the 
superintendent  of  banks  in  writing.  Parcels  of  real  estate 
not  sold  within  ten  years,  or  extension  of  said  period  as 
above  provided,  may  be  purchased  by  any  persons  or  parties 
wanting  them,  at  the  price  to  be  determined  by  arbitration 
of  three  persons  appointed  by  the  Superior  Court  as  ap- 
praisers, at  the  request  of  the  would-be  purchaser. 

Section  929.— COMMERCIAL  BANKS.— There  are 
certain  regulations  which  are  intended  to  apply  particularly 
to  commercial  banks. 

(a)  Limit  of  Loans. — No  commercial  bank  shall  make 
any  loans  to  any  person,  company,  corporation  or  firm  to  an 
amount  exceeding  one-tenth  part  of  the  capital  stock  of  such 
bank  actually  paid  in  and  surplus,  excepting  that  no  com- 
mercial bank  shall  be  prohibited  by  this  act  from  loaning 
to  any  person,  company,  corporation  or  firm  any  sum  not 
exceeding  five  thousand  dollars  without  security;  provided, 


716  BUSINESS   LAWS   FOR   BUSINESS    MEN. 

however,  that  a  bank  may  loan  to  any  person,  company, 
corporation  or  firm  a  sum  not  exceeding  twenty-five  per 
centum  of  its  capital  stock  actually  paid  in  and  surplus  upon 
security,  worth  at  least  fifteen  per  centum  more  than  the 
amount  of  its  loans;  or  it  may  loan  ten  per  centum  of  such 
capital  and  surplus  as  first  above  provided,  and  a  further 
sum  not  exceeding  fifteen  per  centum  of  such  capital  and 
surplus  upon  security  worth  at  least  fifteen  per  centum  more 
than  the  amount  of  such  loan  so  secured;  except  that  a  com- 
mercial bank  may  buy  from,  or  discount,  for  any  person, 
company,  corporation  or  firm,  or  loan  upon  bills  of  lading, 
and  bills  of  exchange,  drawn  in  good  faith  against  actual 
existing  value  or  against  commercial  or  business  paper 
actually  owned  by  the  person  negotiating  the  same;  provided, 
however,  that  at  no  time  shall  the  loans  on  or  purchases  of 
bills  of  lading  or  such  bills  of  exchange,  made  to  any  one 
person,  company,  corporation  or  firm  exceed  seventy-five  per 
centum  of  the  capital  and  surplus  of  such  bank. 

Act  of  the  Legislature,  approved  April  21,  1911. 

(b)  Loans  on  Securities  of  Corporations. — No  loan 
shall  be  made  by  any  commercial  bank  upon  the  securities 
of  one  or  more  corporations,  the  payment  of  which  is  under- 
taken, in  whole  or  in  part,  severally,  but  not  jointly,  by  two 
or  more  individuals,  firms,  or  corporations: 

(1)  If  the  borrowers  or  underwriters  be  obligated  abso- 
lutely or  contingently  to  purchase  the  securities,  or  any  of 
them,  collateral  to  such  loan,  unless  the  borrowers  or  under- 
writers shall  have  paid  on  account  of  the  purchase  of  such 
securities  an  amount  in  cash,  or  its  equivalent,  equal  to  at 
least  twenty-five  per  centum  of  the  several  amounts  for 
which  they  remain  obligated  in  completing  the  purchase 
of  such  securities; 

(2)  If  the  commercial  bank  making  such  loan  be  liable, 
directly  or  indirectly,  or  contingently,  for  the  repayment  of 
such  loan  or  any  part  thereof; 

(3)  If  its  term,  including  any  renewal  thereof  by  agree- 
ment, express  or  implied,  exceed  the  period  of  one  year; 


BANK   LAWS   OF   CALIFORNIA.  717 

(4)  Or  to  an  amount  under  any  circumstances  in  excess 
of  twenty-five  per  centum  of  the  capital  and  surplus  of  the 
commercial  bank  making  such  loan. 

Act  of  the  Legislature,  approved  March  1,  1909. 

(c)  Capital  of  Commercial  Bank. — Every  commercial 
bank  hereafter  organized,  shall  have  paid  up  in  cash  a 
capital  stock  of  not  less  than 

(1)  Twenty-five  thousand  dollars  in  any  city  or  town  the 
population  of  which  does  not  exceed  five  thousand  persons ; 

(2)  Fifty  thousand  dollars  in  any  city  the  population  of 
which  is  more  than  five  thousand  persons  but  does  not  exceed 
twenty-five  thousand  persons; 

(3)  One  hundred  thousand  dollars  in  any  city  the  popula- 
tion of  which  is  more  than  twenty-five  thousand  persons  but 
does  not  exceed  one  hundred  thousand  persons ; 

(4)  Two  hundred  thousand  dollars  in  any  city  the  popu- 
lation of  which  is  more  than  one  hundred  thousand  persons 
but  does  not  exceed  two  hundred  thousand  persons ; 

(5)  Three  hundred  thousand  dollars  in  any  city  the  popu- 
lation of  which  is  more  than  two  hundred  thousand  persons. 

The  foregoing  classification  shall  not  apply  to  any  commer- 
cial bank  already  in  existence  which  has  received  its  certificate 
to  do  a  banking  business  from  the  superintendent  of  banks. 
Act  of  the  Legislature,  approved  April  21,  1911. 

(d)  Loans  to  Bank  Directors. — No  commercial  bank 
shall  loan  any  of  its  funds  to  any  of  its  directors  unless  such 
loan  shall  first  have  been  approved  by  a  two-thirds  vote  of 
its  board  of  directors,  on  which  vote  the  borrowing  director 
shall  not  participate,  and  the  fact  of  making  such  loan,  the 
name  of  the  director  borrowing  the  same,  the  time  when 
the  same  shall  become  due,  the  rate  of  interest  thereon,  and 
the  amount,  value  and  character  of  security  pledged  there- 
for, if  any,  shall  be  forthwith  forwarded  by  the  cashier 
of  such  bank  to  the  superintendent  of  banks;  and  if  the 
superintendent  of  banks  shall  disapprove  of  such  loan  he 
shall  immediately  notify  such  bank  of  his  disapproval  thereof 
and  such  bank  shall   forthwith  collect  such  loan;  provided. 


718  BUSINESS   LAWS   FOR  BUSINESS   MEN. 

however,  that  the  total  loans  to  all  directors  of  such  bank 
shall  not  at  any  one  time  exceed  fifty  per  cent  of  the  capital 
and  surplus  of  such  bank,  and  provided  further,  that  each 
bank  having  any  loan  or  loans  outstanding  to  any  of  its 
directors,  shall  once  each  month  report  in  writing  to  the 
superintendent  of  banks  the  name  of  each  director  to  whom 
such  loan  is  made,  and  amount  of  such  loan,  the  rate  of 
interest  thereon,  the  time  when  the  same  shall  fall  due, 
and  the  security  pledged  therefor,  if  any.  Any  officer  or 
director  of  any  commercial  bank  violating  any  of  the  pro- 
visions of  this  section  shall  be  guilty  of  a  felony. 

Act  of  the  Legislature,  approved  April  1,  1911. 

(e)  Investments  in  Bank  Premises. — No  commercial 
bank  shall  invest  an  amount  exceeding  its  capital  and  sur- 
plus in  its  bank  premises  without  the  approval  of  the  super- 
intendent of  banks;  and  the  authority  of  a  two-thirds  vote 
of  a  full  board  of  directors  shall  be  necessary  to  authorize  the 
purchase  or  construction  thereof. 

Act  of  the  Legislature,  approved  April  21,  1911. 

Section  930.— TRUST  COMPANIES.— The  law  makes 
specific  provisions  regarding  the  power  and  the  limitations 
of  business  of  trust  companies  in  California. 

(a)  Execution  of  Trusts. — Any  corporation  which  has 
been  or  shall  be  incorporated  under  the  general  incorporation 
laws  of  this  State,  authorized  by  its  articles  of  incorporation 
to  act  as  executor,  administrator,  guardian,  assignee,  re- 
ceiver, depositary  or  trustee,  and  having  a  capital  of  not 
less  than  two  hundred  thousand  dollars  actually  paid  in,  in 
cash,  may  be  appointed  to  act  in  such  capacity  in  like  man- 
ner as  individuals  and  shall  be  known  as  a  trust  company. 
In  all  cases  in  which  it  is  required  that  an  executor,  admin- 
istrator, guardian,  assignee,  receiver,  depositary,  or  trustee, 
shall  qualify  by  taking  and  subscribing  an  oath,  or  in  which 
an  affidavit  is  required,  it  shall  be  a  sufficient  quaUfication 
by  such  corporation  if  such  oath  shall  be  taken  and  sub- 
scribed or  such  affidavit  made  by  the  president  or  secretary 


BANK   LAWS   OF   CALIFORNIA.  719 

or  manager  or  trust  officer  thereof,  and  such  officer  shall  be 
liable  for  the  failure  of  such  trust  company  to  perform  any 
of  the  duties  required  by  law  to  be  performed  by  individuals 
acting  in  like  capacity  and  subject  to  like  penalties;  and 
such  trust  company  shall  be  liable  for  such  failure  to  the 
full  amount  of  its  capital  stock;  provided,  any  such  appoint- 
ment as  guardian  shall  apply  to  the  estate  only,  and  not  to 
the  person.  Such  trust  company  shall  be  entitled  to  and 
shall  be  allowed  proper  compensation  for  all  the  services 
performed  by  them  under  the  foregoing  provisions  of  this 
act;  but  such  compensation  shall  not  exceed  that  allowed  to 
natural  persons  for  like  services. 

Act  of  the  Legislature,  approved  March  1,  1909. 

(b)  Deposits  by  Order  of  Court. — Any  court,  having 
appointed  and  having  jurisdiction  of  any  executor,  admin- 
istrator, guardian,  assignee,  receiver,  depositary,  or  trustee, 
upon  the  application  of  such  officer  or  trustee,  or  upon  the 
application  of  any  person  having  an  interest  in  the  estate 
administered  by  such  officer  or  trustee,  after  notice  to  the 
other  parties  in  interest  as  the  Court  may  direct,  and 
after  a  hearing  upon  such  application,  may  authorize  such 
officer  or  trustee  to  deposit  any  moneys  then  in  his  hands, 
or  which  may  come  into  his  hands  thereafter,  and  until 
the  further  order  of  said  Court,  with  any  such  trust  com- 
pany; and  upon  deposit  of  such  money,  and  its  receipt  and 
acceptance  by  such  trust  company,  the  said  officer  or  trustee 
shall  be  discharged  from  further  care  or  responsibility 
therefor.  Such  deposits  shall  be  paid  out  only  upon  the 
orders  of  said  Court. 

Act  of  the  Legislature,  approved  March   1,   1909. 

(c)  Deposits  by  Public  Administrator. — It  shall  be 
lawful  for  any  public  administrator  to  deposit  with  any 
trust  company  having  not  less  than  two  hundred  thousand 
dollars  paid-up  capital,  doing  business  in  the  county,  or  city 
and  county,  in  which  he  is  acting  as  such  administrator,  any 
and  all  moneys  of  any  estate  upon  which  he  is  administering, 
not  required  for  the  current  expenses  of  the  administration ; 


720  BUSINESS   LAWS   FOR  BUSINESS    MEN. 

provided,  that  such  corporation  deposit  with  the  State  Treas- 
urer the  securities  required  by  this  act.  Such  deposits  shall 
relieve  the  public  administrator  from  depositing  with  the 
County  Treasurer  the  moneys  so  deposited  with  such  cor- 
poration. Moneys  so  deposited  by  a  public  administrator 
may  be  drawn,  upon  the  order  of  such  administrator,  coun- 
tersigned by  a  judge  of  a  Superior  Court,  when  required  for 
the  purpose  of  administration,  or  otherwise. 

Act  of  the  Legislature,  approved  March  1,  1909. 

(d)  Deposits  by  Executors,  Guardians,  and  Others. — 
Whenever,  in  the  judgment  of  any  Court  having  jurisdic- 
tion of  any  estate  in  process  of  administration  by  any  exe- 
cutor, administrator,  guardian,  assignee,  receiver,  deposi- 
tary, or  trustee,  and  after  such  notice  to  the  parties  in  inter- 
est as  the  Court  shall  direct,  and  after  a  hearing  on  such 
application,  the  said  Court  may  order  the  said  officer  or 
trustee  to  deposit  with  any  such  trust  company,  for  safe 
keeping,  such  portion  or  all  of  the  personal  assets  of  said 
estate  as  it  shall  deem  proper;  and  thereupon  said  Court 
shall,  by  an  order  of  record,  reduce  the  bond  to  be  given  or 
theretofore  given  by  such  officer  or  trustee,  so  as  to  cover 
only  the  estate  remaining  in  the  hands  of  said  officer  or 
trustee;  and  the  property  as  deposited  shall  thereupon  be 
held  by  such  trust  company,  under  the  orders  and  directions 
of  said  Court.  Any  Court  having  jurisdiction  of  an  estate 
being  administered  by  a  public  administrator,  may  direct 
such  public  administrator  to  deposit  all  or  any  part  of  the 
moneys  of  the  estate  not  required  for  the  current  expenses 
of  the  administration,  with  any  such  trust  company  doing 
business  in  the  county  or  city  and  county,  where  such  pub- 
lic administrator  is  acting. 

Act  of  the  Legislature,  approved  March  1,  1909. 

(e)  Responsibility  of  Trust  Company.  —  Such  trust 
company  shall  not  be  required  to  give  any  bond  or  security 
in  case  of  any  appointment  hereinbefore  provided  for,  except 
as  hereinafter  provided,  but  shall  be  responsible  for  all  in- 
vestments  which   shall  be   made   by  it   of  the   funds   which 


BANK   LAWS   OF   CALIFORNIA.  721 

may  be  entrusted  to  it  for  investment  by  such  Court,  and 
shall  be  liable  as  natural  persons  in  like  positions  now  are, 
and  as  hereinafter  provided. 

(f)  Interest  to  be  Paid. — Such  trust  company  shall  pay 
interest  upon  all  moneys  held  by  it  as  trustee,  by  virtue  of 
this  act,  at  such  rate  as  may  be  agreed  upon  at  the  time 
of  its  acceptance  of  any  such  appointment,  or  as  shall  be 
provided  by  the  order  of  the  Court. 

(g)  Deposit  With  State  Treasurer.— Each  trust  com- 
pany, before  accepting  any  such  appointment  or  deposit, 
shall  deposit  with  the  Treasurer  of  State,  for  the  benefit 
of  the  creditors  of  said  trust  company,  the  sum  of  one 
hundred  thousand  dollars  ($100,000),  in  bonds  of  the  United 
States,  or  municipal  bonds  of  this  State,  or  of  any  county, 
or  city,  city  and  county,  or  school  district  thereof,  or  in 
mortgages  on  improved  and  productive  real  estate  in  this 
State,  being  first  liens  thereon,  and  the  real  estate  being 
worth  at  least  twice  the  amount  loaned  thereon;  said  bonds 
or  mortgages  to  be  approved  by  the  superintendent  of  banks. 
The  bonds  and  securities  so  deposited  may  be  exchanged 
from  time  to  time  for  other  securities,  receivable  as  afore- 
said. Said  bonds  of  the  United  States,  or  municipal  bonds 
of  this  State,  or  of  any  county,  city,  city  and  county,  or 
school  district  thereof,  and  all  said  securities  shall  be  subject 
to  sale  and  transfer,  and  to  the  disposal  of  the  proceeds  by 
said  Treasurer,  only  on  the  order  of  a  court  of  competent 
jurisdiction  and  as  hereinafter  provided.  The  Treasurer 
shall  give  his  receipt  for  the  securities  deposited,  and  the 
State  shall  be  responsible  for  the  safe  return  of  such  securi- 
ties. 

Act  of  the  Legislature,  approved  April  21,  1911. 

(h)   Mortgage    of    Realty    to    State    Treasurer. — Any 

such  trust  company,  having  a  paid-up  capital  in  excess 
of  two  hundred  thousand  dollars,  may  be  permitted  by 
the  superintendent  of  banks  to  mortgage  any  improved 
and  productive  real  estate  owned  by  it,   in   excess  of  said 


722  BUSINESS   LAWS   FOR  BUSINESS    MEN. 

amount,  to  the  Treasurer  of  State,  for  such  sum  as  the 
said  superintendent  of  banks  may  determine,  and  such  mort- 
gage may  be  deposited  with  said  Treasurer,  and  when  so  de- 
posited it  shall  be  included  in  the  amount  of  securities  herein- 
above required  to  be  deposited  with  said  Treasurer  for  the 
benefit  of  the  creditors  of  said  trust  company. 

(i)  Interest  on  State  Deposits. — So  long  as  the  trust 
company  so  depositing  shall  continue  solvent,  it  shall  be 
permitted  to  receive  from  said  Treasurer  the  interest  or 
dividends  on  said  deposits,  and  whenever  any  trust  com- 
pany receives  trust  funds  as  such  trustee  in  excess  of  five 
hundred  thousand  dollars,  it  shall  deposit  with  the  State 
Treasurer  securities  mentioned  in  this  act,  to  be  approved 
by  the  superintendent  of  banks,  in  the  amount  of  another 
one  hundred  thousand  dollars,  and  for  each  five  hundred 
thousand  dollars  of  such  trust  funds  thereafter  received, 
an  additional  deposit  of  fifty  thousand  dollars  of  such 
securities  likewise  approved  shall  be  made  with  the  said 
State  Treasurer;  provided,  however,  that  no  trust  com- 
pany shall  be  required  to  deposit  more  than  one  million  dol- 
lars of  such  securities. 

The  State  shall  be  responsible  for  the  safe  retufn  of  such 
securities  deposited  with  the  Treasurer  of  the  State  under 
this  section. 

Act  of  the  Legislature,  approved  March  1,  1909. 

(j)  Abstracts  of  Title. — ^When  any  part  of  such  deposit 
with  the  State  Treasurer  is  made  in  bonds  and  mortgages, 
it  shall  be  accompanied  by  full  abstracts  of  titles  and 
searches,  or  by  certificates  of  title  issued  by  a  person,  com- 
pany or  corporation,  whose  business  or  objects  are  to  make 
searches  of  titles  and  issue  certificates  of  titles,  and  which 
said  person,  company  or  corporation  shall  be  one  designated 
or  approved  by  said  superintendent  of  banks,  and  shall  be 
examined  and  approved  by  or  under  the  direction  of  the 
said  superintendent  of  banks.  The  fees  for  an  examination 
of  title  by  counsel  to  be  paid  by  the  trust  company  making 


BANK    LAWS   OF    CALIFORNIA.  723 

the  deposit,  shall  not  exceed  twenty  dollars  for  each  mort- 
gage,  and   the    fee   for   each   appraiser,   not   exceeding  two, 
besides  expenses,  shall  be  five  dollars  for  each  mortgage. 
Act  of  the  Legislature,  approved  March  1,  1909. 

(k)  Paid-up  Capital  Required. — Before  the  superintend- 
ent of  banks  issues  his  certificate  to  any  trust  company, 
there  must  be  filed  in  his  office  the  affidavit  of  a  majority  of 
its  board  of  directors  or  the  persons  named  in  said  articles 
as  the  first  directors  of  the  corporation  that  at  least  two 
hundred  thousand  dollars  of  the  capital  stock  has  actually 
been  subscribed  and  paid  in  to  a  person  named  in  such  affi- 
davit for  the  benefit  of  the  corporation. 

(1)  Report  of  Trusts  Held. — On  making  the  report 
required  by  the  terms  of  this  act,  every  trust  company  shall, 
in  addition  to  the  other  facts  to  be  reported  on,  furnish  a 
list  and  brief  description  of  the  trusts  held  by  such  corpora- 
tion, the  source  of  the  appointment  thereto,  and  the  amount 
of  real  and  personal  estate  held  by  such  trust  company  by 
virtue  thereof;  except  that  mere  mortgage  trusts,  wherein 
no  action  has  been  taken  by  such  corporation,  shall  not  be 
included  in  such  statement. 

(m)  Retirement  From  Business. — Any  trust  company 
which  desires  to  retire  from  business  under  this  act,  shall 
furnish  to  the  superintendent  of  banks  satisfactory  evidence 
of  its  release  and  discharge  from  all  the  obligations  and 
trusts  hereinbefore  provided  for;  whereupon  he  shall  revoke 
his  certificate  to  such  trust  company,  and  thereupon  the 
Treasurer  of  State  shall  return  to  said  trust  company  all 
its  securities. 

Act  of  the  Legislature,  approved  March  1,  1909. 

(n)  Confidential  Communications. — Except  as  other- 
wise provided,  any  trust  company  exercising  the  powers  and 
performing  the  duties  provided  for  in  this  act,  shall  keep 
inviolate  all  communications  confidentially  made  to  it  touch- 
ing the  existence,  condition,  management  and  administration 
of  any  trusts  confided  to  it;  and  no  creditor  or  stockholder 


724  BUSINESS   LAWS   FOR   BUSINESS    MEN. 

of  any  such  trust  company  shall  be  entitled  to  disclosure 
of  any  such  communication ;  provided,  however,  that  the 
president,  manager  and  secretary  of  such  trust  company 
shall  be  entitled  to  knowledge  of  such  communication;  and 
provided,  further,  that  in  any  suit  or  proceeding  touching 
the  existence,  condition,  management  or  administration  of 
such  trust,  the  Court  wherein  the  same  is  pending  may  re- 
quire disclosure  of  any  such  communication. 

Act  of  the  Legislature,  approved  March  1,  1909. 

(o)  Use  of  Word  "Trust."— The  use  of  the  word  "trust" 
in  combination  with  or  in  connection  with  the  word  "com- 
pany," "corporation,"  "incorporation,"  "association,"  "so- 
ciety," "organization,"  or  "syndicate,"  is  hereby  prohibited 
to  all  persons,  firms,  associations,  companies  or  corporations 
other  than  corporations  provided  for  by  this  act.  Every 
person,  firm,  association,  company  or  corporation  which  uses 
the  word  "trust"  in  combination  with  or  in  connection  with 
the  word  "company,"  "corporation,"  "incorporation,"  "asso- 
ciation," "society,"  "organization,"  or  "syndicate,"  as  the 
name  under  which  business  is  done  or  transacted,  shall  be 
subject  to  the  provisions  of  this  act  and  to  the  supervision 
of  the  superintendent  of  banks.  Any  person,  firm,  associa- 
tion, company,  or  corporation  making  use  of  the  word 
"trust"  in  combination  or  in  connection  with  the  word  "com- 
pany," "corporation,"  "incorporation,"  "association,"  "so- 
ciety," "organization,"  or  "syndicate,"  in  the  manner  herein- 
above mentioned,  in  the  transaction  of  business,  and  not 
subject  to  the  provisions  of  this  act  and  the  supervision  of 
the  superintendent  of  banks,  shall  be  guilty  of  a  misdemeanor. 

No  corporation  hereafter  formed  shall  use  the  word  "trust" 
or  "trustee"  as  a  part  of  its  corporate  name  unless  it  shall 
be  authorized  by  its  articles  of  incorporation  to  act  as 
executor,  administrator,  guardian,  assignee,  receiver,  deposi- 
tary or  trustee;  nor  shall  any  corporation  hereafter  formed 
accept  or  execute  any  trust  mentioned  in  this  act,  unless  it 
shall  have  complied  with  the  provisions  of  this  act. 

Act  of  the  Legislature,  approved  March  1,  1909. 


BANK    LAWS   OF   CALIFORNIA.  725 

(p)  Investment  of  Capital  and  Trust  Funds. — Every 
trust  company  shall  invest  its  capital  and  trust  funds  re- 
ceived by  it  in  accordance  with  the  laws  relative  to  the 
investment  of  funds  deposited  with  savings  banks,  unless  a 
specific  agreement  to  the  contrary  is  made  between  the 
trust  company  and  the  party  creating  the  trust. 

(q)  Requirements  for  Doing  Banking  Business. — 
Every  trust  company  desiring  to  do  or  doing  a  commer- 
cial banking  business  or  a  savings  bank  business,  or  both, 
in  addition  to  its  trust  business,  shall  have  paid  up  in  cash 
the  capital  as  provided  in  this  act.  Such  capital  for  each 
such  department  shall  be  increased  from  time  to  time 
in  the  same  manner  and  to  the  same  extent  as  though 
such  bank  were  conducting  separate  banks  instead  of  sepa- 
rate departments. 

Every  trust  company  doing  a  departmental  business  shall 
comply  with  the  provisions  of  this  act  governing  each  of 
such  departments  as  to  its  deposits,  reserves,  investments, 
and  loans. 

Act  of  the  Legislature,  approved  March  1,  1909. 

Section  931.— STATE  BANKING  DEPARTMENT.— 

A  State  banking  department  has  been  created  by  the  law.  A 
superintendent  of  banks  is  appointed  by  the  Governor.  All 
banks  are  subject  to  his  inspection.  No  bank  shall  transact 
any  business  in  this  State  without  the  written  approval  of 
the  superintendent  of  banks.  ' 

(a)  Examiner  Must  Not  be  Indebted  to  Bank. — No 
superintendent  of  banks,  chief  deputy,  or  bank  examiner, 
shall  be  or  shall  become  indebted,  directly  or  indirectly,  either 
as  borrower,  endorser,  surety,  or  guarantor,  to  any  bank 
under  his  supervision  or  subject  to  his  examination. 

Act  of  the  Legislature,  approved  April  21,  1911. 

(b)  Doubtful  Securities. — When  a  bank  shall  have  been 
examined  by  any  examiner,  and  he  finds  securities  therein 
which  are,  in  his  judgment,  of  doubtful  value,  he  shall  report 
the  same  to  the  superintendent  of  banks,  who  thereupon  shall 


726  BUSINESS   LAWS   FOR   BUSINESS    MEN. 

be  authorized  to  employ  appraisers  at  the  expense  of  such 
bank  to  appraise  said  securities,  at  a  compensation  to  be 
fixed  by  the  superintendent  of  banks. 

Act  of  the  Legislature,  approved  April  21,  1911. 

(c)  Impairment  of  Capital. — Whenever  the  superin- 
tendent of  banks  shall  have  reason  to  believe  that  the  capital 
of  any  bank  is  reduced  by  impairment  or  otherwise  below 
the  amount  required  by  law  or  by  its  articles  of  incorpora- 
tion, he  shall  require  such  bank  to  make  good  the  deficiency 
within  sixty  days  after  the  date  of  such  requisition.  He  shall 
examine  or  cause  to  be  examined  any  such  bank  to  ascertain 
the  amount  of  such  impairment  or  reduction  of  capital  and 
whether  the  deficiency  has  been  made  good  as  required  by 
him. 

Act  of  the  Legislature,  approved  April  21,  1911. 

(d)  Certificate  Required  for  Transaction  of  Business. 
— No  bank  shall  transact  any  business  in  this  state  without 
the  written  approval  of  the  superintendent  of  banks,  and 
without  his  written  certificate  stating  that  it  has  complied 
with  the  provisions  of  this  act,  and  with  all  the  requirements 
of  law,  and  that  it  is  authorized  to  transact,  within  this  state, 
the  business  specified  therein,  and  that  the  requisite  capital 
has  been  in  good  faith  subscribed  and  paid  up  in  cash,  or,  if 
organized  without  capital  stock,  that  it  has  accumulated  the 
requisite  surplus  or  reserve  fund.  Before  issuing  such  cer- 
tificate the  superintendent  of  banks  shall  examine,  or  cause 
an  examination  to  be  made,  in  order  to  ascertain  whether 
the  requisite  capital  of  such  bank  has  been  paid  up  in  cash  or 
the  requisite  reserve  or  surplus  fund  has  been  accumulated. 
The  superintendent  of  banks  shall  not  authorize  such  bank 
to  commence  business  until  it  appears  from  such  examina- 
tion, or  other  evidence  satisfactory  to  him,  that  the  requisite 
capital  has  been,  in  good  faith,  subscribed  and  paid  in  in 
cash,  or  that  the  requisite  surplus  or  reserve  fund  has  been 
accumulated  or  paid  in   in  cash,  and  until  such  bank  shall 


BANK    LAWS   OF   CALIFORNIA.  727 

have  paid  a  fee  of  fifty  dollars.  Every  person  who  neglects 
to  comply  with  any  requirement  of  this  section  shall  be  guilty 
of  a  misdemeanor. 

When  the  articles  of  incorporation  shall  have  been  filed 
with  the  secretary  of  state,  and  application  made  for  the 
issuance  of  a  certificate  to  do  business  as  a  bank,  the  super- 
intendent of  banks  shall  ascertain,  from  the  best  sources  of 
information  at  his  command,  whether  the  character  and 
general  fitness  of  the  persons  named  as  stockholders  are 
such  as  to  command  the  confidence  of  the  community  in 
which  such  bank  is  proposed  to  be  located,  and,  if  so  satis- 
fied, he  shall,  within  sixty  days  after  such  application  has 
been  made  to  him,  issue,  under  his  hand  and  official  seal, 
the  certificate  of  authorization  required  by  this  act.  The 
superintendent  of  banks  shall  transmit  such  certificate  of 
authorization  to  the  county  clerk  of  such  county,  who  shall 
file  the  same;  the  superintendent  of  banks  shall  also  file  a 
duplicate  of  such  certificate  in  his  own  office. 

Act  of  the  Legislature,  approved  March  1,  1909. 

(e)  Bank  Reports. — Every  bank  doing  a  departmental 
business  shall  render  to  the  superintendent  of  banks  for 
each  department  conducted  by  it,  a  separate  report  showing 
in  detail  the  actual  financial  condition  of  such  department, 
and  shall  at  the  time  of  furnishing  said  report  separately 
publish  the  statement  for  each  department  as  provided  in 
this  act. 

Every  bank  doing  business  in  this  state  shall,  whenever 
required  by  the  superintendent  of  banks,  make  a  report  in 
writing  to  him,  verified  by  the  oath  of  its  president  and  its 
secretary  or  cashier,  or  two  principal  officers.  Such  reports 
shall  show  the  actual  financial  condition  of  the  bank  making 
the  report,  at  the  close  of  any  past  day  specified  by  the 
superintendent,  and  shall  specify  the  following: 

1.  The  amount  of  its  capital  stock  and  the  number  of 
shares  into  which  it  is  divided,  or,  if  not  incorporated,  the 
amount  of  capital  actually  paid  in,  and  by  whom. 


728  BUSINESS   LAWS   FOR  BUSINESS    MEN. 

2.  The  names  of  the  directors  and  the  number  of  shares 
of  stock  held  by  each,  or,  if  not  incorporated,  the  names  of 
each  member  of  the  firm  and  the  amount  of  capital  paid  in 
by  each. 

3.  The  total  amount  of  capital  actually  paid  up  in  money, 
and  the  total  amount  of  contingent  and  other  reserve  funds, 
if  any. 

4.  The  total  amount  due  the  depositors. 

5.  The  total  amount  and  character  of  any  other  liabilities 
it  may  have. 

6.  The  amount  at  which  the  lot  and  building  occupied 
by  the  bank  for  the  transaction  of  its  regular  business  stands 
debited  on  its  books,  together  with  the  market  value  of  all 
other  real  estate  held,  whether  acquired  in  settlement  of 
loans  or  otherwise;  the  amount  at  which  it  stands  debited 
on  the  bank  books,  in  what  counties  situated,  and  in  what 
name  the  title  is  vested,  if  not  in  the  name  of  the  bank 
itself. 

7.  The  amount  loaned  on  real  estate,  specifying  the 
amount  secured  on  real  estate  in  each  county  separately; 
also  specifying  the  name  of  the  person  in  whose  name  the 
property  is  held  in  trust  or  as  security,  in  case  it  is  held 
in  any  name  other  than  that  of  the  bank  and  the  instrument 
creating  the  security  does  not  itself  disclose  the  name  of  the 
bank. 

8.  The  amount  invested  in  bonds,  designating  the  name 
and  amount  of  each  particular  kind. 

9.  The  amount  loaned  on  stocks  and  bonds,  designating 
each  particular  class  and  the  amount  thereof. 

10.  The  amount  of  money  loaned  on  other  securities, 
with  a  particular  designation  of  each  class  and  the  amount 
loaned  on  each. 

11.  The  actual  amount  of  money  on  hand  or  deposited 
in  any  other  bank  or  place,  with  the  name  of  the  place 
where  deposited  and  the  amount  in  each  place. 

12.  Any  other  property  held,  or  any  amount  of  money 
loaned,  deposited,  invested  or  placed,  not  otherwise  herein 
enumerated,  and  the  place  where  situate  and  the  value  of  said 


BANK   LAWS   OF   CALIFORNIA.  729 

property,  and  the  amount  so  loaned,  deposited  or  placed,  and 
any  other  information  he  may  request  relative  to  the  conduct 
and  affairs  of  such  bank. 

The  oaths  of  the  officers  and  the  statements  above  required 
shall  state  that  they  and  each  of  them  have  a  personal 
knowledge  of  the  matters  therein  contained,  and  that  they 
believe  every  allegation,  statement,  matter,  and  thing  therein 
contained  is  true.  Any  wilful  false  statement  in  the  prem- 
ises shall  be  perjury  and  shall  be  punished  as  such. 

The  superintendent  of  banks  shall  call  for  reports  specified 
by  the  previous  section,  at  least  three  times,  each  year,  and 
shall  call  for  such  reports  as  near  as  possible  upon  the  same 
days  as  those  designated  by  the  comptroller  of  the  cur- 
rency of  the  United  States  for  reports  of  national  banking 
associations. 

Act  of  the  Legislature,  approved  March  1,  1909. 

(f)  Publication  of  Statement. — At  the  time  of  furnish- 
ing such  report  to  the  superintendent  of  banks,  every  bank 
shall  also  publish  a  condensed  statement  of  its  financial 
condition,  at  least  once,  in  some  newspaper  of  general  cir- 
culation, published  in  the  city  or  town  where  its  principal 
place  of  business  is  located,  and,  if  no  paper  is  published  in 
such  town,  then  in  some  newspaper  of  general  circulation  in 
the  county  where  its  principal  place  of  business  is  located. 
Such  published  statement  shall  show  the  total  amount  of 
loans,  the  total  amount  of  overdrafts,  the  total  amount 
invested  in  bonds  and  other  securities,  the  total  amount  due 
from  banks,  the  total  amount  of  checks  and  other  cash 
items,  the  total  amount  of  cash  on  hand,  capital  paid  in, 
surplus  funds;  undivided  profits,  less  expenses  and  taxes 
paid;  due  to  other  banks  and  bankers,  due  to  trust  com- 
panies and  savings  banks ;  individual  deposits  subject  to 
checks ;  demand  certificates  of  deposit ;  time  deposits ;  certified 
checks;  cashier's  checks  outstanding;  and  such  other  items 
as  will  show  the  actual  financial  condition  of  the  bank 
making  the  report. 

Act  of  the  Legislature,  approved  March  1,  1909. 


730  BUSINESS   LAWS   FOR   BUSINESS    MEN. 

(g)  Conduct  of  Business  in  Unsafe  Manner. — 'If  it 
shall  appear  to  the  superintendent  of  banks  that  any  bank 
has  violated  its  articles  of  incorporation,  or  any  law  binding 
upon  it,  he  must,  by  an  order  under  his  hand  and  official 
seal,  which  seal  must  be  adopted  by  him,  addressed  to  such 
bank,  direct  the  discontinuance  of  such  violation;  or,  if  it 
shall  appear  to  the  superintendent  of  banks  that  such  bank 
is  conducting  business  in  an  unsafe  or  injurious  manner, 
he  must  in  like  manner  direct  the  discontinuance  of  such 
unsafe  or  injurious  practices.^  Such  order  shall  require 
such  bank  to  show  cause,  before  the  superintendent  of 
banks,  at  a  time  and  place  to  be  fixed  by  him,  why  said 
order  should  not  be  observed.  If  upon  such  hearing  it 
shall  appear  to  the  superintendent  of  banks  that  such  bank 
is  conducting  business  in  an  unsafe  or  injurious  manner,  or 
is  violating  its  articles  of  incorporation,  or  any  law  of  this 
state,  then  the  superintendent  of  banks  shall  make  such 
order  of  discontinuance  final,  and  such  bank  shall  immedi- 
ately discontinue  all  practices  named  in  such  order  by  the 
superintendent  of  banks.  Such  bank  shall  have  ten  days 
after  any  such  order  is  made  final  in  which  suit  may  be 
commenced  to  restrain  enforcement  of  such  order,  and 
unless  such  action  be  so  commenced  and  enforcement  of 
said  order  be  enjoined  within  ten  days,  by  the  court  in 
which  such  suit  is  brought,  then  such  bank  shall  comply 
with  such  order;  and,  in  the  event  of  its  failure  so  to  do, 
then  the  superintendent  of  banks  shall  have  power  to  take 
immediate  charge  and  control  of  said  bank,  and  liquidate  its 
affairs  in  the  manner  provided  in  this  act  for  the  liquida- 
tion of  banks. 

Act  of  the  Legislature,  approved  March  1,  1909. 

(h)  When  Superintendent  May  Take  Possession  of 
Bank. — Whenever  the  superintendent  of  banks  shall  have 
reason  to  conclude  that  any  bank  is  in  an  unsound  or  unsafe 
condition  to  transact  the  business  for  which  it  is  organized, 
or  that  it  is  unsafe  or  inexpedient  for  it  to  continue  business, 
the  superintendent  of  banks  may   forthwith  take  possession 


BANK    LAWS   OF    CALIFORNIA.  731 

of  the  property  and  business  of  such  bank,  and  retain  such 
possession  until  such  bank  shall  resume  business,  or  its 
affairs  be  finally  liquidated,  as  herein  provided. 

On  taking  possession  of  the  property  and  business  of  any 
such  bank,  the  superintendent  of  banks  shall  forthwith  give 
notice  in  writing  of  such  fact  to  any  and  all  corporations 
and  individuals  holding  or  in  possession  of  any  of  the 
assets  of  such  bank. 

No  bank,  corporation  or  individual,  knowing  of  such 
taking  possession  by  the  superintendent  of  banks,  or  notified 
as  aforesaid,  shall  have  a  lien  or  charge  for  any  payment, 
advance  or  clearance  thereafter  made,  or  liability  thereafter 
incurred  against  any  of  the  assets  of  the  bank  of  whose 
property  and  business  the  superintendent  of  banks  shall  have 
taken  possession  as  aforesaid.  Such  bank  may,  with  the 
consent  of  the  superintendent  of  banks,  resume  business 
upon  such  conditions  as  may  be  approved  by  him. 

Upon  taking  possession  of  the  property  and  business  of 
such  bank,  the  superintendent  of  banks  is  authorized  to 
collect  moneys  due  to  such  bank,  and  to  do  such  other 
acts  as  are  necessary  to  conserve  its  assets  and  business, 
and  shall  proceed  to  liquidate  the  affairs  thereof  as  herein- 
after provided. 

The  superintendent  of  banks  shall  collect  all  debts  due 
.and  claims  belonging  to  it,  and  upon  the  order  of  the 
superior  court  may  sell  or  compound  all  bad  or  doubtful 
debts,  and  on  like  order  may  sell  all  real  and  personal 
property  of  such  bank  on  such  terms  as  the  court  shall 
direct;  and  may,  if  necessary  to  pay  the  debts  of  such  bank, 
enforce  individual  liability  of  the  stockholders  by  action  to 
be  brought  within  three  years  after  the  date  of  his  taking 
possession  of  the  affairs  of  such  bank. 

The  superintendent  of  banks  may,  under  his  hand  and 
official  seal,  appoint  one  or  more  special  deputy  superin- 
tendents of  banks,  as  agent  or  agents,  to  assist  him  in  the 
duty  of  liquidation  and  distribution,  the  certificate  of  ap- 
pointment to  be  filed  in  the  office  of  the  superintendent  of 


782  BUSINESS   LAWS   FOR   BUSINESS    MEN. 

banks,  and  a  certified  copy  in  the  office  of  the  clerk  of  the 
county  in  which  the  principal  office  of  such  bank  is  located. 

The  superintendent  of  banks  may,  from  time  to  time, 
authorize  a  special  deputy  superintendent  to  perform  such 
duties  connected  with  such  liquidations  and  distribution  as 
the  superintendent  of  banks  may  deem  proper.  The  super- 
intendent of  banks  may  employ  such  counsel,  and  procure 
such  expert  assistance  and  advice  as  may  be  necessary  in 
the  liquidation  and  distribution  of  the  assets  of  such  bank, 
and  may  retain  such  officers  or  employees  of  such  bank  as  he 
may  deem  necessary.  The  superintendent  of  banks  shall 
require,  from  a  special  deputy  superintendent  and  from 
such  assistants,  such  security  for  the  faithful  discharge  of 
their  duties  as  he  may  deem  proper. 

The  superintendent  of  banks  shall  cause  notice  to  be 
given  by  advertisement  in  such  newspapers  as  he  may  direct, 
weekly,  for  three  consecutive  months,  calling  on  all  persons 
who  may  have  claims  against  such  bank,  to  present  the  same 
to  the  superintendent  of  banks,  and  make  legal  proof  thereof, 
at  a  place  and  within  a  time  not  more  than  six  months  after 
the  last  day  of  publication,  to  be  therein  specified. 

The  superintendent  of  banks  shall  mail  a  copy  of  such 
notice  to  all  persons  whose  names  appear  as  creditors  upon 
the  books  of  the  bank.  If  the  superintendent  of  banks 
doubts  the  justice  and  validity  of  any  claim,  he  may  reject 
the  same  and  serve  notice  of  such  rejection  upon  the  claim- 
ant, either  by  mail  or  personally.  An  affidavit  of  the  service 
of  such  notice  shall  be  prima  facie  evidence  thereof,  and 
shall  .be  filed  with  the  superintendent  of  banks.  An  action 
upon  a  claim  so  rejected  must  be  brought  within  six  months 
after  such  service.  Claims  presented  after  the  expiration 
of  the  time  fixed  in  the  notice  to  creditors  shall  be  entitled 
to  share  ratably  in  the  distribution  to  the  extent  of  the 
assets  in  the  hands  of  the  superintendent  of  banks,  equitably 
applicable  thereto. 

Upon  taking  possession  of  the  property  and  assets  of  such 
bank,  the  superintendent  of  banks  shall  make  an  inventory 
of  the  assets  of  such  bank  in  duplicate,  one  to  be  filed  in 


BANK   LAWS   OF   CALIFORNIA.  733 

the  office  of  the  superintendent  of  banks,  and  one  in  the 
office  of  the  clerk  of  the  county  in  which  the  principal 
office  of  such  bank  is  located;  upon  the  expiration  of  the 
time  fixed  for  the  presentation  of  claims,  the  superintendent 
of  banks  shall  make  in  duplicate  a  full  and  complete  list  of 
the  claims  presented,  including  and  specifying  such  claims 
as  have  been  rejected  by  him,  one  to  be  filed  in  the  office 
of  the  superintendent  of  banks,  and  one  in  the  office  of  the 
clerk  of  the  county  in  which  the  principal  office  of  such 
bank  is  located;  such  inventory  and  list  of  claims  shall 
be  open  at  all  reasonable  times  for  inspection. 

The  compensation  of  the  special  deputy  superintendents, 
counsel,  and  other  officers  and  assistants,  and  all  expenses  of 
supervision  and  liquidation,  shall  be  fixed  by  the  superin- 
tendent of  banks  on  notice  to  such  bank,  and  shall  upon  his 
certificate  be  paid  out  of  the  funds  of  such  bank  in  his 
hands. 

The  sums  collected  by  the  superintendent  of  banks  shall, 
from  time  to  time,  be  deposited  in  one  or  more  banks  in 
this  state,  subject  to  examination  by  the  superintendent  of 
banks. 

At  any  time  after  the  expiration  of  the  date  fixed  for 
the  presentation  of  claims,  the  superintendent  of  banks  may, 
out  of  the  funds  remaining  in  his  hands  after  the  payment  of 
expenses,  declare  one  or  more  dividends,  and  after  the 
expiration  of  one  year  from  the  date  of  first  publication 
of  notice  to  creditors  he  may  declare  a  final  dividend. 

Objection  to  any  claim  not  rejected  by  the  superintendent 
of  banks  may  be  made  by  any  party  interested,  by  filing  a 
copy  of  such  objection  with  the  superintendent  of  banks, 
who  shall  present  the  same  to  the  superior  court  of  the 
county  in  which  such  bank  has  its  principal  place  of  busi- 
ness, with  a  petition  that  said  court  pass  upon  the  validity 
of  such  claims;  and  such  court  shall  thereupon,  upon  such 
notice  to  the  party  presenting  the  same,  and  to  the  superin- 
tendent of  banks,  as  the  court  may  deem  proper,  accept  or 
reject  said  claim,  and  the  superintendent  of  banks  shall 
observe  the   order   of   the   court   in   that   regard;   provided, 


734  BUSINESS  LAWS  FOR  BUSINESS   MEN. 

however,  that  should  the  claim  be  rejected,  such  rejection 
shall  not  conclude  the  claimant  from  bringing  an  action  upon 
such'  claim  within  six  months  after  such  rejection. 

Upon  the  petition  of  the  superintendent  of  banks,  such 
court  may  make  proper   provisions   for   unclaimed   deposits. 

Whenever  any  such  bank,  of  whose  property  and  business 
the  superintendent  of  banks  has  taken  possession  as  aforesaid, 
deems  itself  aggrieved  thereby,  it  may  at  any  time  within 
ten  days  after  such  taking  possession,  and  not  thereafter, 
apply  to  the  superior  court  in  the  county  in  which  the 
principal  office  of  such  bank  is  located,  to  enjoin  further 
proceedings;  and  said  court,  after  citing  the  superintendent 
of  banks  to  show  cause  why  further  proceedings  should  not 
be  enjoined,  and  upon  hearing  the  allegations  and  proofs 
of  the  parties,  and  determining  the  facts,  may,  upon  the 
merits,  dismiss  such  application,  or  enjoin  the  superintendent 
of  banks  from  further  proceedings,  and  direct  him  to  sur- 
render such  business  and  property  to  such  bank. 

Either  party  aggrieved  by  the  judgment  rendered  thereon 
may  appeal  therefrom  to  the  supreme  court,  as  in  other 
cases  of  appeal  thereto  from  the  judgment  of  a  superior 
court. 

An  appeal  as  above  provided  shall  operate  as  a  stay  of 
the  judgment  of  the  superior  court,  and  no  bond  need  be 
given  if  the  appeal  be  taken  by  the  superintendent  of  banks; 
but  if  the  appeal  be  taken  by  such  bank,  a  bond  shall  be 
given,  as  required  by  section  nine  hundred  and  forty-three 
of  the  Code  of  Civil  Procedure. 

Whenever  the  superintendent  of  banks  shall  have  paid 
to  each  and  every  depositor  and  creditor  of  such  corpora- 
tion (not  including  stockholders)  whose  claim  or  claims  as 
such  creditor  or  depositor  shall  have  been  duly  approved 
and  allowed,  the  full  amount  of  such  claim,  and  shall  have 
made  proper  provisions  for  unclaimed  and  unpaid  deposits 
or  dividends,  and  shall  have  paid  all  expenses  of  the  liquida- 
tion, the  superintendent  of  banks  shall  call  a  meeting  of  the 
stockholders   of   such   corporation   by    giving   notice   thereof 


BANK    LAWS   OF    CALIFORNIA.  735 

for  thirty  days,  in  one  or  more  newspapers  published  in 
the  county  where  the  principal  office  of  such  corporation  is 
located.  At  such  meeting,  the  superintendent  of  banks 
shall  appear  and  deliver  to  the  stockholders  all  the  property, 
effects  and  records  of  such  bank,  and  upon  such  transfer  and 
delivery  he  shall  be  discharged  from  any  and  all  further 
liability  to  such  bank  and  its  creditors.  And  thereupon  the 
bank  shall  be  in  the  same  position  as  though  it  had  never 
been  authorized  to  transact  a  banking  business,  and  such 
bank,  by  fulfilling  the  requirements  of  this  act,  and  of  the 
superintendent  of  banks,  can  thereafter  be  authorized  to 
resume  the  conduct  of  its  business  as  a  bank. 

Act  of  the  Legislature,  approved  March  1,  1909. 

The  money  may  be  drawn  out  on  the  warrants  of  the 
state  controller,  issued  on  proofs  of  ownership,  approved 
and  allowed  by  the  state  board  of  examiners. 

All  moneys  paid  into  the  said  fund,  uncalled  for  within 
five  years  after  being  paid  in,  shall  by  operation  of  law,  and 
without  action  had,  escheat  to  the  state,  and  thereafter  only 
be  drawn  out  in  such  manner  as  now  provided  for  by  law 
for  the  estates  of  deceased  persons  escheated  to  this   state. 

The  state  board  of  examiners  must  invest  such  moneys 
in  the  same  manner  that  the  state  school  land  fund  is 
invested  as  provided  by  law.  But  any  claimant  shall  be 
entitled  to  recover  as  herein  provided  only  the  principal 
so  paid  into  the  state  treasury. 

(i)  Failure  to  Make  Reports. — If  any  bank  shall  fail 
to  make  the  report  required  by  law  or  by  the  superintendent 
of  banks,  within  ten  days  from  the  day  designated  for  the 
making  thereof,  or  to  include  therein  any  matter  required 
by  law  or  by  the  superintendent  of  banks,  eyery  such 
delinquent  bank  shall  forfeit  to  the  people  of  the  state  the 
sum  of  one  hundred  dollars  for  each  day  that  such  report 
shall  be  delayed  or  withheld,  and  for  every  day  it  shall 
fail  to  report  any  such  omitted  matter.  In  the  event  of  the 
failure  of  any  such  bank  to  make  the  report  required  from 


736  BUSINESS   LAWS   FOR   BUSINESS    MEN. 

it  by  law,  or  by  the  superintendent  of  banks,  he  shall  imme- 
diately cause  the  books,  papers  and  affairs  of  such  bank 
to  be  thoroughly  examined. 

(j)  Report  of  Directors. — It  shall  be  the  duty  of  the 
board  of  directors  of  every  bank  to  examine  fully  into  the 
books,  papers  and  affairs  of  the  bank  of  which  they  are 
directors,  and  particularly  into  the  loans  and  discounts 
thereof,  with  a  special  view  to  ascertaining  the  value  and 
security  thereof,  and  of  the  collateral  security,  if  any  given, 
in  connection  therewith,  and  into  such  other  matters  as  the 
superintendent  of  banks  may  require;  such  examination  to 
be  made  at  least  once  a  year,  but  no  such  subsequent  yearly 
examinations  shall  be  made  within  three  months  of  the 
next  preceding  examination.  Such  directors  shall  have 
power  to  employ  such  assistance  in  making  such  examina- 
tion as  they  may  deem  necessary.  Within  ten  days  after  the 
completion  of  such  examination,  a  report  in  writing  thereof, 
sworn  to  by  the  directors  making  the  same,  shall  be  made  by 
the  board  of  directors  of  such  bank,  and  placed  on  file 
with  the  records  of  said  bank,  and  shall  be  subject  to  exam- 
ination by  the  superintendent  of  banks. 

Such  report  shall  particularly  contain  a  statement  of  the 
assets  and  liabilities  of  the  bank  examined,  as  shown  by 
its  books,  together  with  any  deductions  from  the  assets, 
or  additions  to  liabilities,  which  such  directors  or  committee, 
after  such  examination,  may  determine  to  make.  It  shall 
also  contain  a  statement,  in  detail,  of  loans,  if  any,  which 
in  their  opinion  are  worthless  or  doubtful,  together  with 
their  reasons  for  so  regarding  them;  also  a  statement  of 
loans  made  on  collateral  security,  which  in  their  opinion 
are  insufficiently  secured,  giving  in  each  case  the  amount 
of  the  loan,  the  name  and  market  value  of  the  collateral, 
if  it  has  any  market  value,  and,  if  not,  a  statement  of  that 
fact,  and  its  actual  value  as  nearly  as  possible.  Such  report 
shall  also  contain  a  statement  of  overdrafts,  of  the  names 
and  amounts  of  such  as  they  consider  worthless  or  doubt- 
ful, and  a  full  statement  of  such  other  matters  as  affect  the 


BANK   LAWS   OF   CALIFORNIA.  737 

solvency  and  soundness  of  the  bank.  If  the  directors  of 
such  bank  shall  fail  to  make,  or  cause  to  be  made,  and  file 
such  report  of  examination  in  the  manner  and  within  the 
time  specified,  the  directors  of  such  bank  shall  be  guilty 
of  a  misdemeanor. 

Act  of  the  Legislature,  approved  March  1,  1909. 

Section  932.— PAR  VALUE  OF  CAPITAL  STOCK. 

— The  capital  stock  of  any  bank  having  a  capital  stock, 
shall  have  a  par  value  of  at  least  one  hundred  dollars  and 
the  paid  up  value  shall  be  endorsed  on  the  face  of  each 
certificate  issued,  which  paid  up  value  shall  be  the  same 
on  all  certificates  issued.  No  bank  shall  have  preferred 
stock. 

Act  of  the  Legislature,  approved  April  21,  19n. 

Section  933.— LIEN  OF  BANK.— A  bank  has  a  general 

lien,  dependent  on  possession,  upon  all  property  in  its  hands 

belonging    to    a    customer,    for    the    balance    due    the    bank 

from  such  customer  in  the  course  of  their  business  together. 

Civil  Code,  Section  3053. 

Section  934.— DEPOSIT  OF  STATE  MONEY.— All 
moneys  under  the  control  of  the  state  treasurer,  belonging 
to  the  state,  may  be  deposited  by  the  state  treasurer  to  the 
credit  of  the  state  in  such  state  or  national  bank,  or  banks, 
in  the  state  as  the  treasurer,  with  the  approval  of  the 
governor  and  state  controller,  shall  select  for  the  safe- 
keeping of  such  deposits,  and  any  sum  so  deposited  shall  be 
deemed  to  be  in  the  state  treasury ;  provided  that  the  bank  or 
banks  in  which  such  money  is  deposited  shall  furnish  security 
as  hereinafter  provided;  and  provided  further,  that  such 
depositary  bank  or  banks  be  selected  from  those  agreeing  to 
pay  the  highest  rate  of  interest,  not  less  than  two  per  cent  per 
annum,  for  such  deposits,  as  may  be  determined  by  bids  to 
be  submitted  at  such  times  and  in  such  manner  as  the  treas- 
urer, with  the  approval  of  the  governor  and  the  state  con- 
troller shall  direct;  provided,  that  not  more  than  one-tenth 


738  BUSINESS   LAWS   FOR   BUSINESS    MEN. 

of  the  aggregate  amount  of  state  moneys  available  for  deposit 
and  on  deposit  shall  be  deposited  in  any  one  bank;  and  pro- 
vided, further,  that  such  deposit  shall  not  exceed  fifty  per  cent 
of  the  paid-up  capital,  exclusive  of  reserve  and  surplus,  of 
any  depositary  bank.  Any  and  all  bids  may  be  rejected  by 
the  treasurer,  with  the  approval  of  the  governor  and  state 
controller,  and  new  bids  asked  for.  The  expense  of  trans- 
portation of  moneys  to  and  from  the  state  treasury  to  such 
depositaries  shall  be  borne  by  such  depositaries.  Said  depos- 
its, with  interest  thereon,  shall  be  subject  to  withdrawal  at 
any  time  upon  the  demand  of  the  state  treasurer,  unless  the 
treasurer,  with  the  consent  of  the  governor  and  controller, 
shall  deposit  any  part  of  such  moneys  upon  different  terms; 
provided  that  no  agreement  for  the  deposit  of  said  money 
shall  be  for  a  longer  period  than  one  year. 

For  the  security  of  the  funds  deposited  by  the  state 
treasurer  under  the  provisions  of  this  act,  there  shall  be 
deposited  with  the  treasurer  bonds  of  the  United  States,  or  of 
this  state,  or  of  any  county,  municipality  or  school  district 
within  this  state,  which  bonds  shall  be  approved  by  the  gov- 
ernor, controller  and  treasurer,  to  an  amount  in  value  at  least 
ten  per  cent  in  excess  of  the  amount  of  the  deposit  with  such 
bank  or  banks ;  and  if,  in  any  case,  or  at  any  time,  such  bonds 
are  not  deemed  satisfactory  security  to  the  governor,  con- 
troller and  treasurer,  they  may  require  such  additional  secur- 
ity as  may  be  satisfactory  to  them.  Said  bonds,  or  any  part 
thereof,  may  be  withdrawn  on  the  written  consent  of  the  gov- 
ernor, controller  and  treasurer,  provided  that  a  sufficient 
amount  of  said  bonds'  to  secure  said  deposits  shall  always  be 
kept  in  the  treasury;  and  in  the  event  that  said  bank  or 
banks  of  deposit  shall  fail  to  pay  such  deposits  or  any  part 
thereof  on  the  demand  of  the  state  treasurer,  then  it  shall 
be  the  duty  of  the  state  treasurer  to  forthwith  convert  said 
bonds  into  money  and  to  disburse  the  same  according  to  law. 

At  the  time  of  depositing  state  moneys  in  any  bank,  desig- 
nated as  a  depositary,  the  state  treasurer  shall  take  and  preserve 
a  receipt  therefor,  stating  the  amount  deposited  and  referring 
to  the  contract  made  between  the  depositary  banks  and  the 


BANK    LAWS    OF    CALIFORNIA.  739 

treasurer.    The  moneys  so  deposited  may  be  drawn  out  by  the 
check  or  order  of  the  state  treasurer. 

Act  of  the  Legislature,  approved  March  24,  1911. 

Section  935.— DEPOSIT  OF  COUNTY  OR  CITY 
MONEY. — County  or  city  moneys  may  be  deposited  in 
banks  by  the  public  officer  having  the  legal  custody  of 
such  funds.  When  such  funds  are  so  deposited,  the  bank 
must  furnish  as  security  bonds  of  the  United  States,  or 
bonds  of  California,  or  bonds  of  any  county,  municipality, 
or  school  district  within  this  state,  which  must  be  approved 
by  the  officer  making  the  deposit  and  the  district  attorney 
of  a  county  or  city  attorney  of  a  city.  The  market  value 
of  the  bonds  furnished  as  security  must  be  at  least  ten 
per  cent  in  excess  of  the  amount  of  the  deposit;  provided, 
the  amount  of  the  deposit  cannot  in  any  case  exceed  the 
face  value  of  the  bonds.  The  bank  receiving  such  deposit 
must  pay  a  reasonable  amount  of  interest,  which  must  not 
be  less  than  two  per  cent  per  annum  on  the  daily  balances 
deposited.  The  rate  of  interest  must  be  fixed  annually  in 
the  month  of  January,  in  the  case  of  counties  by  the  treas- 
urer, auditor  and  chairman  of  the  board  of  supervisors, 
or  in  the  case  of  cities  by  the  treasurer,  auditor  (or  clerk 
in  cities  having  no  auditor),  and  chairman  of  the  council 
or  other  governing  body  of  the  municipality.  Interest  on 
deposits  must  be  paid  quarterly.  Deposits  are  subject  to 
withdrawal  at  any  time  on  demand.  The  bank  may  also 
return  deposits  at  any  time.  The  total  amount  deposited 
in  any  bank  cannot  at  any  one  time  exceed  fifty  per  cent 
of  its  capital  stock.  No  officer  can  have  on  deposit  at  any 
one  time  more  than  ten  per  cent  of  the  public  moneys  under 
his  control,  and  available  for  deposit,  in  any  bank,  while 
there  are  other  qualified  banks  requesting  deposits.  Money 
must  be  deposited  in  banks  within  the  county  or  city,  and 
no  officer  can  be  required  to  deposit  money  in  outside  banks. 
Act  of  the  Legislature,  approved  March  23,  1907. 


740  BUSINESS   LAWS   FOR  BUSINESS    MEN. 

Section  936.— NATIONAL  BANK  CANNOT  DEAL 
IN  STOCKS. — A  national  bank  has  no  power  to  deal  in 
stocks  of  another  corporation;  and  it  cannot  purchase  or 
subscribe  for  the  stock  of  another  corporation.  As  inci- 
dental to  the  power  to  loan  money  on  personal  security, 
however,  a  national  bank  may,  in  the  usual  course  of  doing 
such  business,  accept  stock  of  another  corporation  as  col- 
lateral; and  by  the  enforcement  of  its  rights  as  pledgee  it 
may  become  the  owner  of  the  collateral;  but  it  cannot,  in 
the  ordinary  course  of  business,  buy  or  sell  stocks  of  another 
corporation.  (Decided  by  the  Supreme  Court  in  the  case  of 
Chemical  National  Bank  vs.  Havermale,  which  decision  is 
printed  in  Volume  120  of  the  California  Reports,  page  53.) 

Section  937.— TAKING  OF  STOCK  IN  SATISFAC- 
TION OF  PLEDGE.— While  a  bank  organized  under  the 
act  of  congress  as  a  national  bank  is  not  given  the  power 
to  deal  in  stocks  or  bonds,  such  bank  may  take  title  to 
stocks  or  bonds  in  compromise  of  a  disputed  or  doubtful 
claim,  or  take  them  in  pledge,  or  purchase  them  with  a  view 
to  protecting  or  satisfying  a  claim  secured  "by  such  pledge. 

Prompt  Resale. — Where  a  national  bank  buys  stock 
pledged  to  it,  it  should  dispose  of  such  stock  as  soon  as  a 
sale  can,  to  proper  advantage,  be  made.  (Decided  by  the 
Supreme  Court  of  California,  in  the  case  of  McBoyle  vs. 
Union  National  Bank,  which  decision  is  printed  in  Vol  42, 
California  Decisions,  page  499.) 


PART  VIII. 

MINES    AND    MINING. 

Section  938.— UNITED  STATES  LAWS.— The  laws 
of  the  United  States  govern  the  subject  of  mines  and  min- 
ing, and  provide  the  manner  in  which  locations  shall  be 
made,  how  a  mining  claim  can  be  held,  and  the  particular 
lands  upon  which  a  mining  location  may  be  placed.  The 
laws  of  the  United  States  also  direct  and  control  the  rights 
and  liabilities  of  miners  in  relation  to  each  other.  The 
laws  of  the  United  States  are  paramount  on  all  these  mat- 
ters. 

Section  939.— STATE  LAWS.— While,  as  has  been  said, 
the  laws  of  the  United  States  are  paramount,  yet  the  State 
of  California  has  power,  through  its  Legislature,  to  pass 
mining  laws,  providing  for  the  health  and  safety  of  those 
engaged  in  mining,  or  employed  in  and  about  mining  works; 
and  to  pass  mining  laws  regulating  locations,  and  other  mat- 
ters, provided  such  laws  are  not  in  conflict  with  the  laws 
of  the  United  States. 

Section    940.— LOCAL    RULES    AND    CUSTOMS.— 

The  miners  of  any  mining  district  in  the  State  may  adopt 
local  rules  and  establish  local  customs  in  relation  to  the  acqui- 
sition, holding,  and  working  of  claims  within  such  district; 
and  such  rules  and  customs,  when  proved,  have  the  force 
of  law,  provided  they  do  not  conflict  with  the  laws  of  the 
United  States  or  of  the  State  of  California.  These  local 
rules  and  customs  usually  deal  with  the  posting  and  record- 
ing of  location  notices,  and  sometimes  regulate  the  size 
of  a  claim,  and  the  number  of  claims  which  any  person 
may   locate,   in  the   district;   and   while  they   cannot   extend 

(741) 


742  BUSINESS   LAWS   FOR   BUSINESS    MEN. 

or  enlarge  the  rights  conferred  by  the  laws  of  the  United 
States  or  of  the  State,  they  can  and  frequently  do  restrict 
them. 

Section  941.— WHO  MAY  LOCATE  A  MINING 
CLAIM. — Only  those  who  are  citizens  of  the  United  States, 
or  who  have  declared  their  intention  to  become  such,  are 
allowed  by  the  law  to  make  a  location  of  mineral  lands  in 
California. 

Revised  Statutes  of  the  United  States,  Section  2319. 

Act  of  the  Legislature,  approved  March  13,  1909. 

Section  942.  — UPON  WHAT  LAND  MINING 
CLAIM  MAY  BE  LOCATED.— Only  unoccupied,  un- 
claimed public  mineral  lands  are  locatable  as  a  mining  claim. 
The  land  must  be  public  land,  that  is,  it  must  be  land  the 
title  to  which  is  in  the  United  States,  and  which  is  open  to 
entry.  Therefore,  if  it  is  land  which  has  been  expressly  re- 
served by  law,  or  if  it  is  occupied  as  an  Indian  Reservation, 
it  is  not  open  to  entry  as  mineral  land.  It  must  be  unoccu- 
pied and  unclaimed;  that  is,  it  cannot  be  located  upon  if 
there  is  already  a  claimant  in  good  faith  occupying  the  land. 
But  this  does  not  mean  every  occupancy  of  any  character, 
a  mere  possession  without  right.  The  occupation  and  claim 
to  the  land,  in  order  to  be  a  bar  to  location  by  another, 
must  be  in  good  faith  and  in  compliance  with  the  law  of 
the  United  States.  And,  lastly,  it  must  be  mineral  land. 
The  test  of  the  character  of  the  land  is,  whether  it  is  more 
valuable  for  minerals  than  for  agricultural  purposes.  If 
the  land  contains  mineral  in  its  natural  state,  it  is  mineral 
land,  and  may  be  located  upon  as  a  mining  claim. 

Section  943.— VALUABLE   MINERAL   DEPOSIT.— 

In  order  to  constitute  a  valuable  mineral  deposit  within  the 
meaning  of  the  federal  laws,  there  must  be  minerals  in  such 
quantity  as  to  justify  the  expenditure  of  effort  to  extract 
them.  It  is  not  necessary,  however,  that  mineral  of  sufficient 
amount  and  value  to  allow  immediate  profitable  working  be 


MINES   AND   MINING.  743 

shown  to  exist  in  the  land,  a  present  or  prospective  commer- 
cial value  being  enough.  (Decided  by  the  Supreme  Court  of 
California,  in  the  case  of  Madison  vs.  Octave  Oil  Company, 
which  decision  is  printed  in  Volume  37,  California  Decisions, 
page  29.) 

Section  944.— WHAT  IS  MINING.— Mining  is  defined 
to  be  digging  and  searching  for  precious  and  economic 
metals  and  minerals,  whether  by  shafts,  pits,  and  tunnels, 
or  by  placer  or  hydraulic  gravel  mining;  and  the  term 
includes  the  mining  of  coal,  iron,  phosphate,  and  hydro- 
carbons, and  the  boring  for  oil  and  gas,  as  well  as  prospect- 
ing for  any  of  those  metals  or  minerals. 

Section  945.— WHAT  CONSTITUTES  A  VALID 
LOCATION. — To  constitute  a  valid  location  of  a  mining 
claim,  three  things  are  always  essential.  There  must  be,  first, 
discovery  of  the  mineral;  second,  posting  and  recording  of 
notice ;  third,  marking  the  location  on  the  ground  so  that 
the  boundaries  can  be  readily  traced. 

In  all  legislation,  whether  of  congress  or  of  a  state  or 
territory,  and  by  all  mining  regulations  and  rules,  discovery 
and  appropriation  are  recognized  as  the  source  of  title  to 
mining  claims,  and  development  by  working  as  the  condition 
of  continued  ownership  until  a  patent  is  obtained. 

(a)  Appropriation. — "Appropriation"  is  ordinarily  ef- 
fected by  first  posting  the  notice  of  location  at  or  near  the 
point  where  the  ledge  is  exposed,  then  recording  the  notice, 
and  thereafter  marking  the  boundaries. 

(b)  Performance  of  Essential  Acts. — When  every  act 
necessary  to  complete  a  location  has  been  done  before  an 
adverse  claim  has  accrued,  the  order  in  which  such  acts 
have  been  performed  is  immaterial. 

(c)  Marking  of  Boundaries  Main  Act. — The  marking 
of  the  location  upon  the  ground  so  that  the  boundaries  may 
be  readily  traced,  is  the  main  act  of  original  location. 


744  BUSINESS   LAWS   FOR   BUSINESS    MEN, 

(d)  Posting  of  Notice. — There  is  nothing  in  the  statute 
requiring  the  posting  of  the  notice  on  the  day  of  discovery, 
or  prescribing  where  it  shall  be  posted  on  the  claim  or  at  all. 

(e)  Completion  of  Location. — The  discovery  is  the 
source  of  title  and  vests  the  discoverer  with  the  prior  right 
to  complete  his  location,  which  he  can  only  lose  by  a  failure 
within  a  reasonable  time  to  mark  his  location  so  that  the 
boundaries  can  be  traced  upon  the  ground. 

(f)  Prior  Posting  Unnecessary  to   Prior   Discovery. — 

Prior  discovery  is  not  required  to  be  accompanied  by  a 
prior  posting  of  notice  in  order  to  vest  the  claimant  with 
the  prior  right  to  complete  his  location. 

The  mining  law  of  the  United  States  does  not  require  the 
notice  of  location  to  be  posted  or  recorded. 

(Decided  by  the  Court  of  Appeals  of  California,  in  the 
case  of  McCleary  vs,  W.  D.  Broaddus,  which  decision  is 
printed  in  Volume  11  of  California  Appellate  Decisions, 
page  146.) 

Section  946.— THE  DISCOVERY.— If  it  is  a  lode  claim, 
there  must  be  an  actual  discovery  of  mineral.  If  a  person 
should  attempt  to  take  a  lode  claim  on  land  which  he  had 
not  prospected,  and  knew  nothing  about,  it  would  not  be  a 
valid  location.  Good  faith  is  required  by  the  law.  And  no 
location  of  a  claim  can  be  made  until  the  discovery  of  the 
vein  or  lode  within  the  limits  of  the  claim  located.  To  "dis- 
cover" a  quartz  claim,  means  the  actual  finding  of  mineral- 
bearing  rock  in  place,  the  discovery  of  mineral-bearing  ore 
within  the  crevices  of  the  rock,  or  incased  within  defined 
boundaries;  or,  the  discovery  of  such  indications  of  the 
presence  of  ore  within  rock  in  place,  as  an  experienced 
miner  would  feel  justified  in  spending  his  time  and  money 
upon  with  the  reasonable  expectation  of  finding  ore  in  pay- 
ing quantities.  When  a  locator  finds  rock  in  place  con- 
taining mineral,  he  has  made  a  discovery  within  the  mean- 
ing of  the  law,  whether  the  earth  or  rock  is  rich  or  poor, 
whether   it   assays   high   or   low.     It   is   the   finding   of  the 


MINES   AND   MINING.  745 

mineral  in  the  rock  in  place,  as  distinguished  from  float 
rock,  that  constitutes  the  discovery,  and  warrants  the  pros- 
pector in  making  a  location  of  a  mining  claim.  The  claim 
ant  should,  therefore,  prior  to  locating  his  claim,  unless  the 
vein  can  be  traced  upon  the  surface,  sink  a  shaft  or  run  a 
tunnel  or  drift  to  a  sufficient  depth  to  discover  and  develop 
a  mineral-bearing  vein,  lode,  or  crevice.  He  should  also 
determine,  if  possible,  the  general  course  of  the  vein  in 
either  direction  from  the  point  of  discovery,  by  which  direc 
tion  he  will  be,  governed  in  making  the  boundaries  of  his 
claim  on  the  surface.  What  has  been  said  on  the  subject 
of  discovery  applies  only  to  lode  or  quartz  claims.  The 
law  does  not  specify  any  actual  discovery  of  mineral  as  an 
essential  to  the  location  of  a  placer  claim,  and  it  has  been 
held  in  California  that  a  location  of  a  placer  claim  may  be 
made  without  discovery  of  minerals  being  first  made  on  the 
ground.  But  no  patent  could  be  obtained  for  a  placer  claim 
without  proof  of  the  mineral  character  of  the  claim. 

Section     947.— MARKING     THE     BOUNDARIES.— 

The  boundaries  must  be  marked  in  such  a  way  that  the 
claim  can  be  identified  on  the  ground.  The  locator  should 
drive  a  post  or  erect  a  monument  of  stones  at  each  corner 
of  his  surface  ground;  and  at  the  point  of  discovery,  or  dis- 
covery shaft,  he  should  fix  a  post,  stake,  or  board,  on  which 
should  be  designated  the  name  of  the  lode,  the  name  or 
names  of  the  locators,  and  the  number  of  feet  claimed  and 
in  which  direction  from  the  point  of  discovery. 

Section  948.— LOCATION  NOTICE.— A  notice  of  lo- 
cation must  be  posted  on  the  claim,  at  the  point  of  discovery, 
or  discovery  shaft. 

Section  949.— FORM  OF  NOTICE  OF  LOCATION 
OF  LODE  CLAIM.— The  following  is  a  form  of  location 
of  lode  claim : — 


746  BUSINESS   LAWS   FOR   BUSINESS    MEN. 

Location   Notice. 

NOTICE  IS  HEREBY  GIVEN  TO  ALL  WHOM   IT 

MAY    CONCERN:      That , 

a  citizen  of  the  United  States,  having  discovered  a  lode  or 

vein  of  quartz,  or  rock  in  place,  bearing 

(here  insert  kind  of  mineral  discovered),  within  the  limits 
of  the  claim  hereby  located,  has  this  day,  under  and  in 
accordance  with  the  Revised  Statutes  of  the  United  States, 

Chapter   VII,   Title   32,    located (here 

state  number  of  feet)   linear  feet  of  this  vein  or  lode,  with 

surface  ground (here  state  number  of 

feet)    feet  in  width,  situated  in 

mining  district.  County  of ,  State  of  Cal- 
ifornia,   and    known    as (here 

state  name  of  mine),  extending feet  to 

a (here    describe    natural 

object  or  monument) ,  and feet 

to (here  describe  natural  object  or 

monument)  from  this  notice  at  the  discovery  or  prospect 
shaft,  the  exterior  boundaries  of  this  claim  being  distinctly 
marked  by  reference  to  some  natural  object  or  permanent 
monument,    and    more    particularly     described     as     follows. 

to-wit :    

(Here  insert  description.) 


and  I  intend  to  hold  and  work  said  claim  as  provided  by 
the  local  customs  and  local  rules  of  miners,  and  the  mining 
Statutes  of  the  United  States, 


Dated  on  the  ground,  the day  of ,  191 . . 

Discovered ,  191 . . 

,  locator. 

Recorded ,  191 . . 

Section  950.— FORM  OF  NOTICE  OF  LOCATION 
OF  A  PLACER  CLAIM.— The  following  is  a  form  of 
notice  of  location  of  a  placer  claim: — 

Location  Notice. 

NOTICE  IS  HEREBY  GIVEN  TO  ALL  WHOM  IT 

MAY  CONCERN :   That ,  a  citizen 

of  the   United    States,   has   this   day   located,   in   accordance 


MINES   AND    MINING.  747 

with  the  Revised  Statutes  of  the  United  States,  Chapter 
VI,  Title  32,  the  following  described  placer  mining  ground, 
to- wit :   

(Description:  If  on  surveyed  land,  describe  the  legal  sub- 
division. If  on  unsurveyed  land,  describe  as  accurately  as 
possible  by  courses  and  distances.) 


Situated  in mining  district,  County 

of ,  State  of  California.     This  claim  shall 

be  known  as (here  insert 

name  of  claim)  mining  claim,  and  I  intend  to  work  the 
same  in  accordance  with  the  local  customs  and  rules  of 
miners,  and  the  mining  Statutes  of  the  United  States. 


Dated  on  the  ground  the day  of ,  191 . . . 

Located ,  191. . 

Recorded ,  191.. 

Section  951.— RECORDING  LOCATION  NOTICE.— 

The  Congress  of  the  United  States  has  provided  by  law 
that  "the  location  notice  must  be  filed  for  record  in  all 
respects  as  required  by  the  State  laws  and  local  rules  and 
regulations,  if  there  be  any."  The  State  of  California,  by 
an  Act  of  the  Legislature,  has  provided  that  notices  of 
location  of  mining  claims  must  be  recorded  in  the  Recorder's 
office  of  the  county  where  the  mining  claim  is  situated, 
within  thirty  days  after  the  posting  of  notice  of  location. 
This  applies  to  lode,  placer,  and  tunnel  claims. 

Civil  Code  of  California,  Section  1159. 

Act  of  the  Legislature,  approved  March  13,  1909. 

Section  952.— SIZE  OF  LODE  CLAIM.— Any  person 
who  is  a  citizen  of  the  United  States,  or  who  has  declared 
his  intention  to  become  a  citizen,  may  locate,  record,  and 
hold  a  mining  claim  of  fifteen  hundred  linear  feet  along  the 
course  of  any  mineral  vein  or  lode  subject  to  location;  or 
an  association  of  persons,  who  are  citizens  of  the  United 
States,  may   make  a  joint   location  of   fifteen   hundred   feet 


748  BUSINESS   LAWS   FOR  BUSINESS    MEN. 

along  the  course  of  the  lode  or  vein.  The  claim,  according 
to  the  law,  is  not  to  exceed  fifteen  hundred  feet  in  length. 
As  to  width,  the  law  provides  that  the  lateral  extent  of 
locations  on  veins  or  lodes  shall  in  no  case  exceed  three 
hundred  feet  on  each  side  of  the  middle  of  the  vein  at  the 
surface.  Thus  the  extreme  size  of  a  lode  claim  is  fifteen 
hundred  feet  in  length  by  six  hundred  feet  in  width.  But 
the  law  also  gives  mining  districts  the  right  to  reduce  the 
width  of  a  mining  claim  to  less  than  six  hundred  feet, 
but  not  less  than  fifty  feet.  The  laws  referred  to  are  the 
laws  of  the  United  States.  The  State  of  California  has 
no  law  of  its  own  upon  the  subject.  When  the  locator 
does  not  determine  by  survey  or  exploration  where  the 
middle  of  his  vein  at  the  surface  is,  his  discovery  shaft  is 
taken  to  mark  the  middle  of  the  vein. 

Where  the  vein  runs  in  one  direction,  the  location  must 
follow  the  direction  of  the  vein,  and  the  locator  cannot  stake 
his  claim  crosswise  of  the  vein  and  expect  to  hold  the  full 
amount  allowed  by  law  as  the  size  of  a  lode  claim.  Where 
the  vein  within  a  mining  claim  ran  in  a  northerly  and  south- 
erly direction,  and  the  location  was  crosswise  of  the  vein, 
it  was  held  by  the  Court  of  Appeals  that  the  side-lines  were 
really  end-lines,  considering  the  direction  of  the  lode  on  the 
surface;  and  that  the  rights  of  the  locators  must  be  con- 
fined to  the  area  within  the  side-lines  three  hundred  feet 
on  each  side  of  the  vein  or  lode.  (Decided  by  the  California 
Court  of  Appeals,  in  the  case  of  Southern  California  Ry. 
Co.  vs.  O'Donnell,  which  decision  is  printed  in  Volume  85 
of  the  Pacific  Reporter  (advance  sheets),  page  932.) 

Revised  Statutes  of  the  United  States,  Section  2320. 

Section  953.— SIZE  OF  PLACER  CLAIM.— An  indi- 
vidual may  locate  twenty  acres  as  a  placer  claim.  Two 
persons  may  associate  themselves  together  and  locate  forty 
acres  as  a  placer  claim;  and  so  on  up  to  eight  persons,  who 
may  locate  one  hundred  and  sixty  acres  as  a  placer  claim. 
But  no  individual  can  locate  more  than  twenty  acres,   and 


MINES  AND   MINING.  749 

no  association  of  persons  can  locate  more  than  one  hundred 
and  sixty  acres. 

Revised  Statutes  of  the  United  States,  Sections  2330, 
2331. 

Section  954.— DISCOVERY  ON  PLACER  GROUND. 

— -It  has  already  been  stated  that  there  must  be  a  valid  dis- 
covery of  minerals,  before  the  location  can  have  any  legal 
effect,  and  that  the  discovery  of  a  quartz  claim  must  be  of 
a  lode  or  vein  in  rock  in  place.  But  when  we  come  to  con- 
sider a  placer  claim,  the  rule  stated  does  not  apply.  The 
term  "placer"  is  of  wide  significance.  It  includes  any  form 
of  mineral  deposit,  except  quartz  or  other  rock  in  place. 
All  forms  of  mineral  and  metal  bearing  earth,  other  than 
veins  or  lodes  in  rock  in  place,  are  held  to  be  "placer." 
They  cannot  be  fixed  in  place,  confined  within  walls  of 
rock,  for  they  may  be  found  in  shifting  sand,  or  loose 
gravel,  or  in  the  channels  of  rivers ;  and  the  term  "placer" 
includes  natural  gas,  petroleum,  and  hydrocarbons.  But 
while  a  valid  location  may  be  made  under  the  laws  relating 
to  placer  locations  without  a  previous  discovery  of  mineral, 
yet  such  discovery  must  be  made  before  a  patent  from  the 
United  States  Government  can  be  issued  under  the  Acts  of 
Congress  relating  to  the  disposition  of  mineral  lands.  (De- 
cided by  the  Supreme  Court  of  California  in  the  case  of 
Gregory  vs.  Pershbaker,  which  decision  is  printed  in  Volume 
73  of  the  California  Reports,  page  109.) 

Section  955.— DISCOVERY  OF  OIL.— A  discovery  of 
oil  within  the  limits  of  the  claim  is  essential  to  the  validity 
of  an  oil  location.  To  constitute  a  discovery  of  oil,  there 
must  be  something  more  than  ordinary  surface  indications, 
such  as  the  seepage  of  oil,  or  geological  formations.  There 
must  be  an  actual  discovery  of  oil  in  paying  quantities.  It 
is  not  necessary  that  this  discovery  be  made  before  or  at  the 
time  of  the  location,  for  a  subsequent  discovery  will  operate 
to  perfect  the  location.  But  if  the  location  is  made  before 
discovery  of  oil  in  paying  quantities,  and  the  locator  leaves 


750  BUSINESS   LAWS   FOR   BUSINESS    MEN. 

the  claim,  without  prosecuting  work  on  it,  another  person  may 
lawfully  enter  and  locate  on  the  land.  (Decided  by  the  Su- 
preme Court  of  California,  in  the  case  of  New  England  and 
Coalinga  Oil  Co.  vs.  Congdon,  which  decision  is  printed  in 
Volume  34  of  California  Decisions,  page  395.) 

Section  956.— HOMESTEADER  AND  OIL  LO- 
CATOR.— A  claimant  to  government  land  under  a  home- 
stead entry  acquires  a  valid  title  thereto  as  against  prior 
locators  under  an  oil  placer  mining  location,  where  such 
locators  were  not  in  the  possession  of  the  land  at  the  time 
of  such  entry,  nor  engaged  in  the  diligent  prosecution  of 
the  work  toward  a  discovery,  but  had  merely  made  improve- 
ments thereon  in  excess  of  the  required  amount  of  assess- 
ment work. 

The  rule  that  actual  possession  of  a  mining  claim  held 
under  a  mining  location  is  unnecessary  for  the  protection 
of  the  title  thereto,  is  applicable  only  when  the  location  is 
valid  and  complete. 

The  principle  that  discovery  and  appropriation  are  the 
source  of  title  of  mining  claims,  and  assessment  or  develop- 
ment work  is  the  condition  of  their  continued  possession, 
applies  only  when  the  location  is  valid  and  complete. 

A  location  is  valid  and  complete  only  when,  after  compli- 
ance with  other  requirements,  a  discovery  of  valuable  min- 
eral in  place  has  been  made. 

In  case  of  oil  locations  the  locator  is  permitted  to  mark 
the  boundaries  of  his  location  and  post  and  record  his  notice 
after  discovery  and,  while  diligently  prosecuting  his  work 
to  a  discovery,  is  entitled  to  protection  in  his  possession 
undisturbed  by  any  form  of  hostile  or  clandestine  entry. 

(Decided  by  the  Supreme  Court  of  California,  in  the  case 
of  McLemare  vs.  Express  Oil  Company,  which  decision  is 
printed  in  Volume  40  of  the  California  Decisions,  page  371.) 

Section  957.— TIME  WITHIN  WHICH  LOCATION 
MUST  BE  MADE  AFTER  DISCOVERY.— The  law  of 

the  United  States  does  not  specify  any  certain  time  within 


MINES    AND   MINING.  751 

which  location  must  be  made,  and  notices  posted  or  re- 
corded, after  discovery.  The  location  must  be  made,  and 
the  boundaries  marked  on  the  ground,  within  a  reasonable 
time  after  discovery.  If  local  rules  and  customs  prescribe 
a  certain  time,  that  time  must  be  followed.  Whenever  any 
patent  to  mineral  lands  shall  contain  a  statement  of  the 
date  of  location  of  a  claim  or  claims,  upon  which  such  patent 
is  based,  this  statement  will  be  received  in  the  courts  of 
California  as  prima  facie  evidence  of  the  true  date  of  the 
location.     (Act  of  the  Legislature,  approved  March  7,  1905.) 

Section  958.— OIL  AND  A SPHALTUM.— Petroleum, 
natural  gas,  and  asphaltum  are  held  to  be  mineral,  and  may 
be  located  as  placer  claims.  Much  controversy  over  the 
question,  whether  public  land  in  which  petroleum  was  found 
could  be  located  under  the  mining  laws,  caused  the  Con- 
gress of  the  United  States  to  pass  an  act  on  the  subject 
in  1897,  which  removes  all  doubt.  The  law  reads :  "Any 
person  authorized  to  enter  lands  under  the  mining  laws  of 
the  United  States  may  enter  or  obtain  patent  to  lands  con- 
taining petroleum  or  other  mineral  oil,  and  chiefly  valuable 
therefor,  under  the  provisions  of  the  laws  relating  to  placer 
and  mineral  claims."  Therefore,  twenty  acres  of  oil  lands 
may  be  located  as  a  placer  claim  by  an  individual,  and  as 
much  as  one  hundred  and  sixty  acres  by  an  association  of 
persons.  It  is  not  necessary  that  discovery  of  oil  should 
be  first  made. 

Act  of  Congress,  approved  February  11,  1897. 

Section  959.— TRANSFER  OF  RIGHTS  BY  MEM- 
BERS OF  ASSOCIATION.— The  rights  acquired  by  an 
association  of  locators  of  mineral  lands  may  be  transferred 
among  themselves  before  discovery,  without  affecting  the 
whole  claim,  and  the  subsequent  discovery  by  any  grantee 
will  perfect  the  entire  original  location. 

Where  an  association  of  eight  persons  locate  one  hundred 
and  sixty  acres  of  mineral  land  for  the  purpose  of  discover- 
ing oil,  and  before  discovery  transfer  a  specific  portion  to  a 


752  BUSINESS   LAWS   FOR   BUSINESS    MEN. 

stranger,  such  portion  becomes  a  separate  and  independent 
claim,  unless  there  be  an  agreement  to  the  contrary;  and  a 
subsequent  discovery  of  oil  on  such  several  portion  will  not 
perfect  the  entire  original  location.  (Decided  by  the  Su- 
preme Court  of  California,  in  the  case  of  Merced  Oil  Mining 
Company  vs.  R.  L.  Patterson,  which  decision  is  printed  in 
California  Decisions,  Volume  35,  page  550.) 

Section  960.— ANNUAL  LABOR  AND  ASSESS- 
MENT WORK. — In  order  to  hold  a  mining  claim,  the 
locator  must  do  a  certain  amount  of  work  each  year,  and 
this  is  measured  not  by  time,  but  by  the  value  of  the  work 
performed.  On  each  claim  located,  whether  quartz  or 
placer,  not  less  than  one  hundred  dollars'  worth  of  labor 
must  be  done,  or  an  equal  value  of  improvements  made, 
during  each  year  until  a  patent  has  been  issued  for  the 
claim.  A  failure  to  comply  with  this  law  forfeits  the  claim, 
and  leaves  it  open  for  relocation  by  another  person.  But 
if  the  original  locator,  his  heirs,  assigns,  or  legal  representa- 
tives, after  the  time  has  expired  within  which  he  should 
have  done  the  assessment  work,  and  before  another  person 
has  located  on  the  ground,  then  proceeds  to  do  the  work, 
he  saves  the  forfeiture  and  recovers  the  claim  again  to 
himself. 

Revised  Statutes  of  the  United  States,  Section  2324. 

Section  961.— WHEN  FIRST  WORK  MUST  BE 
DONE. — The  law  does  not  mean  that  the  work  should  be 
done  within  a  year  from  the  date  of  location.  The  period 
for  performing  the  assessment  work  commences  on  the  first 
day  of  January  succeeding  the  date  of  location  of  the  claim. 
At  least  one  hundred  dollars'  worth  of  work  must  be  done 
each  year. 

Supplement   to   the   Revised    Statutes    of   the    United 
States,  Volume  1,  page  276. 

Section  962.  — WHERE  WORK  SHOULD  BE 
DONE. — Annual  labor  or  improvements  to  the  amount  of 
one  hundred  dollars  may  be  anywhere  within  the  boundaries 


MINES    AND   MINING.  753 

of  the  claim.  But  it  is  not  absolutely  necessary  that  this 
work  be  done  within  such  boundaries.  It  may  be  done  on 
adjoining  or  neighboring  ground,  if  the  work  so  done  tends 
to  develop  the  claim,  and  this  will  be  a  sufficient  compliance 
with  the  law. 

And  in  a  case  where  a  miner  holds  several  claims,  the 
annual  labor  or  improvements  required  for  the  whole  of 
them  may  be  done  or  made  upon  any  one  or  more  of  them, 
provided  that  such  labor  or  improvements  tend  to  develop 
them  all.  And  even  if  the  claim  upon  which  the  work  is 
done  is  patented,  and  the  remainder  are  unpatented,  it  will 
make  no  difference,  so  long  as  the  work  done  tends  in  fact 
to  develop,  and  is  done  for  the  purpose  of  developing,  the 
unpatented  claims,  and  as  assessment  work  upon  them. 

Work  done  or  improvements  made,  for  the  purpose  of 
developing  the  ground  embraced  in  the  location,  outside 
of  the  limits  of  the  claim,  is  as  available  for  holding  it  as 
if  done  within  its  boundaries.  Labor  and  improvements, 
within  the  meaning  of  the  law,  are  deemed  to  have  been 
had  on  a  mining  claim,  whether  it  consists  of  one  location  or 
several,  when  the  labor  is  performed  or  the  improvements 
are  made  for  its  development,  to  facilitate  the  extraction 
of  the  metals  it  may  contain ;  and  such  labor  and  im- 
provements may  lawfully  be  on  ground  which  originally 
constituted  only  one  of  the  locations,  as  in  sinking  a  shaft ; 
or  the  labor  and  improvements  may  be  at  a  distance  from 
the  claim  itself,  as  where  the  labor  is  performed  for  the 
turning  of  a  stream,  or  to  bring  water  on  the  claim,  or  where 
the  improvement  consists  in  the  construction  of  a  flume  to 
carry  off  the  debris  or  waste  material.  (Decided  by  the 
Supreme  Court  of  California  in  the  case  of  De  Noon  vs. 
Morrison,  which  decision  is  printed  in  Volume  83  of  the 
California  Reports,  page  163.) 

Section  963.— PROOF  OF  ASSESSMENT  WORK.— 

The   law   of    California   provides    that   proof   of    assessment 
work  must  be  made  by  affidavit,  within  thirty  days  after  the 


754  BUSINESS   LAWS   FOR   BUSINESS   MEN. 

time  limited  for  performing  the  labor  or  making  the  im- 
provements, particularly  describing  the  labor  performed  and 
improvements  made,  and  the  value  thereof.  The  law  also 
provides  that  this  affidavit  must  be  recorded  in  the  office 
of  the  County  Recorder  of  the  county  in  which  the  mine 
or  claim  is  situated,  within  thirty  days. 

Statutes  of  1891,  page  219. 

Act  of  the  Legislature,  approved  March  13,  1909. 

Section  964.— FORM  OF  PROOF  OF  ASSESSMENT 
WORK. — The  following  is  a  form  of  proof  of  assessment 
work : — 

Proof  of  Labor. 

STATE  OF  CALIFORNIA,  1  ^^ 

County   of ( 

Before  me  the  subscriber  personally  appeared 

,  who  being  duly  sworn  says,  that  at  least 

$100  worth  of  labor  or  improvements  were  performed  or 
made  upon (here  state  name  of  min- 
ing claim) ,  situated  in ^ mining 

district.  County  of ,  State  of  California, 

during  the  year  ending  December  31,  191...  Such  expendi- 
ture was  made  by  or  at  the  expense  of 

,  owner  of  said  claim,  for  the  purpose 

of  holding  said  claim. 

That  the  labor  performed  and  improvements  made   were 
as  follows,  to-wit :    

(Here  give  a  particular  description  of  the  labor  performed 

and  improvements  made.) 

That  the  value  of  said  labor  was  $ 

That  the  value  of  said  improvements  was  $ 


Subscribed  and  sworn  to  before  me  this day 

of 191... 


Notary  Public  in  and  for  the  County  of. 
State  of  California. 


MINES   AND   MINING.  755 

Section  965.— RELOCATION  OF  CLAIM  AFTER 
FORFEITURE. — If  for  any  reason  a  mining  claim  has 
been  forfeited,  by  failure  to  do  assessment  work,  or  by 
reason  of  abandonment,  another  person  may  relocate  it. 
He  must  make  his  location  as  the  original  locator  did,  and 
in  his  notice  of  location  he  should  state  that  the  claim  was 
originally  located  by  another  person  (naming  him),  but  that 
the  claim  had  been  abandoned  or  forfeited. 

Section  966.— MINERAL  ENTRIES  WITHIN  FOR- 
EST RESERVES.— The  law  provides  that  "any  mineral 
lands  in  any  forest  reservation  which  have  been  or  which 
may  be  shown  to  be  such,  and  subject  to  entry  under  the 
existing  mining  laws  of  the  United  States  and  the  rules 
and  regulations  applying  thereto,  shall  continue  to  be  sub- 
ject to  such  location  and  entry,"  notwithstanding  the  reser- 
vation. This  makes  mineral  lands  in  the  forest  reserves 
subject  to  location  and  entry  under  the  general  mining  laws 
in  the  usual  manner. 

Section  967.— LOCATION  BY  AGENTS.— A  location 
of  a  mining  claim  may  be  made  in  the  name  of  another  than 
the  actual  locator,  and  when  so  made,  the  person  in  whose 
name  it  is  made  becomes  vested  with  the  legal  title  to  the 
claim.  A  prospector  may  locate  for  himself,  and  then  make 
other  locations  in  the  names  of  others,  and  he  will  be  con- 
sidered the  agent  of  the  persons  in  whose  names  the  loca- 
tions are  made.  (Decided  by  the  Supreme  Court  of  Cali- 
fornia in  the  case  of  Moore  vs.  Hamerslag,  which  decision 
is  printed  in  Volume  109  of  the  California  Reports,  page 
122.) 

Section  968.— LOCATION  BY  MINORS.— A  valid 
location  of  a  mining  claim  may  be  made  by  a  minor.  The 
law  allows  any  one  who  is  a  citizen,  or  who  has  declared 
his  intention  to  become  such,  to  locate  a  mining  claim.  The 
law  does  not  require  that  the  locator  shall  be  of  any  par- 
ticular age.     In  a  California  case  the  Supreme  Court  held 


756  BUSINESS   LAWS   FOR  BUSINESS   MEN. 

that  a  minor  can  make  a  location  of  a  mining  claim  in  this 
State,  saying:  "Nor  is  there  any  reason  in  the  nature  of 
things  why  a  minor  may  not  make  a  valid  location.  After 
the  preliminary  steps  are  taken,  all  that  is  required  is  that 
a  certain  amount  of  work  shall  be  done.  If  the  minor  can- 
not do  it,  he  can  get  any  one  to  do  it  for  him,  and  the  con- 
dition imposed  by  the  statute  is  fulfilled.  If  he  cannot, 
the  claim  lapses,  and  is  open  to  relocation  by  others.  It 
may  be  added  that  so  far  as  we  know  it  is  the  practice 
of  many  mining  communities  for  minors  to  locate  claims." 
(Decided  by  the  Supreme  Court  of  California  in  the  case  of 
Thompson  vs.  Spray,  which  decision  is  printed  in  Volume 
72  of  the  California  Reports,  page  528.) 

Sectipn  969.— TUNNEL  CLAIMS.— The  laws  of  the 
United  States  provide  for  certain  tunnel  claims,  where  a 
tunnel  is  run  for  the  discovery  of  "blind  lodes  or  veins;" 
and  so  long  as  the  tunnel  claimant  operates  his  tunnel,  the 
law  reserves  in  his  favor  3,000  feet  from  the  face  of  the 
tunnel,  with  1,500  feet  in  the  opposite  direction  on  the  strike 
of  the  vein,  from  either  wall  of  his  tunnel.  The  law  states 
that  the  owner  of  the  tunnel  shall  have  the  right  of  pos- 
session of  all  veins  or  lodes  within  3,000  feet  from  the  face 
of  such  tunnel,  on  the  line  thereof,  not  previously  known 
to  exist,  discovered  in  the  tunnel,  to  the  same  extent  as  if 
discovered  upon  the  surface.  Locations  on  the  line  of  such 
tunnel,  of  veins  or  lodes  not  appearing  on  the  surface,  made 
by  other  parties  after  the  commencement  of  the  tunnel,  and 
while  it  is  being  prosecuted  with  reasonable  diligence,  are 
invalid.  Failure  to  prosecute  the  work  on  the  tunnel  for 
six  months  is  considered  as  an  abandonment  of  the  right 
to  all  veins  on  the  line  not  discovered  when  the  work  ceased. 
Revised  Statutes  of  the  United  States,  Section  2323. 

Section   970.— LOCATION   OF   TUNNEL   CLAIM.— 

The  term  "face,"  as  used  in  the  tunnel  claim  law,  means  the 
first  working  face  formed  in  the  tunnel,  and  signifies  the 
point   at   which   the   tunnel   actually   enters    cover,   it    being 


MINES   AND   MINING.  757 

from  this  point  that  the  3,000  feet  are  to  be  counted 
upon  which  prospecting  is  prohibited.  To  avail  them- 
selves of  the  benefits  of  this  provision  of  law,  the  pro- 
prietors of  a  mining  tunnel  will  be  required,  at  the  time 
they  enter  cover,  to  give  proper  notice  of  their  tunnel  loca- 
tion by  erecting  a  substantial  post,  board,  or  monument 
at  the  face  or  point  of  commencement  thereof,  upon  which 
should  be  posted  a  good  and  sufficient  notice,  giving  the 
names  of  the  parties  or  company  claiming  the  tunel  right; 
the  actual  or  proposed  course  or  direction  of  the  tunnel; 
the  height  and  width  thereof,  and  the  course  and  distance 
from  such  face  or  point  of  commencement  to  some  perma- 
nent, well-known  objects  in  the  vicinity;  and  at  the  time 
of  posting  such  notice  they  should,  in  order  that  miners 
or  prospectors  may  be  enabled  to  determine  whether  or 
not  they  are  within  the  lines  of  the  tunnel,  establish  the 
boundary  lines  thereof,  by  stakes  or  monuments  placed 
along  such  lines  at  intervals  of  not  more  than  600  feet,  to 
trie  terminus  of  the  3,000  feet  from  the  face  or  point  of  com- 
mencement of  the  tunnel,  and  the  Hues  so  marked  will  define 
and  govern  as  to  the  specific  boundaries  within  which  pros- 
pecting for  lodes  not  previously  known  to  exist  is  prohib- 
ited while  work  on  the  tunnel  is  being  prosecuted  with  rea- 
sonable diligence.  A  copy  of  the  posted  notice  must  be  filed 
with  the  County  Recorder,  and  should  also  be  filed  with  the 
Recorder  of  the  mining  district,  if  any;  with  an  affidavit  at- 
tached of  the  owners,  claimants,  or  projectors  of  the  tunnel, 
stating  the  amount  expended  by  themselves  and  their  prede- 
cessors in  interest  in  prosecuting  the  work;  the  extent  of  the 
work  performed;  and  that  it  is  their  intention  in  good  faith 
to  prosecute  the  work  on  the  tunnel  with  reasonable  dili- 
gence for  the  development  of  a  vein  or  lode,  or  for  the  dis- 
covery of  mines. 

Section  971.— LODE  AND  PLACER  CLAIMS  IN 
THE  SAME  GROUND.— It  sometimes  occurs  that  a  lode 
will  be  discovered  within  the  boundaries  of  a  placer  claim. 
In    that   event,    the    owners    of   the    placer    claim    have    an 


758  BUSINESS   LAWS   FOR  BUSINESS    MEN. 

immediate  right  to  apply  to  the  Government  for  a  patent,  and 
the  application  must  state  the  existence  of  the  lode.  The 
Government  will  then  issue  a  patent  for  the  lode,  fifty  feet 
in  width,  upon  the  payment  of  $5.00  per  acre;  and  also  a 
patent  for  the  placer  portion  of  the  land  upon  the  payment 
of  $2.50  per  acre.  If  the  owner  of  a  placer  claim  makes 
application  for  a  patent,  without  mentioning  a  known  vein 
or  lode  within  its  boundaries,  any  other  person  may  locate 
the  lode,  in  the  same  manner  as  any  other  quartz  claim  is 
located,  but  acquiring  only  1,500  by  50  feet. 

Revised  Statutes  of  the  United  States,  Section  2333. 

Section  972.— DISCOVERY  OF  VEIN  PASSING 
THROUGH  PLACER  CLAIM.— If  a  discovery  is  made 
on  a  vein  passing  through  a  placer  claim,  and  at  a  point 
just  outside  the  boundary  of  the  placer  claim,  the  discoverer 
of  the  lode  may  make  a  location  which  will  include  such 
portion  of  the  placer  claim  as  is  required  to  secure  a  full 
lode  claim  of  the  dimensions  customary  in  that  mining  dis- 
trict; and  he  may  then  mine  the  vein  underneath  the  surface 
of  the  placer. 

Section  973.— MILL  SITES.— The  owner  of  a  lode 
claim  may  also  locate,  in  the  same  manner,  as  mining  claims 
are  located  (that  is,  by  posting  and  recording  notice,  and 
erecting  monuments  for  identification),  five  acres  of  non- 
mineral  land  for  a  mill  site.  The  mill  site  need  not  be 
adjacent  to  the  mining  claim.  It  must  be  used  for  a  mill 
site  in  connection  with  the  mining  claim,  where  a  mill  site 
is  located  by  the  owner  of  a  lode  claim.  But  the  law 
further  provides  that  the  owner  of  a  quartz-mill  or  reduc- 
tion-works, not  owning  a  mine  in  connection  therewith, 
may  also  locate  a  mill  site,  not  exceeding  five  acres  of  non- 
mineral  land,  and  obtain  a  patent  for  it. 

Revised  Statutes  of  the  United  States,  Section  2337. 

Section  974.— TIMBER  FOR  MINING  PURPOSES. 

The  law  allows  sufficient  timber  to  be  cut  on  mineral  land 
for  the  proper   working  of  the   mine   proper.     Timber   for 


MINES   AND   MINING.  759 

the  mine,  shafts,  or  tunnels,  for  houses  for  employees,  and 
other  purposes  in  the  working  of  the  mine,  may  lawfully 
be  cut  and  used. 

Section  975.— WATER  AND  WATER  RIGHTS  FOR 
MINING  PURPOSES.— For  the  law  as  to  water  and 
water  rights  for  mining  purposes,  see  the  subject,  "Water 
and  Water  Rights." 

Section    976.— MINING    PARTNERSHIPS.— For    the 

law  as  to  mining  partnerships,  see  under  the  heading  "Part- 
nership." 

Section  977.— LIENS  ON  MINING  CLAIMS.— For  the 

law  as  to  liens  on  mining  claims,  see  under  the  heading, 
"Mechanics'  Liens." 

Section  978.— ENTRY  OF  COAL  LANDS.— Coal  lands 
may  be  entered  without  making  the  location  required  for 
other  claims.  There  is  a  difference,  also,  in  the  persons 
qualified  to  take  coal  lands,  and  in  the  number  of  acres 
which  can  be  taken.  The  person  who  takes  coal  land  must 
not  only  be  a  citizen  of  the  United  States,  or  have  declared 
his  intention  to  become  such,  but  he  must  also  be  over 
the  age  of  21  years.  Within  sixty  days  after  the  date  of 
actual  possession  and  the  commencement  of  improvements 
on  the  land,  an  individual  may  enter  at  the  Land  Office  in 
the  district  any  quantity  of  vacant  coal  lands  not  exceeding 
160  acres.  An  association  of  persons  may  enter  not  ex- 
ceeding 320  acres.  The  price  to  be  paid  for  coal  lands  is 
$20  per  acre,  for  lands  within  fifteen  miles  of  a  completed 
railroad,  or  $10  per  acre  for  lands  more  than  fifteen  miles 
from  a  completed  railroad. 

Revised  Statutes  of  the  United  States,  Section  2348. 

Section  979.— HOW  TO  OBTAIN  A  PATENT  TO  A 
MINING  CLAIM.— The  Revised  Statutes  of  the  United 
States,  Section  2335,  provide  the  manner  in  which  a  patent 


760  BUSINESS   LAWS   FOR   BUSINESS    MEN. 

to  a  mining  claim  may  be  obtained.  It  will  be  seen  from 
what  follows  that  the  claim-owner  who  desires  a  patent 
must  go  to  a  lawyer,  to  have  his  application  made  out,  and 
the  various  plats  and  notices  properly  filed  and  published; 
and  as  he  cannot  safely  use  any  of  the  necessary  forms 
himself,  without  the  aid  of  a  competent  lawyer,  the  forms 
are  not  given  in  this  book.  The  claimant  who  wants  a 
patent  is  required,  in  the  first  place,  to  have  a  correct  survey 
of  his  claim  made,  under  authority  of  the  United  States 
Surveyor-General  for  California ;  such  survey  to  show  with 
accuracy  the  exterior  surface  boundaries  of  the  claim,  which 
boundaries  are  required  to  be  distinctly  marked  by  monu- 
ments on  the  ground.  Section  2335  of  the  United  States 
Revised  Statutes  is  as  follows :  "A  patent  for  any  land 
claimed  and  located  for  valuable  deposits  may  be  obtained 
in  the  following  manner :  Any  person,  association,  or  cor- 
poration authorized  to  locate  a  claim  under  this  chapter, 
having  claimed  and  located  a  piece  of  land  for  such  pur- 
poses, who  has,  or  have,  complied  with  the  terms  of  this 
chapter,  may  file  in  the  proper  land  office  an  application 
for  a  patent,  under  oath,  showing  such  compliance,  together 
with  a  plat  and  field  notes  of  the  claim  or  claims  in  com- 
mon, made  by  or  under  the  direction  of  the  United  States 
Surveyor-General,  showing  accurately  the  boundaries  of  the 
claim  or  claims,  which  shall  be  distinctly  marked  by 
monuments  on  the  ground,  and  shall  post  a  copy  of  such 
plat,  together  with  a  notice  of  such  application  for  a  patent, 
in  a  conspicuous  place  on  the  land  embraced  in  such  plat 
previous  to  the  filing  of  the  application  for  a  patent,  and  shall 
file  an  affidavit  of  at  least  two  persons  that  such  notice 
has  been  duly  posted,  and  shall  file  a  copy  of  the  notice  in 
such  land  office,  and  shall  thereupon  be  entitled  to  a  patent 
for  the  land,  in  the  manner  following:  The  register  of  the 
land  office,  upon  the  filing  of  such  application,  plat,  field 
notes,  notices,  and  affidavits,  shall  publish  a  notice  that 
such  application  has  been  made,  for  the  period  of  sixty  days, 
in  a  newspaper  to  be  by  him  designated  as  published  near- 
est to  such  claim ;  and  he  shall  also  post  such  notice  in  his 


MINES   AND   MINING.  761 

office  for  the  same  period.  The  claimant  at  the  time  of 
filing  this  application,  or  at  any  time  thereafter,  within 
sixty  days  of  publication,  shall  file  with  the  register  a  cer- 
tificate of  the  United  States  Surveyor-General  that  five 
hundred  dollars'  worth  of  labor  has  been  expended  or  im- 
provements made  upon  the  claim  by  himself  or  grantors; 
that  the  plat  is  correct,  with  such  further  description  by 
such  reference  to  natural  objects  or  permanent  monuments 
as  shall  identify  the  claim,  and  furnish  an  accurate  descrip- 
tion, to  be  incorporated  in  the  patent.  At  the  expiration 
of  the  sixty  days  of  publication,  the  claimant  shall  file  his 
affidavit,  showing  that  the  plat  and  notice  have  been  posted 
in  a  conspicuous  place  on  the  claim  during  such  period  of 
publication.  If  no  adverse  claim  shall  have  been  filed  with 
the  register  and  the  receiver  of  the  proper  land  office  at  the 
expiration  of  the  sixty  days  of  publication,  it  shall  be  as- 
sumed that  the  applicant  is  entitled  to  a  patent,  upon  the 
payment  to  the  proper  officer  of  five  dollars  per  acre,  and 
that  no  adverse  claim  exists." 

Revised  Statutes  of  the  United  States,  Section  2335. 

Section  980.— MINING  LEASE.— A  mining  lease  is 
necessarily  different  in  many  respects  from  the  ordinary 
lease,  for  it  must  provide  for  amount  and  character  of  work 
to  be  done,  timbering,  the  use  of  machinery,  inspection  of 
work  and  mine,  the  payment  of  royalty,  and  possibly  other 
matters,  which  never  enter  into  leases  of  other  property. 

A  mining  lease  must  be  in  writing,  if  the  term  is  for 
more  than  one  year. 

Section  981.— FORM  OF  MINING  LEASE.— The  fol- 
lowing is  a  form  of  mining  lease: — 

THIS  INDENTURE,  made  this day  of 

,  in  the  year  of  our  Lord  one  thousand  nine 

hundred  and ,  between 

,  lessor,  and lessee  or 

tenant,  Witnesseth,  That  the  said  lessor  for  and  in  con- 
sideration of  the  rents,  royalties,  covenants,  and  agreements 


762  BUSINESS   LAWS   FOR   BUSINESS    MEN. 

hereinafter  reserved,  and  by  the  said  lessee  to  be  paid,  kept, 
and  performed,  has  granted,  remised,  and  let,  and  by  these 
presents  does  grant,  remise,  and  let  unto  the  said  lessee,  all 
the  following  described  mine  and  mining  property,  situated 

in mining  district.  County  of , 

State  of  California,  to-wit :    

(Description  of  property.) 

Together  with  the  appurtenances ,  to 

have  and  to  hold  unto  the  said  lessee  or  tenant  for  the  term 

of years  from  the  date  hereof,  expiring  at 

noon  on  the day  of ,   A.    D. 

,  unless  sooner  forfeited  or  determined  through  the 

violation  of  any  covenant  hereinafter  against  the  said  tenant 
reserved. 

And  in  consideration  of  the  said  demise,  the  said  lessee 
does  covenant  and  agree  with  said  lessor  as  follows,  to-wit : — 

To  enter  upon  said  mine  or  premises  and  work  the  same 
mine  fashion,  in  manner  necessary  to  good  and  economical 
mining,  so  as  to  take  out  the  greatest  amount  of  ore  possi- 
ble, with  due  regard  to  the  safety,  development,  and  preserva- 
tion of  the  said  premises  as  a  workable  mine. 

To  work  and  mine  said  premises  as  aforesaid  steadily  and 
continuously  from  the  date  of  this  lease ;  and  that  any  failure 

to  work  said  premises  with  at  least 

persons  employed  for  the  space  of consecutive 

days  may  be  considered  a  violation  of  this  covenant. 

To  well  and  sufficiently  timber  said  mine  at  all  points 
where  proper,  in  accordance  with  good  mining;  and  to  repair 
all  old  timbering  wherever  it  may  become  necessary. 

To  allow  said  lessor  and  his  agents  to  enter  upon  and  into 
all  parts  of  said  mine  for  the  purpose  of  inspection,  with 
use  of  all  passages,  ropes,  windlass,  ladder-ways,  and  all 
other  means  of  ingress  and  egress  for  such  purpose. 

To  not  assign  this  lease,  or  any  interest  thereunder,  and 
to  not  sublet  the  said  premises  or  any  part  thereof,  without 
the  written  assent  of  said  lessor,  and  to  not  allow  any  per- 
son or  persons  except  the  said  lessee  and  his  workmen  to 
take  or  hold  possession  of  said  premises  or  any  part  thereof 
under  any  pretense  whatever. 

To  occupy  and  hold  all  cross  or  parallel  lodfes,  dips,  spurs, 
feeders,  crevices,  or  mineral  deposits  of  any  kind,  which 
may  be  discovered  in  working  under  this  lease,  or  in  any 
tunnel  run  to  intersect  said lode,  or  by  the  said 


MINES   AND  MINING.  763 

lessee  or  any  person  or  persons  under  him  in  any  manner 

at  any  point  within feet  of  the  center 

Hne  of  said  lode,  as  the  property  of  said  lessor ;  with  privilege 
to  said  lessee  of  working  the  same  as  an  appurtenance  of 
said  demised  premises,  during  the  term  of  this  lease;  and 
to  not  locate  or  record  the  same,  or  allow  the  same  to  be 
located  or  recorded,  except  in  the  name  of  said  lessor. 

To  keep  at  all  times  the  drifts,  shafts,  tunnels,  and  other 
passages  and  workings  of  said  demised  premises  thoroughly 
drained  and  clear  of  loose  rock  and  rubbish  of  all  kinds. 

To  pay  and  deliver  to  said  lessor  as  royalty, 

of  all  ore  to  be  extracted  from  said  premises  during  said 
term,  of  like  assay  to  that  retained  by  said  lessee,  delivered 

at as    soon    as   mined,    without    offset, 

deduction,  or  charge  whatever,  except  lessor's  proportion  for 
packing. 

To  deliver  up  to  said  lessor  the  said  premises,   with  the 

appurtenances   and  all   improvements in 

good  order  and  condition,  with  all  shafts  and  tunnels  and 
other  passages  thoroughly  clear  of  rubbish  and  drained,  and 
the  mine  in  all  points  ready  for  immediate  continued  work- 
ing (accidents  not  arising  from  negligence  alone  excusing), 

without  demand  or  further  notice,  on  said day  of 

,A.  D ,  at  noon,  or  at  any  time  previous, 

upon  demand  for  forfeiture. 

And  finally,  upon  the  violation  by  said  lessee,  or  any 
person  under  him,  of  any  covenant  or  covenants  herein- 
before reserved,  the  term  of  this  lease  shall,  at  the  option 
of  said  lessor,  expire,  and  the  same  and  said  premises  with 
the  appurtenances  shall  become  forfeit  to  said  lessor;  and 
said  lessor  or  his  agent  may  thereupon,  after  demand  of 
possession  in  writing,  enter  upon  said  premises  and  dis- 
possess all  persons  occupying  the  same,  with  or  without 
force,  and  with  or  without  process  of  law ;  or  at  the  option 
of  said  lessor,  the  said  tenant  and  all  persons  found  in 
occupation  may  be  proceeded  against  as  trespassers  from 
the  beginning  of  said  term  both  as  to  realty  and  the  ore 
served  therefrom;  or  as  guilty  of  unlawful  detainer. 

Each  and  every  clause  and  covenant  of  this  indenture 
shall  extend  to  the  heirs,  executors,  and  administrators  of 
all  parties  hereto;  and  to  the  assigns  of  said  lessor;  and  as 
said  lessor  may  elect,  to  the  assigns  of  said  lessee. 


764  BUSINESS   LAWS   FOR   BUSINESS    MEN. 

In  witness  whereof,  The  said  parties,  lessor  and  lessee, 
have  hereunto  set  their  hands  and  seals  the  day  and  year 
first  above  written. 

(Seal.) 

(Seal.) 

(Here  add  acknowledgment  before  Notary  Public.) 

Section  982.— OIL  AND  GAS  LEASES.— The  law  is 
more  strictly  applied  to  leases  for  oil  and  gas  purposes  than 
to  any  others.  Other  minerals,  being  of  solid  formation, 
are  in  place  within  certain  boundaries,  or,  being  placer, 
yet  are  not  usually  shifting  nor  fluctuating.  Oil  and  gas 
are  fugitive  and  wandering,  and  their  existence  within  the 
Hmits  of  a  particular  tract  is  uncertain.  Some  of  the  prin- 
ciples of  law  applied  to  oil  and  gas  leases  are  as  follows: — 

(a) — Right  to  Bore  for  Oil  Necessarily  Exclusive. — 
The  Supreme  Court  of  the  United  States  has  decided  that  the 
right  to  bore  for  oil  or  gas  within  a  given  area  is  necessarily 
exclusive,  owing  to  the  pecuUar  nature  of  the  operations. 
Therefore,  if  the  owner  of  land  leases  to  another  the  right 
to  bore  for  oil  or  gas  within  a  certain  described  area,  he  is 
prohibited,  whether  expressed  in  the  lease  or  not,  from 
boring  another  well  therein  himself,  and  he  may  be  pre- 
vented by  injunction  from  interfering  with  the  exclusive 
rights  of  the  lessee.  (Decided  by  the  Supreme  Court  of  the 
United  States  in  the  case  of  Brown  vs.  Spillman,  which 
decision  is  printed  in  Volume  155  of  the  United  States 
Supreme  Court  Reports,  page  665.) 

(b) — Lessee  Must  Begin  Operations  Within  a  Reason- 
able Time. — If  the  lease  is  silent  as  to  the  time  when  the 
lessee  must  begin  boring,  the  law  fills  the  gap  by  providing 
that  he  must  begin  operations  within  a  reasonable  time. 
What  is  a  reasonable  time  will  depend  upon  the  particular 
case  and  all  the  circumstances;  for  instance,  the  nature  of 
the  country,  the  ease  or  difficulty  with  which  machinery 
may  be  brought  on  the  ground,  the  availability  of  labor,  etc. 


MINES    AND   MINING.  765 

(c) — Failure  to  Commence  Work  Forfeits  the  Lease. — 

Although  the  lease  is  for  a  definite  term,  yet  a  failure  to 
commence  work  within  the  time,  named,  or,  if  no  time  is 
named,  within  a  reasonable  time,  forfeits  the  lease. 

(d) — Work  Must  Be  Prosecuted  With  Diligence. — 
When  work  is  once  begun,  it  must  be  carried  on  with  dili- 
gence. This  does  not  mean  every  day,  or  every  hour.  But 
there  must  not  be  any  unreasonable  or  prolonged  cessation 
from  actual  operations.  The  work  must  be  carried  on  so 
steadily,  and  with  such  practical  application,  as  will  show 
the  good  faith  of  the  lessee. 

(e) — Lease  Must  Be  Literally  Complied  With. — An  oil 

lease  must  be  literally  complied  with.  If  the  lessee  agrees 
to  sink  a  well  of  a  certain  bore,  he  will  not  comply  with  his 
lease  by  sinking  a  well  of  a  smaller  bore.  He  must  give  it 
the  size  and  capacity  agreed  on. 

(f) — Failure  to  Find  Oil. — Where  the  lease  is  for  a  fixed 
period,  and  as  much  longer  as  oil  is  found  or  produced  in 
paying  quantities,  if  oil  is  not  found  in  paying  quantities 
within  the  time,  the  lease  is  forfeited. 

(g) — Net  Proceeds. — ^Where  the  lessee  agrees  to  pay  the 
lessor  one-tenth,  or  any  other  portion,  of  the  profits  realized 
from  the  sale  of  the  oil  produced,  the  word  "profits"  does 
not  mean  the  gross  output,  but  only  the  net  amount  realized 
after  deducting  expenses. 

(h) — Failure  to  Pay  Royalty. — A  failure  to  pay  the  roy- 
alty agreed  on  by  the  lessee  will  forfeit  the  lease,  at  the 
option  of  the  lessor. 

Section  983.— FORM  OF  OIL  LEASE.— The  following 
is  a  form  of  oil  lease.  The  lease,  if  it  is  to  be  recorded, 
should  be  acknowledged. 


766  BUSINESS  LAWS  FOR  BUSINESS   MEN. 

THIS  LEASE,  Made  the day  of. 

A.   D.   191 . . ,  by  and  between 


of  the  County  of ,  State  of  California,  lessor. ., 

and 

lessee . . . 

WITNESSETH:  That  said  lessor.,,  for  and  in  consid- 
eration of  the  rents,  covenants,  and  agreements  hereinafter 
mentioned,  reserved,  and  contained  on  the  part  and  behalf 
of  said  lessee. .  to  be  paid,  kept,  and  performed,  does  by 
these  presents  grant,  remise,  and  let  unto  said  lessee..,  the 
exclusive  right,  privilege,  and  easement  of  sinking,  boring, 
developing,  and  working  to  any  desired  depth,  wells  for  the 
extraction  of  natural  gas,  petroleum,  kerosene,  coal  oil,  and 
other  oil,  gaseous  and  volatile  substances,  and  of  taking  from 
such  wells,  and  appropriating,  having,  using,  and  disposing 
of  any  and  all  of  said   substances,   in   all  the   certain   tract 

of  land  situate  in  the  County  of ,   State 

of  California,  described  as  follows,  to-wit :    


(Here  describe  land.) 


and  also  the  right,  privilege,  and  easement  of  conducting 
and  carrying  away  from  the  said  wells  and  other  wells  that 
may  be  sunk  or  bored  by  said  lessee,  on  adjacent  and 
contiguous  lands  through  pipes  underground,  as  hereinafter 
provided,  all  natural  gas,  petroleum,  kerosene,  coal  oil,  and 
other  oil,  gaseous,  and  volatile  substances  extracted  from 
said  wells. 

To  have  and  to  hold  all  of  said  rights,  privileges,  and  ease- 
ments unto  said  lessee . .    exclusively   from  the 

day  of ,  A.  D.  191 . . ,  for  and  during  the  term 

of years,  with  the  right  to  said 

lessee . .   to  a  renewal  of  this  lease  from  said  lessor . .    for  a 

second  term  of years,  from  and  after  the 

expiration  hereof  upon  the  terms  hereinafter  provided. 

Said  lessor . .  further  agrees  that  said  lessee  . .  may  occupy 
and  use  at  one   or  more   places   on   said  tract   of   land,   an 

area  not  to  exceed acres, 

upon  which  to  sink  a  well,  wherever  a  well  may  be  bored 
thereon.  A  piece  of  land  shall  be  selected  without  un- 
necessary   injury    to    the    lessor..,    of    such    shape    as    the 


MINES   AND   MINING.  767 

lessee.  .  may  desire  for  boring  such  wells  and  operating  the 
machinery  used  in  boring,  working,  and  casing  the  same, 
and  care  and  storage  of  the  product,  said  piece  of  land  to  be 
so  used  so  long  during  the  term  of  this  lease  as  is  necessary 
for  said  purposes. 

It  is  further  understood,  that  should  any  natural  gas, 
petroleum,  kerosene,  coal  oil,  or  other  oil,  gaseous  or  vola- 
tile substances  be  produced  from  said  wells,  or  from  wells 
sunk  or  bored  by  the  lessee  on  adjacent  or  contiguous 
lands,  the  said  lessee  shall  have  the  right  to  enter  upon 
said  lands  and  dig  trenches  from  said  wells  through  said 
lands,  without  unnecessary  injury  to  the  lessor,  and  lay 
pipes  therein  for  conveying  away  therefrom  any  and  all 
of   said   substances,    provided   the   top   or   upper    surface   of 

said  pipes  are  laid  at  least inches  below  the 

surface  of  the  ground,  and  the  trenches  in  which  they  are 
laid  are  well  filled  in  with  earth  so  as  not  to  interfere  with 
the  full  and  free  cultivation  or  other  use  or  enjoyment  of 
said  lands  by  the  lessor,  but  no  such  trenches  are  to  be  dug 

so  as  to  interfere  with  the  use  of  or  to  injure 

or    other    improvements    on    said    premises 

at  the  time  such  trenches  are  dug,  and  none  are  to  be  dug 

through  any   

without  giving  the  owner  written  notice  thereof,  and  pay- 
ing therefor  the  value  of  all  property  injured  or  destroyed 
thereby;  and  no  pipe  is  to  be  laid  across  any  creek  or  slough 
so  as  in  any  way  to  obstruct  or  interfere  with,  the  free 
and  full  flow  of  water  through  the  same,  and  all  pipes 
laid  through  said  lands  are  to  be  made  tight  and  secure 
so  as  not  to  •  permit  the  escape  therefrom  of  any  substances 
injurious  to  any  property,  and  should  any  such  substance 
escape  from  such  pipes  and  injure  any  such  property  (and 
the  lessee  should  fail  to  repair  such  pipes  and  prevent  such 

escape  and  stop  such  injury,  within days 

after  receiving  from  the  lessor  a  written  notice  so  to  do), 
then  the  lessee  shall  be  liable  for  and  shall  pay  to  the  owner 
all  damages  so  caused. 

It  is  further  understood  and  agreed  by  and  between  the 
parties  hereto,  that  the  lessee,  so  long  as  this  lease  remains 
in  full  force,  is  to  be  the  sole  and  exclusive  owner  for  and 
during  the  full  term  of  this  lease,  and  of  every  renewal 
thereof,  of  all  natural  gas,  petroleum,  kerosene,  coal  oil, 
and  other  oil,  gaseous,  and  volatile  substances  extracted 
from  wells  on  said  land;  and  the  lessor  shall  have  no  right 
during  the  continuance  of  this  lease  or  any  renewal  thereof 


768  BUSINESS   LAWS   FOR   BUSINESS   MEN. 

before  default  in  the  payment  of  the  royalty  hereafter  men- 
tioned, to  bore  or  sink  any  well  or  wells  for  natural  gas, 
petroleum,  kerosene,  coal  oil,  or  other  oil,  gaseous  or  vola- 
tile substances  on  any  of  said  land,  or  to  use  or  take  any 
such  substance  therefrom;  but  the  lessor  is  at  all  times 
to  be  the  sole  and  exclusive  owner  of  all  water  that  may 
flow  therefrom,  provided  that  the  lessee  may  use  sufficient 
of  said  water  to  operate  and  run  any  steam  engines  and 
boilers  used  at  or  near  said  well  for  boring  or  working  the 
same,  and  subject  to  the  uses  herein  provided,  shall  permit 
the  flow  of  water  from  said  wells  for  the  use  and  benefit 
of  the  lessor,  so  far  as  the  same  may  flow  without  inter- 
fering with  the  proper  use  of  the  wells  by  the  lessee. 

And  the  lessee  shall  have  the  right  at  all  times  during  the 
continuance  of  this  lease  or  any  renewal  thereof,  to  enter 
upon  and  pass  over  said  land  to  and  from  all  wells  bored 
thereon  as  herein  provided ;  but  he  is  to  do  no  damage  to 
any  of  said  premises  without  paying  a  fair  and  reasonable 

compensation  therefor  within days  after  such 

damage  is  done,  and  will  give  the  lessor  notice  in  writing 
before  commencing  to  bore  a  well  on  any  portion  of  said 
land. 

It  is  further  understood  and  agreed,  that  the  lessee  shall 
at  all  times  during  the  existence  of  this  lease  have  the  right 
to  enter  upon  and  remove  from  said  land  all  improvements, 
machinery,  well-casing,  and  all  other  property  placed  by 
him  thereen  or  in  wells  thereon. 

It  is  further  understood  and  agreed,  that  the  lessee  shall, 
so  long  as  this  lease  remains  in  force,  pay  to  the  lessor  the 

value  at  the  well  or  wells  of  the part 

of  all  the  gas,  oil,  or  other  products  herein  mentioned,  said 
value  to  be  ascertained  and  fixed  at  the  point  of  production, 

on  or  before  the day  of  each  month,  and 

payment  shall  be  made  on  the day  of  each 

and  every  month  for  all  gas,  oil,  or  other  products  produced 
during  the  preceding  calendar  month. 

It  is  expressly  and  distinctly  understood  and  agreed  be- 
tween the  parties  hereto,  that  it  shall  at  all  times  be  the 
privilege  of  the  lessee  to  discontinue  and  terminate  this 
lease  by  a  failure  to  pay  any  installment  of  monthly  royalty 

within days  after  the  same   becomes   due  as 

herein  provided,  and  such  failure  shall  operate  ipso  facto 
as  a  surrender  of  this  lease,  and  upon  such  surrender  the 
lessee  shall  be  discharged  from  all  liability  to  pay  any  rent 
to  become  due  by  the  terms  of  this  lease. 


MINES   AND   MINING.  769 

And  should  any  well  or  wells  bored  or  sunk  on  said  land 
as    herein   provided    be    abandoned   by   the    lessee,    he    shall 

give  the  lessor days'  written  notice  of  his 

intention   to   abandon   the   same.      If   the    lessor   so   desires, 

and  shall  pay  to  said  lessee  within days 

the  costs  of  the  casing-  already  in  said  well  or  wells,  the 
lessee  agrees  to  sell  the  same  to  the  lessor  at  the  actual 
cost  of  said  casing  delivered  at  the  mouth  of  the  well,  and 
thereupon  the  lessor  shall  become  the  owner  of  such  well 
or  wells  and  all  of  the  products  thereof  of  any  kind  or 
nature. 

Nothing  herein  contained  is  to  be  so  construed  as  to  affect 
the  right  of  the  lessor  to  fully  possess,  occupy,  and  enjoy 
said  lands  subject  to  the  conditions  herein  expressed  in 
favor  of  the  lessee. 

It  is  understood  and  agreed  between  the  parties  hereto 
that  wherever  the  term  lessor  is  used  in  this  lease,  it 
extends  to  and  includes  the  heirs,  executors,  administrators, 
and  assigns  of  the  lessor  named  herein ;  and  the  term  lessee 
extends  to  and  includes  the  heirs,  executors,  administrators, 
and  assigns  of  the  lessee  herein  named. 

And  now  it  is  further  understood  and  agreed  by  all  the 
parties  hereto,  that  if  none  of  said  natural  gas,  oil,  or  other 
kindred  substance  is  found  in  or  near  said  lands,  and  the 
lessee  does  not  proceed  to  develop  said  leased  lands  within 

months  from  this  date,  and 

complete  a  well  within months  there- 
after, then  this  lease  shall  terminate  and  be  of  no  value, 
otherwise  to  remain  in  full  force  and  effect. 

In  witness  whereof,  the  said  parties  have  hereunto  set 
their  hands  and  seals  the  day  and  year  first  above  written. 

(Seal.) 

(Seal.) 


Section  984.— MINING  DEEDS. — A  mining  claim  may 
be  sold  and  transferred  by  deed,  either  before  or  after  a 
patent  has  been  applied  for  or  obtained.  The  locator  of  a 
mining  claim  obtains  the  legal  title  by  his  location,  and 
may  transfer  his  title  at  any  time. 

Section  985.— FORM  OF  MINING  DEED.— The  fol- 
lowing is  a  form  of  mining  deed  for  quartz.     If  used   for 


770  BUSINESS   LAWS   FOR   BUSINESS    MEN. 

placer  claim,  the  description  should  be  changed  so  as  to 
apply  :— 

THIS  INDENTURE,  made  the day  of 

,  in  the  year  of  our  Lord  one  thousand  nine 

hundred  and ,  between 

,   of    the    County    of ,    and    State 

of  California,  party  of  the  first  part,  and 

,  of  the  County  of ,  and  State 

of  California,  party  of  the  second  part; 

Witnesseth,  That  the  said  party  of  the  first  part,  for  and 
in  consideration  of  the  sum  of Dol- 
lars, lawful  money  of  the  United  States  of  America,  to  him 
in  hand  paid  by  the  said  party  of  the  second  part,  the 
receipt  whereof  is  hereby  acknowledged,  hath  granted,  bar- 
gained, sold,  remised,  released,  and  forever  quitclaimed, 
and  by  these  presents  does  grant,  bargain,  sell,  remise, 
release,   and   forever   quitclaim,   unto   the   said   party   of  the 

second  part,  his  heirs  and  assigns,  the 

lode,  as  located,  surveyed,  recorded,  and  held  by  said  party 
of  the  first  part,  situated  in mining  dis- 
trict,   County,  State  of  California,  and 

named    and    called Mine,    together    with 

all  the  dips,  spurs,  and  angles,  and  also  all  the  metals,  ores, 
gold  and  silver  bearing  quartz,  rock,  and  earth  therein, 
and  all  the  rights,  privileges,  and  franchises  thereto  _  inci- 
dent, appendant,  and  appurtenant,  or  therewith  usually 
had  and  enjoyed;  and  also,  all  and  singular  the  tenements, 
hereditaments,  and  appurtenances  thereunto  belonging,  or 
in  any  wise  appertaining,  and  the  rents,  issues,  and  profits 
thereof;  and  also,  all  the  estate,  right,  title,  interest,  prop- 
erty, possession,  claim,  and  demand  whatsoever,  as  well  in 
law  as  in  equity,  of  the  said  party  of  the  first  part,  of,  in, 
or  to  the  said  premises,  and  every  part  and  parcel  thereof, 
with  the  appurtenances. 

To  have  and  to  hold,  all  and  singular,  the  said  premises, 
together  with  the  appurtenances  and  privileges  thereto  in- 
cident, unto  the  said  party  of  the  second  part,  his  heirs 
and  assigns  forever.  In  witness  whereof  the  said  party 
of  the  first  part  has  hereunto  set  his  hand  and  seal  the 
day  and  year  first  above  written. 

(Seal.) 

(Here  add  acknowledgment  before  Notary.) 


MINES   AND   MINING.  771 

Section    986.— WORKING    MINE    ON    SHARES.— A 

valid  agreement  may  be  made  for  the  working  of  a  mine 
on  shares,  and  such  agreement  does  not  constitute  and 
will  not  be  considered  a  lease  of  the  mining  claim.  Under 
such  a  contract,  the  parties  have  a  common  interest  in  the 
products  of  the  mine  when  taken  out.  Such  a  contract  does 
not  create  the  relation  of  landlord  and  tenant,  but  fixes  a 
rule  of  compensation  for  services  rendered.  It  is,  in  all  its 
essential  features,  a  contract  for  labor  to  be  performed  and 
to  be  paid  for  by  a  share  of  the  profits  realized  from  such 
labor.  (Decided  by  the  Supreme  Court  of  California  in  the 
case  of  Hudepahl  vs.  Liberty  Hill  Mining  Co.,  which  de- 
cision is  printed  in  Volume  80  of  the  California  Reports, 
page  553.) 

Section  987.— WHEN  BOUNDARY  MARKS  ARE 
SUFFICIENT. — The  boundary  marks  are  always  sufficient 
to  sustain  a  location  if  they  are  so  distinct  and  plain  that  the 
claim  can  be  identified  on  the  ground.  In  a  case  in  Siskiyou 
County,  two  adjoining  mining  claims  were  each  marked  at 
the  corners  by  four  stakes  about  a  foot  and  a  half  long,  flat- 
tened "on  two  sfdes,  and  driven  into  the  ground  about  four 
inches ;  two  stakes  being  at  the  ends  of  the  dividing  line  com- 
mon to  both  claims ;  some  stakes  being  in  the  brush,  and 
others  in  the  open  ground.  In  the  middle  of  the  dividing  line 
was  a  tree  blazed  on  both  sides,  on  one  of  which  the  notices 
of  location  were  posted,  describing  the  claims  by  courses  and 
distances,  running  from  the  tree  to  a  stake,  and  from  stake 
to  stake  to  point  of  beginning.  The  ledge  on  both  claims 
had  been  sufficiently  developed  to  show  its  existence  and 
direction.  The  Supreme  Court  held  that  the  law  as  to 
marking  the  location  on  the  ground  was  sufficiently  com- 
plied with,  under  the  most  stringent  construction  of  the 
law.  (Decided  by  the  Supreme  Court  of  California  in  the 
case  of  Eaton  vs.  Norris,  which  decision  is  printed  in  Vol- 
ume 131  of  the  California  Reports,  page  561.) 


772  •      BUSINESS   LAWS   FOR   BUSINESS    MEN. 

Section  988.— ERROR  IN  DESCRIPTION  IN  LOCA 
TION  NOTICE.— The  description  in  a  notice  of  location 
of  a  mining  claim,  specifying  the  number  of  acres  claimed, 
is  sufficient,  if  it  designate  the  land  by  the  adjoining  tracts 
on  the  north,  east,  and  south,  and  by  unoccupied  lands  on 
the  west;  and  the  insertion  of  the  wrong  legal  subdivisions 
will  not  invalidate  it.  (Decided  by  the  Supreme  Court  of 
California  in  the  case  of  Duryea  Vs.  Boucher,  which  decision 
is  printed  in  Volume  67  of  the  California  Reports,  page  141.) 

Section  989.— CHARACTER  OF  ANNUAL  ASSESS- 
MENT WORK.— Whether  the  character  of  the  annual 
assessment  work  is  of  the  kind  required  by  law  is  always 
a  question  of  fact,  to  be  determined  by  the  surrounding 
circumstances.  Not  all  expenditures  made  with  a  view  to 
working  a  mine  would  be  considered  work  expended  upon 
a  mine  for  the  purpose  of  holding  it;  as,  for  instance,  work 
done  at  a  distance  from  the  mine  in  the  construction  of  a 
mill.  On  the  other  hand,  it  has  been  decided  that  the 
services  of  a  watchman  looking  after  the  buildings  erected 
to  work  a  mine  properly  constitutes  assessment  work, 
though  the  mine  is  idle  at  the  time.  (Decided  by  the  Su- 
preme Court  of  California  in  the  case  of  Altoona  Quick- 
silver Mining  Co.  vs.  Integral  Quicksilver  Mining  Co., 
which  decision  is  printed  in  Volume  114  of  the  California 
Reports,  page  100.) 

Section  990.— TIME  WITHIN  WHICH  RELOCA- 
TION CAN  BE  MADE.— The  law  of  California  gives  to 
the  occupant  of  a  mining  claim  thirty  days  after  the  expira- 
tion of  the  year  within  which  to  file  his  affidavit  of  assess- 
ment work  done,  in  the  office  of  the  County  Recorder ;  and 
the  mine  is  not  open  to  relocation  until  after  the.  expira- 
tion of  the  thirty  days.  For  instance,  the  occupant  has 
the  whole  of  the  calendar  year  succeeding  the  date  of  his 
location  in  which  to  do  his  assessment  work;  then  he  has 
thirty  days  more  in  which  to  file  his  affidavit  of  work  done 
with  the  County  Recorder,  and  no  relocation  can  be  valid 


MINES   AND   MINING.  773 

within  such  times.  (Decided  by  the  Supreme  Court  of 
California  in  the  case  of  Harris  vs.  Kellogg,  which  decision 
is  printed  in  Volume  117  of  the  California  Reports,  page 
484.) 

Statutes  of  1891,  page  219. 

Section  991.— RESUMPTION  OF  WORK.— As  already 
stated,  the  locator  of  a  mining  claim  must  expend  upon  it 
in  labor  or  improvements  $100  each  year,  and  non-compli- 
ance with  this  requirement  renders  the  claim  subject  to 
relocation  by  others,  unless,  before  such  relocation,  the 
original  locator,  his  heirs,  assigns,  or  legal  representatives, 
have  resumed '  work  upon  the  claim.  This  resumption  of 
work,  however,  must  be  bona  fide  in  character  and  with  the 
intention  of  completing  the  amount  of  work  due.  It  is 
not  sufficient,  when  the  claim  has  become  subject  to  reloca- 
tion, for  the  claimant  to  go  upon  it  and  do  a  few  hours'  or 
a  few  days'  work,  and  then  quit,  thinking  that  he  has  thus, 
by  such  perfunctory  resumption,  done  all  that  is  sufficient 
to  hold  his  claim  for  another  year;  he  must  resume  work 
in  good  faith,  with  the  intention  of  completing  the  full 
amount  required  by  law.  (Decided  by  the  Supreme  Court 
of  California  in  the  case  of  McCormick  vs.  Baldwin,  which 
decision  is  printed  in  Volume  104  of  the  California  Reports, 
page  227.) 

Section  992.— FAILURE  TO  COMPLY  WITH  LO- 
CAL CUSTOMS  IN  WORKING  MINING  CLAIMS.— 

A  right  to  hold  and  work  a  mining  claim  when  acquired  may 
be  lost  by  a  failure  or  neglect  to  comply  with  the  rules 
and  regulations  of  the  miners,  relative  to  the  acquisition 
and  tenure  of  claims,  in  force  in  the  district  where  the 
claim  is  located;  and  if  such  rules  and  regulations  are  not 
complied  with  by  those  holding  claims  in  the  district,  the 
ground  becomes  once  more  open  to  the  occupation  of  the 
next  comer.  (Decided  by  the  Supreme  Court  of  CaHfornia 
in  the  case  of  St.  John  vs.  Kidd,  which  decision  is  printed 
in  Volume  26  of  the  California  Reports,  page  263.) 


774  BUSINESS   LAWS   FOR   BUSINESS    MEN. 

Section    993.— OVERLAPPING    LOCATIONS.— It    is 

familiar  history  in  mining  districts  that  claims  have  often 
been  found  to  overlap  one  another  to  a  greater  or  less 
extent.  When  this  occurs,  the  law  of  California  is,  in  so 
far  as  the  ground  taken  was  vacant,  each  location,  if  prop- 
erly made  in  other  respects,  is  valid  and  sufficient  to  that 
extent.  As  to  the  ground  actually  covered  by  the  two 
locations,  the  right  will  be  determined  by  ascertaining 
which  location  was  first  made.  If  A  makes  a  location 
to-day,  and  B  makes  a  location  to-morrow,  and  the  location 
of  B  covers  a  part  of  the  ground  located  by  A  the  day  before, 
B  will  lose  so  much  of  his  location  as  overlaps  the  location 
of  A;  for  A  was  first  in  time,  and  thus  acquired  a  prior 
right.  But  B  will  not  lose  his  whole  location.  So  much 
of  it  as  does  not  overlap  the  prior  location  will  be  good, 
and  he  can  hold  that  much.  (Decided  by  the  Supreme 
Court  of  California  in  the  case  of  Doe  vs.  Tyler,  which 
decision  is  printed  in  Volume  72i  of  the  California  Reports, 
page  21.) 

Section  994.— INTERSECTING  VEINS.— Where  two 
veins  or  lodes  of  mineral  belonging  to  different  owners 
intersect,  the  owner  of  the  vein  which  was  first  located  has 
the  right  to  the  ore  in  the  space  of  intersection,  but  the 
other  owner  has  a  right  of  way  through  such  space  for  the 
purpose  of  working  his  vein.  (Decided  by  the  Supreme 
Court  of  California  in  the  case  of  Wilhelm  vs.  Silvester, 
which  decision  is  printed  in  Volume  101  of  the  California 
Reports,  page  358.) 

Section  995.— RULE  THAT  END  LINES  SHALL 
PARALLEL  EACH  OTHER.— The  Revised  Statutes  of 
the  United  States  say  that  "the  end  lines  of  each  claim 
shall  be  parallel  with  each  other."  But  this  does  not  mean 
that  the  two  end  lines  must  be  exactly  parallel.  In  the 
case  of  Doe  vs.  Sanger,  a  San  Bernardino  County  mining 
iuit,  the  Supreme  Court  of  California  stated  the  true  rule 
as   follows:     "It  has  been  held  that  the  provisions   of  the 


MINES    AND   MINING.  775 

Federal  statutes  relating  to  lode  claims  were  passed  with 
the  understanding,  founded  upon  the  general  practice  of 
miners,  that  the  surface  locations  of  such  claims  will  be 
made  lengthwise  along  the  general  direction  of  the  lode 
or  vein  in  the  general  form  of  a  parallelogram,  with  the 
side  lines  along  the  lode,  and  the  end  lines  across  it.  But 
suppose  that  a  surface  location  should  be  made,  for  instance, 
in  the  shape  of  an  octagon.  In  such  a  case  there  would  be 
no  end  lines  and  no  side  lines,  and  if  the  locator  could  go 
outside  his  lines  in  one  direction  he  could  do  so  in  eight 
directions,  and  encroach  upon  his  neighbors  from  every 
point  of  the  compass.  If,  however,  a  location  is  made  in 
substantial  compliance  with  the  intent  of  the  statute — that 
is,  where  there  are  two  side  lines  running  along  the  course 
of  the  vein,  and  two  shorter  end  lines  running  across  it, 
so  that  the  two  sets  of  lines  are  distinct,  and  apparent — 
such  a  location  is  not  void,  but  gives  the  right  to  follow  a 
vein  laterally,  although  the  original  end  lines  may  not  be 
exactly  parallel,  or  although  they  may  differ  from  a  true 
parallel."  (Decided  by  the  Supreme  Court  of  California 
in  the  case  of  Doe  vs.  Sanger,  which  decision  is  printed 
in  Volume  83  of  the  California  Reports,  page  203.) 

Section  996.— EXTRA-LATERAL  RIGHT,  OR 
RIGHT  TO  PURSUE  THE  VEIN  OR  LODE  ON  ITS 
DIP  BEYOND  THE  SIDE  LINES  OF  THE  CLAIM. 

— Section  2322  of  the  Revised  Statutes  of  the  United  States 
provides :  "The  locators  of  all  mining  locations  shall  have 
the  exclusive  right  of  possession  and  enjoyment  of  all  the 
surface  included  within  the  lines  of  their  locations,  and 
all  veins,  lodes,  and  ledges  throughout  their  entire  depth 
the  top  or  apex  of  which  lies  inside  of  such  surface  lines 
extended  downward  vertically,  although  such  veins,  lodes, 
or  ledges  may  so  far  depart  from  a  perpendicular  in  their 
course  downward  as  to  extend  outside  of  the  vertical  side 
lines  of  such  surface  locations."  A  mineral  vein  or  lode 
seldom  or  never  descends  vertically  into  the  earth,  but  on 
its    downward   course    makes    an   angle    with    the    vertical — 


776  BUSINESS   LAWS   FOR   BUSINESS    MEN. 

or,  in  popular  terms,  it  does  not  go  straight  down,  but  in 
a  slanting  direction — so  that,  if  followed  far  enough  into 
the  interior  of  the  earth,  it  will  eventually  be  found  to  ex- 
tend outside  of  the  side  lines  of  the  claim.  In  other  words, 
the  vein  eventually  reaches  the  point  in  the  interior  of  the 
earth  where,  if  a  vertical  line  were  run  to  the  surface  it 
would  strike  a  point  outside  the  surface  boundaries  of  the 
claim.  The  right  to  thus  follow  the  vein  on  its  downward 
course  beyond  the  side  lines  of  the  claim  is  sometimes  called 
the  extra-lateral  right,  and  is  conferred  by  the  Section 
of  the  Revised  Statutes  of  the  United  States  just  quoted. 
In  thus  following  the  vein  on  its  dip,  the  miner  is  confined, 
however,  to  that  part  of  it  which  is  found  between  the  end 
lines  of  his  claim  extended  in  their  own  direction.  The 
law  prescribes  that  the  end  lines  of  a  claim  shall  be  parallel 
with  each  other.  Yet  for  the  full  enjoyment  of  this  extra- 
lateral  right  it  is  important  that  the  end  lines  of  the 
claim  should  follow  this  requirement  of  parallelism ;  for 
it  has  been  held  by  the  courts  that  where  the  end  lines 
were  not  parallel,  but  converged  in  the  direction  of  the 
dip  of  the  vein,  the  miner  could  not  pursue  the  vein  outside 
of  his  side  lines  beyond  the  point  where  his  converging  end 
lines  extended  met.  On  the  other  hand,  where  the  end 
lines  diverged  in  the  direction  of  the  dip,  thus  making  the 
portion  of  the  vein  included  within  them  larger  the  farther 
such  end  lines  were  extended,  it  has  been  held  that  the 
miner  could  not  take  the  ore  from  any  greater  length  of 
vein  outside  of  his  side  lines  than  was  included  between  his 
end  lines  as  laid  down  on  the  ground. 

Section  997.— DAMAGES  FOR  TRESPASS  ON  MIN- 
ING CLAIM. — One  who  unintentionally,  and  in  the  honest 
belief  that  he  is  lawfully  exercising  a  right  which  he  has, 
enters  upon  the  mining  property  of  another  and  removes 
his  ore,  is  liable  in  damages  for  its  value,  and  for  no  more. 
He  may  limit  the  recovery  of  the  owner  by  deducting 
from  the  value  of  the  ore  at  the  mouth  of  the  shaft  the  cost 
of  mining  and  transporting  it  to  that  point.     But  one  who 


MINES   AND    MINING.  777 

wilfully  and  intentionally  takes  ores  from  the  land  of  an- 
other is  liable  to  him  for  the  full  value  of  the  property  taken, 
at  the  time  of  his  conversion  of  it,  without  any  deduction 
for  the  labor  bestowed  or  expense  incurred  in  removing  it 
and  preparing  it  for  the  market. 

Section  998.  — STATE  HOMESTEAD  ON  MINING 
CLAIM. — The  locator  of  a  mining  claim  may,  under  the 
State  law,  declare  a  homestead  upon  it,  if  he  is  living  on 
it;  and  when  that  is  done  it  has  all  the  characteristics  of 
a  homestead  declared  upon  any  other  character  of  land; 
subject,  however,  to  the  holder  complying  with  the  require- 
ments of  the  law  relating  to  the  holding  of  mining  claims 
until  issue  of  patent  from  the  United  States  Government. 
(Decided  by  the  Supreme  Court  of  California  in  the  case 
of  Gaylord  vs.  Place,  which  decision  is  printed  in  Volume 
98  of  the  California  Reports,  page  472.) 

.  Section  999.— SCHOOL  LANDS.— The  law  of  Congress 
granting  certain  agricultural  lands  to  the  State  of  Califor- 
nia for  school  purposes,  and  providing  that  mineral  lands 
shall  not  be  subdivided  into  sections,  public  lands  belong- 
ing to  the  State  under  said  Act,  if  agricultural,  which  the 
proper  United  States  officials  have  platted  into  a  section 
and  classified  as  agricultural  lands,  and  concerning  which 
the  Receiver  of  the  public  land  office  has  certified  that  the 
State's  title  thereto  under  said  Act  is  free  from  adverse 
claims,  are  not,  after  their  disposal  by  the  State,  subject 
to  re-entry  as  mineral  lands;  the  determination  of  the 
United  States  officials  that  the  lands  were  agricultural 
being  conclusive  against  a  collateral  attack.  (Decided  by 
the  Supreme  Court  of  California  in  the  case  of  Saunders 
vs.  La  Purisima  Gold  Mining  Co.,  which  decision  is  printed 
in  Volume  125  of  the  California  Reports,  page  159.) 

Section  1000.— AUTHORITY  OF  MINE  SUPERIN- 
TENDENT TO  PURCHASE  SUPPLIES.— Mine  Super- 
intendents,   by    virtue    of    their   position,    have    authority    to 


778  BUSINESS   LAWS   FOR  BUSINESS   MEN. 

purchase  all  supplies  necessary  for  the  operation  of  the 
mine;  and  when  they  do  so  the  owners  will  be  bound  to 
pay  for  them.  In  one  case  it  was  held  by  our  Supreme 
Court  that  the  owner  of  the  mine  was  bound  to  pay  for 
provisions  ordered  by  the  Superintendent  for  a  boarding 
house  at  which  the  miners  lived,  atjd  the  Court  said:  "The 
record  discloses  the  fact  that  it  was  absolutely  necessary 
that  provisions  should  be  furnished  this  boarding-house, 
in  order  that  the  mine  might  continue  in  operation;  and  it 
would  seem  that,  aside  from  any  express  authority  from 
the  defendant  to  purchase  these  articles,  and  regardless  of 
the  question  of  ostensible  agency,  the  respective  Superin- 
tendents of  the  mine,  by  virtue  of  their  positions  alone, 
had  the  power  to  bind  the  defendant  for  the  payment  of 
these  goods."  (Decided  by  the  Supreme  Court  of  California 
in  the  case  of  Heald  vs.  Hendy,  which  decision  is  printed 
in  Volume  89  of  the  California  Reports,  page  632.) 

Section  1001.  —  HYDRAULIC  MINING.— Hydraulic 
mining,  as  the  term  is  used  in  the  laws  of  California,  is 
mining  by  means  of  the  application  of  water,  under  pressure, 
through  a  nozzle,  against  a  natural  bank.  It  may  be  car- 
ried on  in  this  State  wherever  and  whenever  it  can  be  done 
without  material  injury  to  the  navigable  streams,  or  the 
lands  adjacent  thereto. 

Civil  Code,  Sections  1424,  1425. 

Section  1002.— TAILINGS  AND  DEBRIS.— No  person 
or  corporation  has  the  right  to  cover  his  neighbor's  land 
with  debris  from  mine  or  mill,  nor  to  permit  any  of  the 
tailings  or  refuse  matter  to  flow  or  be  placed  on  the  land 
of  another.  For  the  violation  of  another's  right  of  use 
and  possession,  by  flowing  or  covering  his  land  with  debris, 
or  by  causing  his  soil  to  wash  or  cave,  the  owner  of  the 
mine  will  be  liable  in  damages,  and  the  injury  may  be 
stopped  by  injunction. 


MINES   AND   MINING.  779 

Section  1003.—  CALIFORNIA  DEBRIS  COMMIS- 
SION.— The  Congress  of  the  United  States  passed  an  Act,  in 
1893,  creating  a  commission  called  the  California  Debris 
Commission.  The  purpose  of  the  law  was  to  provide  a 
means  for  controlling  the  deposit  of  debris  in  the  rivers 
and  streams  in  that  part  of  California  constituting  the  San 
Joaquin  and  Sacramento  watersheds.  As  enacted,  after 
creating  the  California  Debris  Commission,  it  declares,  foi 
the  purpose  of  the  Act,  "hydraulic  mining"  and  "mining 
by  hydraulic  process"  to  have  the  meaning  and  application 
given  to  those  terms  in  the  State  of  California.  The  Act 
prohibits  and  declares  unlawful  such  hydraulic  mining 
"directly  or  indirectly  injuring  the  navigability  of  said  river 
systems,  carried  on  in  said  territory,  other  than  as  per- 
mitted under  its  provisions."  From  these  provisions  it 
seems  quite  clear  that  its  real  intent  and  meaning  is  to 
prohibit  and  make  unlawful  any  and  all  hydraulic  mining 
in  the  territory  drained  by  the  Sacramento  and  San  Joaquin 
river  systems  in  the  State  of  California,  directly  or  indi- 
rectly injuring  the  navigability  of  said  river  systems;  and 
to  permit  it  in  all  cases  where  the  work  can  be  prosecuted 
without  such  injury  to  the  navigability  of  said  river  systems 
or  to  the  lands  adjacent  thereto;  and  that,  in  order  to  prop- 
erly determine  the  facts  upon  which  the  legislative  will  is 
to  act,  a  skilled  commission  is  created,  whose  duty  it  is  to 
ascertain  and  determine  what  will  or  will  not  cause  the 
prohibited  injury,  and  to  prescribe  the  character  of  im- 
pounding works,  and  the  extent  to  which  hydraulic  mining 
in  the  territory  described  may  be  carried  on  without  causing 
such  injury. 

Section  1004.— CONSOLIDATION  OF  MINING 
CORPORATIONS. — Two  or  more  mining  corporations 
owning  claims  lying  in  the  same  vicinity  may  consolidate  upon 
terms  agreed  upon  by  the  respective  Boards  of  Directors 
or  Trustees  of  such  corporations,  provided  the  written  con- 
sent of  stockholders  representing  two-thirds  of  the  capital 
stock    of    each    company    be    obtained.      Such    consolidation 


780  BUSINESS    LAWS    FOR   BUSINESS    MEN. 

does  not  relieve  the  respective  companies  or  their  stock- 
holders of  existing  indebtedness.  In  case  of  such  consoli- 
dation, notice  of  the  same  must  be  given  by  advertising  for 
at  least  one  month  in  a  newspaper  in  the  county  where 
the  mining  property  is  situated,  and  also  in  a  newspaper 
published  in  the  county  where  the  principal  place  of  business 
of  any  of  such  corporations  shall  be.  When  the  consolida- 
tion is  completed  a  certificate  thereof,  containing  the  manner 
and  terms  of  the  consolidation,  must  be  filed  in  the  office  of 
the  County  Clerk  of  the  county  in  which  the  original  certifi- 
cate of  incorporation  of  any  of  said  companies  was  filed,  and 
a  copy  thereof  must  be  filed  in  the  office  of  the  Secretary  of 
State.  Such  certificate  must  be  signed  by  a  majority  of  each 
Board  of  Directors  or  Trustees  of  the  original  companies; 
and  they  must  within  thirty  days  after  the  filing  of  such  cer- 
tificate, and  after  at  least  ten  days'  public  notice,  call  a  meet- 
ing of  the  stockholders  of  all  of  said  companies  so  consoli- 
dated, to  elect  a  Board  of  Trustees  or  Directors  for  the 
consolidated  company  for  the  ensuing  year.  The  said  cer- 
tificate must  also  contain  all  the  matters  required  to  be 
stated  in  Articles  of  Incorporation. 
Civil  Code,  Section  361. 

Section  1005.— TRANSFER  OF  STOCK  IN  MINING 
CORPORATIONS.— The  Civil  Code  of  California,  Sec- 
tions 586,  587,  makes  the  following  particular  provisions 
about  the  transfer  of  stock  in  mining  corporations:  "Any 
corporation  organized  in  this  State  for  the  purpose  of  min- 
ing or  carrying  on  mining  operations  in  or  without  this 
State,  may  establish  and  maintain  agencies  in  other  States 
of  the  United  States,  for  the  transfer  and  issuing  of  their 
stock;  and  a  transfer  or  issue  of  the  stock  at  any  such  trans- 
fer agency,  in  accordance  with  the  provisions  of  its  By-Laws, 
is  valid  and  binding  as  fully  and  eflfectually  for  all  purposes 
as  if  made  upon  the  books  of  such  corporation  at  its  prin- 
cipal office  within  this  State.  The  agencies  must  be  gov- 
erned by  the  By-Laws  and  the  Directors  of  the  corporation. 
All  stock  of  such  corporation,  issued  at  a  transfer  agency, 


MINES   AND   MINING.  781 

must  be  signed  by  the  President  and  Secretary  of  the  cor- 
poration, and  countersigned  at  the  time  of  its  issue  by  the 
agent  having  charge  of  the  transfer  agency." 
Civil  Code,  Sections  586,  587. 

Section  1006.— HOURS  OF  WORK  IN  UNDER- 
GROUND MINES.— The  period  of  employment  for  all 
persons  working  in  underground  mines  in  search  of  minerals, 
whether,  base  or  precious,  or  who  are  engaged  in  such  under- 
ground mines  for  other  purposes,  or  who  are  employed  or 
engaged  in  other  underground  workings  whether  for  the 
purpose  of  tunneling,  making  excavations  or  to  accomplish 
any  other  purpose  or  design,  or  who  are  employed  in  smelt- 
ers and  other  institutions  for  the  reduction  or  refining  of 
ores  or  metals,  shall  not  exceed  eight  hours  within  any 
twenty-four  hours,  and  the  hours  of  employment  in  such 
employment  or  work  day  shall  be  consecutive,  excluding, 
however,  any  intermission  of  time  for  lunch  or  meals; 
provided  that,  in  the  case  of  emergency  where  life  or  prop- 
erty is  in  imminent  danger,  the  period  may  be  a  longer 
time  during  the  continuance  of  the  exigency  or  emergency. 
Act  of  the  Legislature,  approved  March  10,  1909. 

Section  1007.— ABANDONED  OIL  WELLS.— Aban- 
doned oil  wells  must  be  filled  by  the  owner,  with  clay,  earth 
or  cement  mortar,  thoroughly  packed  and  tamped^  to  a 
point  above  the  upper  oil-bearing  strata.  While  withdrawing 
the  casing,  water  must  be  effectually  and  permanently  ex- 
cluded. 

Act  of  the  Legislature,  approved  March  20,  1909. 

Section  1008.— CAPPING  GAS  WELLS.— All  persons, 
firms,  corporations  and  associations  are  prohibited  from  wil- 
fully permitting  any  natural  gas  wastefully  to  escape  into 
the  atmosphere. 

All  persons,  firms,  corporations  or  associations  digging, 
drilling,  excavating,  constructing  or  owning  or  controlling 
any  well  from  which  natural  gas  flows  shall  upon  the  aban- 
donment of  such  well,  cap  or  otherwise  close  the  mouth  of  or 


782  BUSINESS   LAWS   FOR   BUSINESS    MEN. 

entrance  to  the  same  in  such  a  manner  as  to  prevent  the 
unnecessary  or  wasteful  escape  into  the  atmosphere  of  such 
natural  gas.  And  no  person,  firm,  corporation  or  association 
owning  or  controlling  land  in  which  such  well  or  wells  are 
situated  shall  wilfully  permit  natural  gas  flowing  from  such 
well  or  wells,  wastefully  or  unnecessarily  to  escape  into  the 
atmosphere. 

Any  person,  firm,  corporation  or  association  who  shall 
wilfully  violate  any  of  the  provisions  of  this  act  shall  be 
deemed  guilty  of  a  misdemeanor,  and  upon  conviction  thereof 
shall  be  punished  by  a  fine  of  not  more  than  one  thousand 
dollars  or  by  imprisonment  in  the  county  jail  for  not  more 
than  one  year,  or  by  both  such  fine  and  imprisonment. 

For  the  purposes  of  this  act  each  day  during  which 
natural  gas  shall  be  wilfully  allowed  wastefully  or  unneces- 
sarily to  escape  into  the  atmosphere  shall  be  deemed  a  sepa- 
rate and  distinct  violation  of  this  act. 

Act  of  the  Legislature,  approved  March  25,  1911. 

Section  1009.—  EXTRACTION  OF  MINERALS 
FROM  THE  WATERS  OF  STREAMS  OR  LAKES.— 

Minerals  contained  in  the  waters  of  any  stream  or  lake  in 
this  state  shall  not  be  extracted  from  said  waters  except 
upon  charges,  terms  and  conditions  prescribed  by  law.  No 
person,  firm,  corporation  or  association  shall  hereafter  gain 
the  right  to  extract  or  cause  to  be  extracted  said  minerals 
from  said  waters  by  user,  custom,  prescription,  appropriation, 
littoral  rights,  riparian  rights,  or  in  any  manner  other  than 
by  lease  from  or  express  permission  of  the  state  as  prescribed 
by  law;  and  no  such  lease  or  permission  shall  be  granted  for 
a  longer  period  than  twenty-five  years. 

Act  of  the  Legislature,  approved  April  14,  1911. 

Section  1010.— MINERAL  LANDS  UNCOVERED 
BY  RECEDING  WATERS  OF  LAKES.— Where  the 
waters  of  a  lake,  or  other  body  of  water,  recede  or  drain 
away,  thus  leaving  on  State  land  valuable  minerals  un- 
covered;  the   land  uncovered   by   the   recession   or   drainage 


MINES   AND   MINING.  783 

of  such  waters  will  be  subject  to  lease  from  the  State,  for 
periods  not  longer  than  twenty-five  years,  upon  such  charges, 
terms  and  conditions  as  may  be  prescribed  by  law. 

Act  of  the  Legislature,  approved  April  14,  1911. 

Section  1011.-— CONDITIONS  OF  LEASE  OF  MIN- 
ERAL LANDS  UNCOVERED  BY  RECEDING  WA- 
TERS.— Every  person,  firm  or  corporation  taking  from  the 
waters  of  such  stream,  lakes  or  lands  any  minerals,  shall  file, 
on  or  before  the  last  Monday  in  January  of  each  year,  with 
the  county  assessor  of  the  county  in  which  any  such  stream  or 
lake  is  situated,  and  also  with  the  state  controller,  a  written 
statement,  duly  verified,  showing  in  tons  of  2,000  pounds,  the 
amount  of  mineral  taken  by  such  person,  firm  or  corporation 
from  such  water  or  land  during  the  year  ending  December 
31st  last  preceding  and  sold  by  said  person,  firm  or  corpora- 
tion during  the  said  year  preceding.  Any  such  person,  firm 
or  corporation  neglecting  or  refusing  to  furnish  such  state- 
ment shall  be  subject  to  a  fine  of  $100.00  for  each  day  after 
the  said  last  Monday  in  January  such  person,  firm  or  corpora- 
tion shall  fail  to  furnish  such  statement,  and,  in  addition  to 
said  fine,  shall  forfeit  all  leases  granting  the  right  to  extract 
such  minerals  from  said  water  and  said  land.  Any  person 
who  shall,  either  on  behalf  of  himself  or  any  firm  or  corpora- 
tion, verify  any  such  statement  which  shall  be  untrue  in  any 
material  part,  shall  be  deemed  guilty  of  a  misdemeanor. 

In  case  either  the  assessor  or  the  state  controller  shall 
not  be  satisfied  with  the  statement  as  returned,  he  may 
make  an  examination  of  the  matters  necessary  to  verify  or 
correct  said  statement,  and,  for  that  purpose,  may  subpoena 
witnesses  and  call  for  and  compel  the  production  of  necessary 
books  and  papers  belonging  to  the  person,  firm  or  corpora- 
tion making  the  returns. 

(a)  Royalty. — The  county  assessor  of  the  county  shall, 
after  examination  and  approval  by  him  and  the  state  con- 
troller of  such  statement,  proceed  to  collect  from  such  per- 
son, firm  or  corporation  a  royalty  of  25  cents  for  each  ton 


784  BUSINESS   LAWS   FOR   BUSINESS    MEN. 

of  2,000  pounds  of  mineral  taken  from  such  water  or  land 
by  such  person,  firm  or  corporation  and  sold  during  the  pre- 
ceding year,  in  the  manner  provided  for  the  collection  of 
personal  property  taxes;  provided  that  the  royalty  on  sodium 
bicarbonate  and  on  sodium  hydrate  so  taken  shall  be  fifty 
(50)  cents  for  each  ton  of  2000  pounds. 

(b)  Application  to  Lease  Lands. — Any  person,  firm  or 
corporation  desiring  to  lease  any  lands  under  this  act  must 
make  application  therefor  to  the  surveyor  general  of  the 
state,  describing  the  lands  sought  to  be  leased  by  legal 
subdivisions,  or,  if  the  legal  subdivisions  are  unknown  to 
the  applicant,  by  metes  and  bounds.  The  application  must 
be  accompanied  by  a  filing  fee  of  $10.00. 

(c)  Survey  of  Lands. — Upon  the  receipt  of  such  appli- 
cation, the  surveyor  general  shall  direct  the  county  surveyor 
of  the  county  in  which  such  lands  are  situated  to  survey  the 
land  sought  to  be  leased.  The  county  surveyor  shall  make 
an  actual  survey  of  the  land,  at  the  expense  of  the  appli- 
cant, establishing  the  four  corners  to  each  quarter  section, 
and  connecting  the  same  with  a  United  States  survey;  and 
within  30  days  file  with  the  surveyor  general  a  copy,  under 
oath,  of  his  field  notes  and  plat.  If  the  county  surveyor 
fails  to  make  the  survey  as  herein  provided,  the  surveyor 
general  shall  immediately  direct  another  person  to  make 
the  survey  at  the  expense  of  the  applicant,  and  said  survey 
shall  be  made  and  completed  within  30  days  after  the  au- 
thorization, and  the  field  notes  and  plats,  or  copies  thereof, 
shall  be  sworn  to  by  the  surveyor  making  them  and  shall 
be  filed  with  the  surveyor  general. 

(d)  Approval  or  Rejection  of  Application. — All  appli- 
cations to  lease  land  under  this  act  shall  be  approved  or 
rejected  by  the  surveyor  general  within  ninety  days  after 
the  receipt  thereof.  Immediately  after  the  approval  of  the 
application,  the  surveyor  general  shall  execute  and  deliver  to 
the  applicant  a  lease  of  the  lands  described  in  the  application. 


MINES   AND   MINING.  785 

(e)  Rental. — The  lands  designated  in  this  act  shall  be 
leased  at  the  rate  of  $2.50  per  acre,  per  year,  payable  yearly 
in  advance.  All  moneys  received  as  rental  for  such  lands  and 
as  royalty  upon  the  mineral  product  of  the  waters  of  the 
lakes,  streams  or  lands  above  mentioned,  shall  be  paid  into 
the  state  school  land  fund. 

(f)  First  Payment. — Whenever  any  lease  is  delivered  to 
the  applicant  by  the  surveyor  general,  the  lessee  shall,  within 
15  days  thereafter,  present  said  lease  to  the  treasurer  of  the 
State  of  California,  and  make  payment  of  the  first  annual 
rental.  The  treasurer  shall  receive  the  money  and  give  a 
receipt  therefor.  All  subsequent  annual  payments  of  rental 
must  be  paid  to  the  state  treasurer,  in  like  manner,  within 
15  days  after  they  become  due. 

(g)  Limit  of  Lease. — In  case  payments  are  not  made 
as  herein  provided,  the  lease  and  all  rights  thereunder  shall 
cease  and  terminate.  No  lease  shall  run  for  more  than  25 
years;  provided,  that  upon  the  expiration  of  any  lease,  such 
lease  may  be  extended  for  a  period  of  25  years  upon  such 
terms  and  conditions  as  may  then  be  prescribed  by  law. 

(h)  Reservations  to  State. — All  leases  made  under  the 
authority  of  this  act  shall  contain  a  reservation  to  the  state 
of  a  right  to  locate  rights  of  way  across  such  leased  lands, 
subject  only  to  the  requirements  that  the  rights  of  way  shall 
be  located  in  such  manner  as  to  cause  the  least  injury  to 
the  leased  lands  across  which  the  same  may  be  located,  and 
that  any  damage  suffered  by  the  lessee  of  such  lands  shall 
be  compensated  by  the  lessee  of  the  lands  for  whose  benefit 
the  right  of  way  is  required;  and  every  such  lease  shall 
be  subject  to,  and  shall  contain  a  reservation  of,  the  right 
of  any  city  and  county  or  incorporated  city  or  town  of  this 
state  to  at  any  time  appropriate  and  take,  under  the  laws 
of  this  state  relative  to  the  appropriation  of  waters,  water 
from  any  stream  or  lake  tributary  to  or  discharging  into 
any  stream  or  lake  of  the  character  mentioned  in  section 
one  of  this  act  for  any  use  or  uses  within  the  authorized 


786  BUSINESS  LAWS  FOR  BUSINESS   MEN. 

powers   of   such   city   and   county,    or   incorporated    city   or 
town. 

(i)  Lease  to  Rights  of  Way. — Leases  of  rights  of  way, 
not  exceeding  100  feet  in  width,  for  access  to  any  waters 
or  lands  designated  by  this  act,  may  be  applied  for  and 
granted  in  the  manner  herein  provided  for  leasing  lands. 
Such  rights  of  way  shall  be  leased  at  an  annual  rental  of 
$2.50  an  acre,  and  the  same  shall  be  paid  as  herein  provided 
for  leased  lands. 

(j)  Termination  of  Lease. — ^AU  leases  of  mineral  lands 
provided  for  by  this  act  shall  cease  and  terminate  on  Decem- 
ber 31st  of  any  year  if  the  lessee  or  assigns  has  not,  during 
the  year  preceding,  extracted  or  removed  from  such  land 
and  water  an  amount  of  mineral  equal,  in  the  aggregate, 
to  a  minimum  of  5  tons  per  acre  of  land  leased;  provided 
that  when  a  lease  is  not  delivered  to  the  lessee  until  after 
the  fifteenth  day  of  January  of  any  year,  the  minimum  ton- 
nage for  such  year  shall  be  less  than  five  (5)  tons,  and 
shall  be  proportional  to  the  number  of  days  remaining  in 
such  year  after  the  completion  of  the  works. 

(k)  Legislature  May  Change  Royalty. — The  Legisla- 
ture shall  have  the  right  to  change,  from  time  to  time,  the 
royalty  per  ton  of  minerals  extracted  and  the  annual  rental 
per  acre  of  land,  and  such  change  shall  apply  to  all  persons, 
firms  or  corporations  holding  leases  hereunder;  provided, 
that  no  lease  given  under  this  act  shall  be  subject  to  any 
change,  as  to  the  royalty  or  rental  provided  for  in  said 
lease,  subsequent  to  the  execution  of  such  lease  until  after 
ten  years  from  the  passage  of  this  act. 

(1)  Abandonment  of  Lease. — Any  lessee  hereunder  may 
abandon  and  surrender  a  lease  at  the  expiration  of  any  cal- 
endar year  by  filing  with  the  county  assessor  of  the  county  in 
which  is  situated  the  lands  described  in  said  lease,  and  with 
the  surveyor  general  and  the  state  controller,  notices  of  said 
abandonment  or  surrender;  but  said  notices  must  be  filed  at 
least  60  days  before  the  expiration  of  said  calendar  year; 


MINES   AND   MINING.  787 

and  said  abandonment  and  surrender  shall  not  absolve  the 
said  lessee  from  the  payment  of  any  royalty  which  may  be 
due  at  the  end  of  said  fiscal  year  for  minerals  extracted 
from  the  waters  or  lands  in  this  act  specified. 

Act  of  the  Legislature,  approved  April  27,  1911. 

Section  1012.— MORTGAGE  OF  MINING  PROP- 
ERTY.— The  directors  of  a  mining  corporation  have  no 
power  or  authority  to  mortgage  the  mining  ground  of  the 
company  without  a  ratification  by  the  holders  of  two-thirds 
of  the  capital  stock.  The  want  of  such  ratification  can  be 
raised  by  anyone  who  connects  himself  with  the  title  of  the 
corporation  which  owned  the  property,  as  well  as  by  the 
stockholders  thereof.  The  consent  of  the  stockholders  cannot 
be  presumed  from  the  mere  fact  of  the  execution  of  the  mort- 
gage, whether  under  the  corporate  seal  or  not. 

(Decided  by  the  District  Court  of  Appeals  of  California, 
Second  District,  in  the  case  of  Mrs.  M.  T.  Bennett  vs.  Red 
Qoud  Mining  Company,  which  decision  is  printed  in  Vol- 
ume 11  of  California  Appellate  Decisions,  page  623.) 


PART   IX. 

WATER    AND    WATER    RIGHTS. 

Section     1013.— APPROPRIATION    OF    WATER.— 

The  right  to  the  use  of  running  water,  flowing  in  a  river  or 
stream,  or  down  a  canyon  or  ravine,  may  be  acquired  in 
California  by  appropriation.  Appropriation  must  be  for 
some  useful  or  beneficial  purpose,  and  when  the  appropria- 
tor  or  his  successor  in  interest  ceases  to  use  it  for  such 
purposes,  the  right  ceases. 

Civil  Code,  Sections  1410,  1411. 

Section   1014.— NOTICE  OF  APPROPRIATION.— A 

person  desiring  to  appropriate  water  must  post  a  notice,  in 
writing,  in  a  conspicuous  place  at  the  point  on  the  stream 
where  he  intends  to  take  the  water  from  it.  This  notice 
must  state  (1)  that  he  claims  the  water  there  flowing  to 
the  extent  of  (giving  the  number)  inches,  measured  under 
a  four-inch  pressure;  (2)  the  purpose  for  which  he  claims 
it,  and  the  place  of  intended  use;  (3)  the  means  by  whicli 
he  intends  to  divert  it;  (4)  and  the  size  of  the  flume,  pipe, 
or  aqueduct  in  which  he  intends  to  divert  it  from  the  stream. 
Statutes  of  1903,  page  361. 

Section  1015.— NOTICE  MUST  BE  RECORDED.— A 

copy  of  the  notice  of  appropriation  must  be  recorded,  within 
ten  days  after  it  is  posted,  in  the  office  of  the  Recorder  of 
the  county  in  which  it  is  posted. 
Statutes  of  1903,  page  361. 

Section      1016.— CHANGE      OF     PLACE      OF      IN- 
TENDED DIVERSION.— The  law  passed  in  1903,  above 
stated,  provides  that  after  filing  the  notice  of  appropriation 
(788) 


WATER   AND   WATER   RIGHTS.  789 

for  record,  "the  place  of  intended  diversion,  or  the  place  of 
intended  use,  or  the  means  by  which  it  is  intended  to  divert 
the  water,  may  be  changed  by  the  person  posting  said 
notice,  or  his  assigns,  if  others  are  not  injured  by  such 
change."  But  the  law  does  not  state  in  what  manner  the 
change  shall  be  made,  whether  by  posting  and  recording 
a  new  notice,  or  in  some  other  way  indicating  the  intention 
to  change  the  place  of  diversion,  the  place  of  intended  use, 
or  the  means  of  taking  the  water.  The  law  being  uncertain 
in  this  particular,  it  would  be  well  to  file  a  new  notice  for 
record  stating  the  change. 

Statutes  of  1903,  page  361. 

Section  1017.— FORM  OF  NOTICE  OF  APPROPRI- 
ATION.— The  following  is  a  form  of  notice  of  appropria- 
tion, to  be  posted  and  recorded  as  stated  in  preceding  sec- 
tions. The  notice  should  be  posted  at  the  outlet  or  point  of 
diversion  on  the  bank  of  the  stream: — 

Notice  of  Claim  of  Water. 

The  undersigned  claims  the  water  running  in  this  stream 

to  the  extent  of (state  number  of  inches) 

inches,  measured  under  a  four-inch  pressure. 

I  claim  the  water  for 

(Here  state  purpose  for  which  water  is  to  be  used.) 

and  I  intend  to  use  it  at 

(Here  state  place  where  water  is  to  be  used.) 


I  intend  to  divert  the  water  by  means  of 

(Here  state  whether  it  is  intended  to  use  a  flume,  pipe,  ditch, 

or  aqueduct.) 

The  size  of  the  flume  (or  ditch,  or  aqueduct,  as  the  case 
may  be)  in  which  I  intend  to  divert  said  water  will  be 
(here  state  size.) 


Claimant. 
Notice  posted ,  191 . . 


790  BUSINESS   LAWS   FOR  BUSINESS   MEN, 

Section  1018.— WHEN  WORK  MUST  BE  DONE.— 
Within  sixty  days  after  the  notice  is  posted,  the  claimant 
must  commence  the  excavation  or  construction  of  the  works 
in  which  he  intends  to  divert  the  water,  or  the  survey,  road 
or  trail  building,  necessarily  incident  thereto,  and  must  prose- 
cute the  work  diligently  and  uninterruptedly  to  completion, 
unless  temporarily  interrupted  by  snows  or  rain;  provided, 
that  if  the  erection  of  a  dam  has  been  recommended  by  the 
California  Debris  Commission  at  or  near  the  place  where 
it  is  intended  to  divert  the  water,  the  claimant  shall  have 
sixty  days  after  the  completion  of  such  dam  in  which  to  com- 
mence the  excavation  or  construction  of  the  works  in  which 
he  intends  to  divert  the  water;  provided,  that  whenever  any 
city  and  county,  or  any  incorporated  city  or  town  within  this 
State  makes,  or  has  made,  or  acquires  or  has  acquired  any 
appropriation  of  any  of  the  waters  of  this  State  in  accord- 
ance with  the  provision  of  Section  1415  of  this  code,  it 
shall  not  be  necessary  for  such  city  and  county,  city  or 
town  to  commence  the  work  for  development  of  more  of 
the  waters  so  claimed  than  is  actually  necessary  for  the  imme- 
diate needs  of  such  city  and  county,  city  or  town;  and  it 
shall  be  held  to  be  a  sufficient  compliance  with  the  require- 
ments of  the  law,  to  the  full  amount  of  water  stated  in  the 
notice  posted  and  recorded,  for  such  city  and  county,  citv  or 
town,  to  within  sixty  days  make  the  necessary  surveys,  or 
within  six  months  to  authorize  the  issuance  of  municipal 
bonds,  for  the  construction  of  the  necessary  works  designed 
to  supply  such  city  and  county,  city  or  town,  with  the  water 
required  for  immediate  use.  Any  appropriation  heretofore 
made  by  any  such  city  and  county,  city  or  town,  in  connec- 
tion with  which  surveys  were  at  any  time  made,  or  an  issue 
of  bonds  authorized  for  the  construction  of  any  portion  of 
the  works  necessary  for  a  diversion  of  any  part  of  the  water 
appropriated,  is  hereby  confirmed  to  the  full  amount  of  water 
stated  in  the  original  notice  or  notices. 

Act  of  the  Legislature,  approved  May  1,  1911. 


WATER   AND   WATER   RIGHTS.  791 

Section  1019.  — ELECTRICAL  POWER.— No  water 
for  the  generation  of  electricity  or  electrical  or  other  power 
may  be  appropriated  for  a  longer  period  than  twenty-five 
years,  except  by  a  municipal  corporation,  other  than  an 
irrigation  district  or  a  lighting  district,  or  by  an  irrigation 
district  when  such  electricity,  electrical  or  other  power  is 
for  use  and  distribution  only  within  its  own  limits,  and  as 
subsidiary  to  and  mainly  for  ■  the  purpose  of  serving  and 
carrying  out  irrigation,  or  by  a  lighting  district  when  such 
electricity,  electrical  or  other  power  is  for  use  and  distribu- 
tion only  within  its  own  limits. 

Act  of  the  Legislature,  approved  April  8,  1911. 

(a)  Water  Not  Being  Used  Declared  Unappropriated. 

— All  water  or  the  use  of  water  which  has  been  heretofore 
appropriated  and  which  has  not  been  put,  or  which  has  ceased 
to  be  put,  to  some  useful  or  beneficial  purpose,  or  which  is 
not  now  in  the  process  of  being  put  to  some  useful  or 
beneficial  purpose  with  due  diligence  in  proportion  to  the 
magnitude  of  the  work  necessary  properly  to  utilize  for  the 
purpose  of  such  appropriation  such  water  or  such  use  of 
water,  is  hereby  declared  to  be  unappropriated. 

(b)  State  May  Fix  Rates. — All  appropriations  of  water 
or  the  use  of  water  for  generating  electricity  or  electrical  or 
other  power  shall  be  subject  to  the  right  of  the  state  to 
regulate  and  fix  the  rates  of  compensation  for  which  such 
electricity  or  electrical  or  other  power  may  be  sold,  rented  or 
distributed. 

(c)  Application  for  Permit. to  Make  Appropriation  of 
Water. — Any  person,  firm,  association  or  corporation  here- 
after intending  to  appropriate  water  or  the  use  of  water  for 
the  generation  of  electricity,  or  of  electrical  or  other  power, 
before  commencing  the  construction  or  enlargement  or  ex- 
tension of  any  building,  power  house,  ditch,  canal  or  any 
distributing  or  controlling  works,  or  performing  any  work  in 
connection  with  said  appropriation  or  proposed  appropriation, 
shall  make  an  application  in  duplicate  to  the  board  of  control 


792  BUSINESS  LAWS  FOR  BUSINESS   MEN. 

provided  for  in  this  act  for  a  permit  to  make  such  appro- 
priation. No  person,  firm,  association  or  corporation  shall 
wilfully  divert  or  use  water  or  shall  wilfully  attempt  to  divert 
or  use  water  for  generating  electricity  or  electrical  or  other 
power  without  first  complying  with  the  provisions  of  this  act. 
The  possession  or  use  of  water  for  generating  electricity  or 
electrical  or  other  power  except  when  a  right  to  said  water  or 
the  use  thereof  shall  have  been  acquired  in  accordance  with 
law  shall  be  prima  facie  evidence  of  such  wilful  diversion  or 
use  or  attempted  diversion  or  use  of  such  water. 

(d)  Facts  to  Be  Stated  in  Application. — Every  applica- 
tion for  a  permit  to  appropriate  water  or  the  use  of  water 
for  the  generation  of  electricity  or  of  electrical  or  other 
power  shall  set  forth  the  residence,  or  principal  place  of  busi- 
ness, if  the  applicant  be  a  corporation,  and  postoffice  address 
of  the  applicant,  the  source  of  the  water  or  the  use  of  water 
to  be  appropriated  or  used,  the  nature  and  amount  of  the 
proposed  use,  the  head  of  and  amount  of  water  to  be  utilized, 
the  uses  to  which  the  water  and  electricity  or  electrical  or 
other  power  are  to  be  applied,  the  nature,  the  location  (which 
may  be  changed  by  permission  of  the  board  of  control),  the 
character,  the  estimated  capacity,  and  the  estimated  cost  of 
the  works,  and  whether  the  water  is  to  be  and  will  be  re- 
turned to  the  stream  or  source  from  which  it  is  to  be  taken 
and  if  so  at  what  point  on  the  stream  or  source  it  is  proposed 
to  return  said  water  to  said  stream  or  source.  If  the  appli- 
cation is  for  the  construction  of  a  reservoir  for  the  purpose 
of  storing  water  to  be  used  for  the  generation  of  electricity 
or  of  electrical  or  other  power,  it  shall  give  the  estimated 
height  of  the  dam  and  the  estimated  capacity  of  the  reservoir 
in  addition  to  the  other  requirements  above  set  forth.  All 
applications  shall  be  accompanied  by  such  maps  and  drawings 
in  duplicate  and  such  other  data  in  duplicate  as  may  be 
prescribed  by  the  board  of  control,  and  such  accompanying 
data  shall  be  considered  as  a  part  of  the  application.  A  true 
copy  of  such  application  without  such  accompanying  data  and 
maps  and  drawings  shall  be  recorded  by  the  applicant  in  the 


WATER   AND   WATER   RIGHTS.  793 

office  of  the  recorder  of  the  county,  or  city  and  county,  in 
which  the  proposed  works  are  to  be  erected,  within  ten  days 
after  said  application  is  filed  with  said  board. 

(e)  Examination  of  Application  by  Board  of  Control. 
— Upon  receipt  of  an  application  under  this  act  it  shall  be 
the  duty  of  the  board  of  control  immediately  to  cause  to  be 
made  an  endorsement  thereon  of  the  date  of  its  receipt  and 
to  keep  the  duplicate  of  said  application  and  its  endorsement 
on  file  as  a  record  of  the  same.  The  board  of  control  shall 
immediately  examine  the  said  application  after  it  has  been 
filed.  If  upon  such  examination  the  application  is  found  to 
be  defective,  one  copy  of  it  and  its  accompanying  data,  maps 
and  drawings  shall  be  returned  to  the  applicant  for  correction 
or  completion,  and  the  date  of  and  reasons  for  the  return 
thereof  shall  be  endorsed  thereon  and  a  record  kept  of  such 
endorsement  in  the  office  of  the  board  of  control.  No  appli- 
cation shall  lose  its  priority  of  filing  on  account  of  such  de- 
fect; provided,  a  proper  application  is  filed  in  the  office  of  the 
board  of  control  within  thirty  days  of  the  date  of  said  return 
to  the  applicant.  It  shall  be  the  duty  of  the  board  of  control 
within  six  months  to  enter  an  order  directing  the  rejection 
of  such  application  if  after  further  hearing  the  public  inter- 
ests shall  seem  to  the  board  of  control  so  to  demand.  Appli- 
cations may  be  approved  for  a  less  amount  of  water  or  the 
use  of  water  than  that  applied  for,  if  there  exist  substantial 
reasons  therefor,  but  in  any  event  shall  not  be  approved  for 
more  water  or  the  use  of  water  than  can  be  applied  to  the 
use  for  which  application  is  made  under  an  efficient  and 
economical  use  thereof. 

(f)  Approval  or  Rejection  of  Application. — The  ap- 
proval or  rejection  of  an  application  shall  be  endorsed  thereon 
and  a  record  made  of  such  endorsement  in  the  office  of  the 
board  of  control.  One  copy  of  the  application  so  endorsed 
shall  be  returned  immediately  to  the  applicant  in  person  or 
by  registered  mail.  If  said  application  be  approved,  the 
applicant  shall  immediately  record  said  approved  application, 
together  with  the  endorsement  thereon,  in  the  office  of  the 


794  BUSINESS   LAWS   FOR   BUSINESS   MEN. 

recorder  of  the  county,  or  city  and  county,  in  which  the 
proposed  works  are  to  be  constructed,  and  shall  be  authorized 
on  receipt  of  said  approval  and  on  recording  the  same,  to 
proceed  with  the  construction  of  the  necessary  works  and 
to  take  all  steps  required  to  apply  the  water  or  the  use  of 
the  water  to  the  purpose  of  generating  electricity  or  electrical 
or  other  power  as  provided  in  the  approved  application,  and 
to  perfect  the  proposed  appropriation ;  provided,  however, 
that  no  right  in  or  to  such  water  or  the  use  thereof  shall 
vest  in  or  accrue  to  the  said  applicant  until  the  final  permit 
is  issued  as  hereinafter  provided. 

(g)  Construction  Work. — Actual  construction  work  shall 
begin  within  six  months  from  the  date  of  the  approval  of 
the  application  and  the  construction  of  the  work  shall  there- 
after be  prosecuted  with  reasonable  diligence  in  proportion 
to  the  magnitude  of  the  undertaking,  and  if  such  work  is  not 
so  commenced  and  prosecuted  the  board  of  control  may 
revoke  its  approval  of  the  application;  and  such  work  shall 
be  completed  within  a  reasonable  time  as  fixed  in  the  permit 
not  to  exceed  five  years  from  the  date  of  such  approval. 
Upon  application  of  the  proposed  appropriator  the  board  of 
control  may  for  good  cause  extend  the  time  within  which 
such  work  shall  be  completed  under  any  permit,  but  no  such 
extension  shall  be  for  a  longer  period  than  one  year  beyond 
the  period  fixed  in  the  permit. 

Upon  the  completion  of  the  works  for  the  diversion  and 
application  of  water  or  the  use  of  water  under  this  act,  the 
holder  of  such  permit  or  his  assigns  shall  report  such  com- 
pletion to  the  board  of  control,  and  the  board  of  control 
without  delay  shall  cause  to  be  made  a  full  inspection  and 
examination  of  the  works  constructed  and  a  report  upon  their 
construction  and  condition,  and  whether  or  not  they  conform 
to  the  terms  of  the  application  and  permit  and  are  adequate 
for  the  purposes  intended. 

(h)   License  to  Use  Water. — Upon  the  receipt  of  such 
report,  the  board  shall,  if  the  law  has  been  fully  complied 


WATER   AND   WATER  RIGHTS.  795 

with,  and  if  the  work  shall  have  been  completed  in  accord- 
ance with  the  application,  issue  a  license  to  the  applicant  or 
his  assigns,  allowing  him  or  them  to  divert  and  use  said 
water,  or .  so  much  thereof  as  may  be  necessary  for  the 
use  proposed,  for  a  certain  period  of  time  therein  specified, 
but  in  no  case  for  more  than  twenty-five  (25)  years.  Licenses 
granted  upon  application  made  under  this  act  for  water  or 
the  use  of  water  shall  be  numbered  consecutively  as  to  each 
stream  or  other  source  in  the  order  as  to  the  dates  when 
such  applications  are  filed. 

(i)  Facts  Stated  in  License. — Said  license  shall  set  forth 
the  name  of  the  licensee,  his  place  of  residence,  and  if  a 
corporation  or  firm  or  association,  the  date  of  its  organiza- 
tion and  its  principal  place  of  business,  the  stream  or  source 
from  which  the  water  is  to  be  diverted  or  used,  the  quantity 
of  water  the  licensee  is  authorized  to  divert  from  the  stream 
or  source,  the  point  or  points  on  said  stream  or  source  at 
which  said  water  is  to  be  diverted  or  used,  the  location  of 
the  proposed  works,  the  period  of  time  for  which  the  water 
may  be  used,  which  in  no  case  shall  be  for  more  than  twenty- 
five  years,  by  what  means  and  the  purposes  for  which  the 
licensee  is  authorized  to  use  the  same. 

(j)  Rights  Vested  in  Licensee. — Any  license  issued  as 
above  provided  for  water  or  the  use  of  water  appropriated 
under  this  act  shall  vest  in  the  licensee  the  right  to  the 
use  of  the  amount  of  water  mentioned  therein  for  the  period 
of  time  therein  set  forth,  in  the  manner  and  for  the  purpose 
therein  mentioned  and  not  otherwise;  provided  that  such 
license  shall  not  impair  or  affect  any  rights  to  water  or  the 
use  of  water  which  shall  have  become  vested  prior  to  the 
making  of  the  application  above  provided  for. 

(k)  Renewal  of  License. — Any  appropriator  of  water  or 
the  use  of  water  under  the  provisions  of  this  act  for  the 
purpose  of  generating  electricity  or  electrical  or  other  power, 
or  the  successor  or  assigns  of  said  appropriator,  if  a  renewal 
or  extension  of  the  license  herein  provided   for  is   desired, 


796  BUSINESS   LAWS   FOR  BUSINESS   MEN. 

shall,  not  less  than  one  or  more  than  two  years  prior  to 
the  termination  of  the  license  granted  as  herein  provided, 
notify  the  board  of  control  that  a  renewal  and  extension  of 
such  license  is  desired.  The  board  of  control  shall  there- 
upon issue  to  said  appropriator  a  renewal  and  extension 
of  said  license  for  a  fixed  period,  but  in  no  case  for  more 
than  a  period  of  twenty-five  years  from  the  date  of  such 
renewal,  in  compliance  with  such  laws  of  the  state  as  shall 
then  be  in  force  regulating  the  renewal,  issuing  and  granting 
of  any  license  for  water  or  the  use  of  water  for  generating 
electricity  or  electrical  or  other  power. 

(1)  License  Not  Valid  for  Excess. — No  license  for  the 
appropriation  of  water  or  the  use  of  water  as  herein  pro- 
vided shall  be  valid  as  to  any  excess  of  the  capacity  of  the 
works  actually  constructed. 

(m)  License  to  Store  Surplus  Waters. — The  board  of 
control  may  upon  application  made  therefor  in  the  manner 
provided  in  this  act  and  upon  like  procedure,  grant  to  any 
person,  firm,  association  or  corporation  a  license  to  divert 
and  store  for  the  purpose  of  generating  electricity  or  electrical 
or  other  power,  the  surplus  waters  of  any  stream  during 
floods  or  high  water  or  during  those  portions  of  the  year 
when  such  water  is  not  required  or  being  stored  for  irriga- 
tion purposes,  and  for  the  purpose  of  this  act  all  water 
which  is  not  used  during  the  season  of  flood  or  high  water 
is  declared  to  be  surplus  water. 

(n)  Appropriations  Subject  to  Fees. — All  appropriations 
of  water  or  the  use  of  water  for  generating  electricity  or 
electrical  or  other  power  heretofore  or  hereafter  made  shall 
be  subject  to  the  right  of  the  state  to  impose  the  fees  and 
charges  herein  provided,  and  shall  also  be  subject  to  the 
right  of  the  state  to  increase  or  decrease  such  fees  and 
charges  from  time  to  time  thereafter. 

(o)  Fees. — Every  person,  firm,  association  or  corporation 
making  application  for  permission  to  appropriate  water  or 
the  use  of  water  under  this  act  shall  at  the  time  of  filing 


WATER   AND   WATER   RIGHTS.  797 

the  said  application  pay  to  said  board  of  control  a  fee  of 
ten  dollars.  Every  person,  firm,  association  or  corporation 
at  the  time  of  receiving  a  license  to  appropriate  water  or 
the  use  of  water  as  provided  in  this  act  shall  pay  to  said 
board  a  fee  of  one  hundred  dollars,  and  also  shall  pay  to 
said  board  when  the  said  license  is  issued,  and  in  addition 
thereto  and  annually  thereafter  a  charge  for  each  theoretical 
horse  power  of  the  works  estimated  as  follows :  For  the 
first  one  hundred  (100)  horse  power  there  shall  be  no 
charge;  and  for  all  above  one  hundred  (100)  horse  power 
ten  (10)  cents  for  each  horse  power.  All  fees  collected 
shall  be  accounted  for  at  the  following  regular  meeting 
of  the  board  of  control  and  paid  by  said  board  into  the 
general  fund  of  the  state  treasury  within  thirty  days 
thereafter. 

(p)  Board  of  Control. — For  the  purpose  of  carrying  out 
the  provisions  of  this  act,  a  board  of  control,  to  consist  of 
five  persons,  is  hereby  created  and  established.     Three  mem- 
bers of  said  board  shall  be  appointed  by  the  governor  for 
a  term  of  four  years;  provided,  that  the  members  first  ap- 
pointed shall  be  appointed  so  that  one  of  them  shall  go  out 
of  office  at  the  end  of  one  year,  one  at  the  end  of  two  years, 
and  one  at  the  end  of  three  years.     The  governor  and  the 
state  engineer  are  hereby  made  ex-officio   members  of  said 
board  of  control  in  addition  to  the  three  members  appointed 
by  the  governor.    The  appointed  members  of  said  board  shall 
receive  as  compensation   for  services  rendered  by  them,   as 
such  members,  the  sum  of  ten  (10)  .dollars  per  day  for  each 
day's   services   actually   rendered.     'If,   however,   there   shall, 
hereafter,  be  created  by  law,  any  state  board  or  commission 
having   power  to   regulate   or   fix   rates   to   be   charged    for 
services     rendered,     or    commodities     furnished,     by     public 
utilities,   or   by   persons   or   corporations    engaged   in   public 
service  business,  or  if  any  state  board  or  commission   now 
existing  shall  hereafter  have  such  powers  conferred  upon  it, 
then  the  powers  and  duties  of  the  board  of  control  herein 
created   shall   vest   in   and   be   exercised   by   such   board   or 


798  BUSINESS   LAWS   FOR   BUSINESS   MEN. 

commission,  and  said  board  of  control  shall  thereupon  cease 
to  exist. 

(q)  Powers  of  Board. — The  board  of  control  is  hereby 
authorized  and  empowered  to  do  and  perform  the  acts  and 
things  required  of  it  by  this  act  and  to  adopt  rules  and 
regulations  necessary  to  carry  out  the  provisions  of  this 
act,  and  it  shall  be  the  duty  of  the  board  to  provide  for  the 
public  hearing  upon  the  merits  of  all  applications  filed  with 
the  board  and  to  prescribe  the  rules  of  procedure  to  be 
observed  at  such  hearings. 

Every  member  of  said  board  of  control  is  hereby  author- 
ized to  administer  oaths  and  to  cause  the  production  of  per- 
sons, papers,  records  and  books  in  all  matters  of  business 
transacted  before  said  board. 

(r)  Annual  Reports  to  Board. — All  persons,  firms,  asso- 
ciations or  corporations  generating  electricity  or  electrical 
or  other  power  by  water  or  the  use  of  water  appropriated 
under  the  provisions  of  this  act  shall  keep  their  plants  and 
systems  in  proper  repair,  and  shall  upon  the  first  day  of 
January  after  the  passage  of  this  act,  and  annually  thereafter, 
report  to  said  board  of  control  the  condition  of  their  plants 
and  distributing  systems,  the  number  of  kilowatt  hours  of 
electricity  or  electrical  or  other  power  generated  during  each 
month  of  said  year,  the  number  of  kilowatt  hours  of  elec- 
tricity or  electrical  or  other  power  rented,  sold  or  distributed 
during  each  month  of  said  year,  and  the  names  of  the  per- 
sons, firms,  associations  or  corporations  to  whom  said  power 
has  been  rented,  sold  or  distributed. 

(s)   Combinations  in  Restraint  of  Trade  Prohibited. — 

No  person,  firm,  association  or  corporation  appropriating 
water  or  the  use  of  water  hereunder  shall  enter  into  any 
agreement,  combination  or  trust  in  restraint  of  trade  con- 
trary to  law,  and  if  any  of  the  works  owned  or  operated 
by  any  licensee  under  this  act  or  assign  or  assigns  shall  be 
owned;  leased,  trusteed,  possessed  or  controlled  by  any  device, 
permanently,  temporarily,  directly  or  indirectly,  tacitly,  or  in 


WATER   AND   WATER   RIGHTS.  799 

any  manner  whatsoever  so  that  it  or  they  form  a  part  of 
or  in  any  way  effect  any  combination,  or  if  it  or  they  are  in 
anywise  controlled  by  any  combination  or  conspiracy  to  limit 
the  output  of  electricity  or  electrical  or  other  power,  or  to 
increase  the  price  at  which  electricity  or  electrical  or  other 
power  is  sold,  rented  or  distributed,  or  to  prevent  the  lower- 
ing of  said  price,  or  in  restraint  of  trade  with  foreign  nations, 
or  between  two  or  more  states  or  territories,  or  with  any 
state  or  territory  in  the  generation,  sale,  distribution  of  elec- 
tricity or  electrical  or  other  power,  all  rights  to  the  appropri- 
ation of  water  or  the  use  of  water  shall  cease  and  be  for- 
feited to  the  people  of  the  state  by  proceedings  instituted  in 
the  courts  for  that  purpose  by  the  attorney-general  of  the 
state  either  upon  his  own  initiative  or  upon  demand  of  the 
board  of  control. 

(t)  Violation  of  this  Act  a  Misdemeanor. — Any  violation 
of  this  act  or  of  any  order  or  regulation  of  the  board  of 
control  is  hereby  declared  to  be  a  misdemeanor,  and  shall  be 
punished  by  a  fine  not  exceeding  five  thousand  (5000) 
dollars,  or  by  imprisonment  in  the  county  jail  not  exceeding 
one  (1)  year,  or  by  both  such  fine  and  imprisonment. 

(u)  Act  Not  Applicable  to  Municipal  Corporations. — 

None  of  the  provisions  of  this  act  shall  apply  to  municipal 
corporations,  other  than  irrigation  districts  or  lighting  dis- 
tricts, nor  to  the  use  by  any  irrigation  district  of  water  for 
the  generation  of  electricity,  electrical  or  other  power  only 
for  use  and  distribution  within  its  own  limits,  and  as  sub- 
sidiary to  and  mainly  for  the  purpose  of  serving  and  carrying 
out  irrigation,  nor  to  the  use  by  any  lighting  district  of 
water  for  the  generation  of  electricity,  electrical  or  other 
power  only  for  use  and  distribution  within  its  own  limits. 

(v)  Appropriations  by  Municipal  Corporations. — Muni- 
cipal corporations,  other  than  irrigation  districts  and  lighting 
districts,  desiring  to  appropriate  water  for  the  generation  of 
electricity,  electrical  or  other  power,  and  all  irrigation  dis- 
tricts and  lighting  districts  desiring  to  appropriate  water  for 


800  BUSINESS    LAWS    FOR   BUSINESS    MEN. 

the  generation  of  electricity,  electrical  or  other  power,  and 
all  irrigation  districts  and  lighting  districts  desiring  to  appro- 
priate water  for  the  generation  of  electricity,  electrical  or 
other  power  for  the  uses  hereinabove  in  this  section  specified, 
shall  within  ten  days  from  the  time  that  they  post  and  record 
notices  of  appropriation,  as  required  by  law,  file  with  the 
board  of  control  a  notice  of  said  appropriation,  together  with 
the  name  and  postoffice  address  of  the  appropriator,  the 
source  of  the  water  to  be  appropriated  or  used,  the  nature 
and  amount  of  the  proposed  use,  the  head  of  an  amount  of 
water  proposed  to  be  utilized,  the  uses  to  which  the  water 
and  power  are  to  be  applied,  the  nature,  location,  character, 
estimated  capacity  and  estimated  cost  of  the  works,  and 
whether  the  water  is  to  be  and  will  be  returned  to  the  stream 
or  source  from  which  it  is  to  be  taken,  and  if  so,  at  what 
point  on  said  stream  or  source.  If  the  appropriation  con- 
templates the  construction  of  a  reservoir  for  the  purpose  of 
storing  water  to  be  used  for  the  generation  of  electricity  or 
electrical  or  other  power,  the  notices  filed  with  the  board  shall 
also  give  the  estimated  height  of  the  dam  and  the  estimated 
capacity  of  the  reservoir,  in  addition  to  the  other  require- 
ments above  set  forth. 

Act  of  the  Legislature,  approved  April  8,  1911. 

Section  1020.— FORFEITURE  OF  CLAIM.— A  failure 
to  comply  with  the  law,  as  to  notices,  commencement  of 
work,  or  completion  of  the  work  by  diligently  prosecuting 
it,  will  forfeit  the  right  of  the  claimant  to  the  use  of  the 
water,  as  against  a  subsequent  claimant  who  does  comply 
with  the  law. 

Civil  Code,  Section  1419. 

Section  1021.— RIPARIAN  RIGHTS.— The  owner  of 
land  upon  a  stream  has  a  right  to  the  use  of  water,  which 
is  called  a  riparian  right.  He  is  entitled,  without  making 
an  appropriation  under  the  law,  to  have  the  use  of  water 
flowing  by  his  land  for  any  purpose  to  which  it  can  be 
applied  beneficially — for  supplying  his  natural  wants,  including 


WATER   AND   WATER  RIGHTS.  801 

the  use  of  the  water  for  the  domestic  purposes  of  his 
home  or  farm,  such  as  drinking,  washing,  or  cooking,  and 
for  his  stock.  This  is  what  is  called  a  riparian  right,  and 
the  owner  of  land  upon  both  navigable  and  unnavigable 
streams  is  called  a  riparian  proprietor.  As  such,  he  is  en- 
titled to  have  the  stream  which  washes  his  land  flow  in  its 
natural  channel,  without  diminution  or  alteration.  It  may 
be  subject  to  condemnation  for  public  use,  but  it  cannot  be 
condemned  for  public  use  without  full  compensation  being 
made  to  the  riparian  proprietor  for  its  loss.  And  he  may  in- 
sist that  the  stream  shall  flow  to  his  land  in  the  usual  quan- 
tity, at  its  natural  place  and  height,  and  that  it  shall  flow  off 
his  land  to  his  neighbor  below  in  its  accustomed  channel  and 
at  its  usual  level.  His  right  to  the  use  of  the  water  is  not 
a  mere  easement,  but  is  inseparably  annexed  to  the  soil  itself. 
It  does  not  in  any  way  depend  upon  appropriation,  but  is  a 
part  of  the  land,  and  goes  with  the  land  from  owner  to 
owner,  as  conveyances  may  be  made.  He  may  take  the  water 
from  its  natural  channel,  and  carry  it  on  to  other  parts  of 
his  land,  provided  he  turns  it  back  into  the  channel  again 
to  his  neighbor  below.  However,  his  use  of  the  water  must 
be  reasonable,  so  as  to  let  it  flow  on  when  he  is  through 
with  it,  so  that  others  may  also  have  the  benefit  of  their 
riparian  right  in  the  use  of  the  water,  for  the  natural  wants 
of  their  proprietors.  He  must  see  to  it  that  the  surplus, 
after  he  uses  the  water,  is  returned  to  the  stream,  for  the 
use  of  those  below.  He  is  never  allowed,  as  against  a  lower 
proprietor,  to  use  all  the  water  of  the  stream  on  his  own 
land,  unless  such  use  is  absolutely  necessary  for  strictly 
domestic  purposes  and  to  furnish  drink  for  man  and  beast. 

Section  1022.—  PROTECTION  OF  RIPARIAN 
RIGHTS. — The  courts  of  California  will  protect  the  riparian 
proprietor,  by  issuing  an  injunction  against  any  one  who 
interferes  with  his  proper  use  and  enjoyment  of  the  water. 
The  courts  will  also  allow  him  damages  for  injury  to  his 
premises,  against  any  one  who  deprives  him  of  his  use  of 
the  water. 


802  BUSINESS   LAWS   FOR   BUSINESS    MEN. 

Section  1023.— MANNER  OF  USING  WATER.— One 

.making  an  appropriation  of  water  from  a  natural  stream 
may  make  use  of  any  natural  or  artificial  channel  available 
and  convenient  for  the  purpose  of  conducting  the  water,  so 
long  as  other  persons  interested  in  such  conduit  do  not  object, 
and  his  appropriation  so  made  will  be  as  effectual  as  if  he 
had  carried  it  through  a  ditch  or  pipe-line  made  for  that 
purpose  and  no  other.  A  person  making  an  appropriation 
of  water  from  a  natural  stream  need  not  construct  any  head- 
gate  at  the  place  of  diversion,  and  if  a  simple  cut  will  accom- 
plish the  purpose  of  diverting  the  water  from  the  stream,  it 
is,  if  accompanied  with  a  beneficial  use,  a  good  appropriation 
as  against  others  making  a  subsequent  diversion  and  use. 
(Decided  by  the  Supreme  Court  of  California  in  the  case  of 
Lower  Tule  Ditch  Co.  vs.  Angiolo  Water  Co.,  which  decision 
is  printed  in  Volume  86  of  the  Pacific  Reporter,  page  1081.) 

Section  1024.  —  WATER  RIGHTS  ON  PUBLIC 
LAND. — From  the  earliest  times  in  California  it  has  been 
customary  to  divert  water  on  the  public  lands  for  mining, 
agricultural,  and  other  purposes,  and  this  right  was,  in  1866, 
confirmed  and  approved  by  Act  of  Congress.  Therefore, 
the  occupant  of  public  land  who  is  living  on  it  in  good  faith 
has  the  right,  whether  the  land  is  surveyed  or  unsurveyed, 
to  appropriate  water  flowing  in  a  stream,  canyon,  or  ravine, 
and  take  it  to  his  land  for  agricultural,  mining,  or  domestic 
purposes.  It  will  make  no  difference  whether  he  has  or  has 
not  obtained  a  legal  title  to  the  land  he  occupies.  If  he  is 
an  occupant  of  the  land,  claiming  under  the  laws  of  the 
United  States,  this  will  be  sufl&cient  to  entitle  him  to  appro- 
priate water  for  use  on  the  land.  (Decided  by  the  Supreme 
Court  of  California  in  the  case  of  Ely  vs.  Ferguson,  which 
decision  is  printed  in  Volume  91  of  the  California  Reports, 
page  187.) 

Section  1025.— OBTAINING  TITLE  BY  PRESCRIP- 
TION.— A  right  to  the  use  of  water  may  be  obtained  by 
prescription.     That  is,  one  who  has  been  continuously  using 


WATER   AND   WATER   RIGHTS.  803 

water,  conveyed  in  a  ditch,  flume,  or  aqueduct,  for  five  years, 
claiming-  the  right  as  against  the  world,  obtains  a  title  to  the 
water  by  reason  of  such  possession  adverse  to  others.  A 
party  may  obtain  a  prescriptive  title  to  the  water  of  a  stream 
by  using  it  on  vacant  government  land;  if  a  lawful  use  of 
the  water  is  made,  it  makes  no  difference  who  is  the  owner 
of  the  land  upon  which  it  is  used.  (Decided  by  the  Supreme 
Court  of  California  in  the  case  of  Southern  California  In- 
vestment Company  vs.  George  Wilshire,  which  decision  is 
printed  in  Volume  28,  California  Decisions,  page  80.) 

Section   1026.— WATER  FOR  IRRIGATION.— Under 

the  law  of  riparian  rights,  the  riparian  proprietor  has  the 
right  to  use  a  reasonable  amount  of  the  water  of  a  stream 
running  through  his  premises  for  irrigating  his  riparian 
land,  but  he  has  not  the  right  for  that  purpose  to  take  all 
the  water  which  flows  in  the  stream  at  the  point  where  he 
diverts  it.  What  is  a  reasonable  amount  of  water  for  irriga- 
tion is  a  question  that  must  depend  upon  the  particular  cir- 
cumstances of  each  case  in  which  it  arises,  and  it  is  a 
question  which  is  frequently  of  difficult  solution;  but  it  is 
settled  in  California  that  in  no  case  can  a  riparian  proprietor, 
for  the  purpose  of  irrigation,  use  all  the  water  of  the  stream, 
and  thus  leave  a  lower  proprietor  without  any.  And  while 
he  may  use  a  part  of  the  water  of  the  stream  to  irrigate 
his  land,  the  land  irrigated  must  be  riparian;  that  is,  the 
land  irrigated  must  be  the  land  through  which  the  stream 
flows.  He  cannot  take  the  water  away  to  other  land,  al- 
though owned  by  him.  He  is  restricted  in  the  use  of  the 
water  for  irrigation  to  the  land  through  which  the  stream 
flows.  (Decided  by  the  Supreme  Court  of  California  in  the 
case  of  Gould  vs.  Stafford,  which  decision  is  printed  in  Vol- 
ume 91  of  the  California  Reports,  page  146.) 

Section  1027.— WATER  FOR  MINING.— The  Statutes 
of  the  United  States  provide:  "That  whenever,  by  priority 
of  possession,  rights  to  the  use  of  water  for  mining  have 
accrued,    and    the    same    are    recognized    and    acknowledged 


804  BUSINESS   LAWS   FOR   BUSINESS    MEN. 

by  the  local  customs,  laws,  and  decisions  of  courts,  the 
possessors  and  owners  of  such  vested  rights  are  protected 
in  the  same,  and  the  right  of  way  for  the  construction  of 
ditches  and  canals,  they  are  hereby  acknowledged  and  con- 
firmed." 

Revised  Statutes  of  the  United  States,  Section  2339. 

(a) — The  California  Statute. — In  California,  the  Legis- 
lature has  provided  by  law  that  the  owner  of  a  mine  is 
entitled  to  a  right  of  way  through  or  over  other  mines, 
for  ditches,  canals,  or  tunnels  used  in  the  working  of  his 
mine.  He  may  therefore  bring  water  to  his  mine  in  a  ditch 
or  flume  over  another  mining  claim,  or,  if  necessary,  in  a 
tunnel  through  another  mine.  Of  course,  if  by  construct- 
ing a  ditch,  flume,  or  tunnel,  to  carry  water  to  a  mining 
claim,  damage  is  done  to  other  property  over  or  through 
which  it  passes,  the  owner  of  the  damaged  property  must 
be  recompensed  for  his  loss. 

Statutes  of  1891,  page  220. 

(b) — First    Appropriator    Has    First    Right. — The    law 

about  riparian  rights  does  not  apply  to  mining.  For  mining 
purposes,  the  first  appropriator  has  first  right.  An  appropri- 
ation of  water  for  mining  purposes  is  made  in  the  same 
manner  as  an  appropriation  of  water  for  other  purposes, 
which  has  already  been  stated. 

(c) — Miner's  Inch  of  Water. — The  standard  miner's  inch 
of   water,   in   California,   is   fixed  by   law   as   equivalent   or 
equal  to  one  and  one-half  cubic   feet  of  water  per  minute 
measured  through  any  aperture  or  orifice. 
Statutes  of  1901,  page  660. 

Section  1028.— SUBTERRANEAN  WATERS.— A  novel 
and  interesting  question,  involving  immense  individual  and 
corporation  investments,  has  been  before  the  Supreme  Court 
of  California,  and  received  a  final  determination.  It  relates 
to  subterranean  waters,  whether  flowing  in  underground 
channels,  or  percolating  through  the  earth  and  collecting  in 


WATER   AND   WATER   RIGHTS,  805 

a  given  spot.  The  dispute  occurred  in  San  Bernardino 
County,  and  the  case  of  Katz  vs.  Walkinshaw  has  become 
celebrated  in  this  State,  deciding,  as  it  does,  that  the  right 
of  a  land-owner  to  take  and  use  subterranean,  percolating 
waters,  and  divert  the  same  from  land  of  an  adjoining  owner, 
is  limited  to  a  reasonable  use  in  connection  with  the  use  of 
his  own  land,  and  does  not  authorize  him  to  appropriate  such 
waters  by  artesian  wells  and  sell,  the  water  for  the  irrigation 
of  distant  lands,  to  the  detriment  of  adjoining  land-owners. 
The  case  has  been  in  the  Supreme  Court  twice,  the  first  de- 
cision being  written  by  Judge  Temple  and  the  last  by  Judge 
Shaw.  The  Superior  Court  of  San  Bernardino  County  decided 
the  case  in  favor  of  the  defendant,  who  had  sunk  a  well  on 
his  land,  and  thereby  drew  off  the  water  from  the  well  of 
his  neighbor;  but  the  Supreme  Court  reversed  this  decision 
and  decided  the  case  in  favor  of  the  plaintiff.  The  following 
extracts  from  the  opinion  prepared  by  Judge  Temple  in  the 
Supreme  Court  will  give  the  interesting  and  important  points 
involved : 

"The  action  was  brought  to  enjoin  defendant  from  draw- 
ing off  and  diverting  water  from  an  artesian  belt,  which  is 
in  part  on  or  under  the  premises  of  plaintiffs,  and  to  the 
water  of  which  they  have  sunk  wells,  thereby  causing  the 
water  to  rise  and  flow  upon  the  premises  of  plaintiffs  and 
which  had  constantly  so  flowed  for  twenty  years  before  the 
wrong  complained  of  was  committed  by  defendant.  The 
water  is  necessary  for  domestic  purposes  and  for  irrigating 
the  lands  of  plaintiffs,  upon  which  there  are  growing  trees, 
vines,  shrubbery,  and  other  plants,  which  are  of  great  value 
to  plaintiffs. 

"These  facts  are  admitted,  and  further  that  defendant  is 
diverting  the  water  for  sale,  to  be  used  on  lands  of  others 
distant  from  the  saturated  belt  from  which  the  artesian  water 
is  derived. 

"The  plaintiffs  contend  that  this  sub-surface  water  consti- 
tutes an  underground  stream,  and  that  plaintiffs  are  riparian 
thereto,  and  as  such  riparian  owners  they  are  seeking  relief 
in  this  case. 


806  BUSINESS   LAWS   FOR   BUSINESS    MEN. 

"The  defendant  denies  that  she  is  taking  or  diverting 
water  from  an  underground  stream  or  water-course,  and 
alleges  that  all  the  water  which  arises,  in  the  artesian  wells 
on  her  premises,  and  which  she  is  selling,  is  percolating 
water,  and  is  parcel  of  her  premises,  and  her  property. 

"In  effect,  therefore,  while  denying  that  she  is  doing  any 
act  of  which  plaintiffs  can  complain,  she  really  only  denies 
that  she  is  diverting  water  from  an  underground  water- 
course, and  asserts  her  right  to  dispose  of  the  water  in  the 
manner  alleged,  because  it  is  percolating  water,  not  confined 
to  a  definite  water-course. 

"The  so-called  artesian  belt  includes  several  square  miles 
of  territory.  It  is  a  large  accumulation  of  earth  upon  the 
base  of  very  high  mountains,  and  is  composed  of  detritus 
of  varying  quantity  and  material,  with  no  regular  stratifica- 
tion. Wells  have  been  sunk  at  least  to  the  depth  of  750 
feet,  but  no  bed-rock  has  been  found.  It  has  quite  an  in- 
cline from  the  mountain,  and  is  from  700  to  1,500  feet  above 
sea  level.  Mr.  F.  C.  Finkle,  a  civil  engineer,  was  the  chief 
witness  for  the  plaintiffs,  and  testified  both  as  to  facts  pal- 
pable to  the  senses,  and  as  an  expert.  He  says,  the  satu- 
rated land  is  fed:  First,  by  the  underflow  from  the  numer- 
our  ravines,  canyons,  and  streams  which  enter  the  valley 
from  the  mountains ;  and,  secondly,  by  the  rain  and  flood- 
water  upon  and  absorbed  upon  the  slope  and  between  the 
artesian  belt  and  the  mountains.  This  water  percolating 
down  into  the  soil,  and  constantly  pressed  forward  by  water 
accumulating,  finally  gets  under  partially  impervious  earth, 
where  it  is  held  under  sufficient  pressure  to  create  the  arte- 
sian belt.  The  banks  of  this  supposed  sub-surface  stream, 
the  witness  thought,  were  on  the  west,  'a  cemented  dyke 
which  runs  throughout  the  valley,  and  the  eastern  boundary 
of  it  is  the  clay  bank  or  dyke  at  the  south  side  of  the  Santa 
Ana  River.'  Within  these  Hmits  many  ravines  enter  from 
the  mountains,  some  of  them  carrying  at  times  great  quan- 
tities of  water,  much  of  which  has  been  appropriated  and 
carried  off  in  pipes  or  cemented  aqueducts. 


WATER    AND   WATER   RIGHTS.  807 

"It  is  evident  that  if  there  is  any  flow  to  this  underground 
body  of  water  thus  held  under  pressure,  it  is  by  percolation. 
The  witness  stated  that  the  process  was  the  same  the  world 
over.  The  lower  lands  are  saturated  from  above.  'It  is 
done  by  saturation  from  the  rainfalls  and  the  floods,  and 
percolations  through  voids  in  the  soil.' 

"It  is  quite  manifest  that  this  body  (if  it  can  be  so  styled) 
of  percolating  water  cannot  be  called  an  underground  water- 
course to  which  riparian  rights  can  attach,  unless  we  are 
prepared  to  abolish  all  distinction  between  percolating  water 
and  the  water  flowing  in  streams  with  known  or  ascertainable 
banks,  which  confine  the  water  to  definite  channels.  All  rain 
water  which  falls  upon  the  hills  and  mountains  sides  which 
does  not  flow  ofif  at  once,  as  surface  water,  is  absorbed  and 
percolates  down  in  the  same  way  to  the  valley  below.  No 
doubt  limits  can  be  found  to  every  such  flow,  as  in  this  case. 
The  distinction  is  well  established  and,  in  some  respects, 
different  rules  of  law  applied  to  the  two  cases.  The  plaintiffs 
therefore  cannot  establish  their  claims  upon  the  theory  of  an 
underground  water-course  to  which  they  are  riparian. 

"But  the  appellants  contend  that,  though  they  are  not 
riparian  to  an  underground  water-course,  and  although  the 
saturated  belt  carries  only  percolating  water,  still  they  are 
entitled  to  the  injunction  prayed  for. 

"It  is  obvious,  at  once,  that  the  analogy  between  the  right 
to  remove  sand  and  gravel  from  the  land  for  sale,  and  to 
remove  and  sell  percolating  water  is  not  perfect.  If  we 
suppose  a  saturated  plain,  one  may  remove  and  sell  the  sand 
and  gravel  from  his  land  without  affecting  or  diminishing 
the  sand  and  gravel  on  the  lands  of  his  neighbors.  If  the 
water  on  his  lands  is  his  property,  then  the  water  in  the 
soil  of  his  neighbors  is  their  property.  But  when  he  drains 
out  and  sells  the  water  on  his  land,  he  draws  to  his  land 
and  also  sells  water  which  is  the  property  of  his  neighbor. 
And  the  effect  is  similar  in  other  respects.  By  pumping  out 
the  water  from  his  lands  he  can,  perhaps,  deprive  his  neigh- 
bors of  water  for  domestic  uses,  and,  in  fact,  render  their 
land  valueless.     In  short,  the  members  of  the  community,  in 


808  BUSINESS   LAWS   FOR   BUSINESS    MEN. 

the  case  supposed,  have  a  common  interest  in  the  water.  It 
is  necessary  for  all,  and  it  is  an  anomaly  in  the  law  if  one 
person  can  for  his  individual  profit  destroy  the  community 
and  render  the  neighborhood  uninhabitable. 

"We  have  derived  our  law,  in  respect  to  subterranean 
waters,  as  in  other  respects,  mostly  from  England,  but  in 
regard  to  this  matter  the  first  cases  are  quite  modern.  Even 
yet  the  text-books  on  water  rights  have  but  little  to  say 
upon  the  subject  of  percolating  water.  Such  law  as  has 
been  made  upon  the  subject  comes  from  countries  and  cli- 
mates where  water  is  abundant,  and  its  conservation  and 
economical  use  of  little  consequence  as  compared  with  a 
climate  like  Southern  California.  The  learned  counsel  for 
appellants  state  in  their  brief,  that  water  at  San  Bernardino 
is  worth  $1,000  per  inch  of  flow.  Percolating  water  or 
water  held  in  the  earth,  is  the  main  source  of  supply  for 
domestic  uses,  and  for  irrigation,  without  which  most  lands 
are  unproductive.  It  is  also  stated  that  speculators  are 
seeking  to  appropriate  the  percolating  water,  by  getting 
title  to  some  part  of  a  water  shed  or  slope,  and  by  running 
canals  and  tunnels,  and  by  sinking,  to  obtain  water  for  sale. 
It  is  asserted  that  the  lands  naturally  made  moist  by  per- 
colating water  are  very  productive,  and  were  first  settled 
upon,  and  have  been  most  highly  improved;  and  he  asks 
whether  these  lands  are  to  be  converted  into  deserts,  because 
speculators  may  pump  and  carry  away  to  some  distant  locality 
the  sub-surface  waters  which  render  the  land  fertile.  Cer- 
tainly no  such  case  as  this  has  come  before  a  court,  or  could 
well  exist,  in  England,  or  in  the  Eastern  States. 

"No  doubt  the  land  proprietor  owns  the  water  which  is 
parcel  of  his  land,  and  may  use  it  as  he  pleases,  regard  being 
had  to  the  rights  of  others.  It  is  not  unreasonable  that  he 
should  dig  wells  in  order  to  have  the  fullest  enjoyment  and 
usefulness  of  his  estate,  or  for  pleasure,  trade,  or  whatever 
else  the  land  as  land  may  serve.  But  to  fit  it  up  with  wells 
and  pumps  of  such  persuasive  and  potential  reach  that  from 
their  base  the  defendant  can  tap  the  water  stored  in  the 
plaintiflF's  land,  and  in   all  the   region  thereabout,   and   lead 


WATER  AND  WATER  RIGHTS.  809 

it  to  his  own  land,  and  by  merchandising  it  prevent  its 
return,  is,  however  reasonable  it  may  appear  to  the  defendant 
and  its  customers,  unreasonable  as  to  the  plaintiff,  and  others 
whose  lands  are  thus  clandestinely  sapped,  and  their  value 
impaired." 

A  rehearing  was  granted  by  the  Supreme  Court,  and  on 
November  28th,  1903,  another  and  final  decision  was  made 
by  the  full  court,  and  the  former  opinion  given  by  Judge 
Temple  was  approved  and  sustained  in  every  particular. 
Upon  the  final  determination  of  the  suit,  Judge  Shaw  pre- 
pared the  opinion.  It  is  extremely  interesting  and  valu- 
able. Following  are  extracts  showing  the  principal  points 
in  Judge  Shaw's  opinion: 

"A  rehearing  was  granted  in  this  case  for  the  purpose  of 
considering  more  fully,  and  by  the  aid  of  such  additional 
arguments  as  might  be  presented  by  persons  not  parties  to 
the  action,  but  vitally  interested  in  the  principle  involved, 
a  question  that  is  novel  and  of  the  utmost  importance  to 
the  application  to  useful  purposes  of  the  waters  which  may 
be  found  in  the  soil. 

"Petitions  for  rehearing  were  presented  not  only  in  behalf 
of  the  defendant,  but  also  on  behalf  of  a  number  of  corpora- 
tions engaged  in  the  business  of  obtaining  water  from  wells 
and  distributing  the  same  for  public  and  private  use  within 
this  State,  and  particularly  in  the  southern  part  thereof. 
Able  and  exhaustive  briefs  have  been  filed  on  the  rehear- 
ing. The  principle  decided  by  the  late  Justice  Temple  in 
the  former  opinion,  and  the  course  of  reasoning  by  which 
he  arrived  at  the  conclusion,  have  been  attacked  in  these 
several  briefs  and  petitions  with  much  learning  and  acumen, 
it  is  proper  that  we  should  here  notice  some  of  the  objections 
thus  presented. 

"Many  arguments,  objections,  and  criticisms  are  presented 
in  opposition  to  the  rules  and  reasoning  of  the  former  opinion. 
It  is  contended  that  the  rule  that  each  land-owner  owns 
absolutely  the  percolating  waters  in  his  land,  with  the  right 
to  extract,  sell,  and  dispose  of  them  as  he  chooses,  regardless 


810  BUSINESS   LAWS   FOR   BUSINESS   MEN. 

of  the  results  to  his  neighbor,  is  part  of  the  common  law, 
and  as  such  has  been  adopted  in  this  State. 

"The  true  doctrine  is  that  the  common  law  by  its  own 
principles  adapts  itself  to  varying  conditions,  and  modifies 
its  own  rules  so  as  to  serve  the  ends  of  justice  under  the 
different  circumstances,  a  principle  adopted  into  our  code 
by  Section  3510,  Civil  Code:  'When  the  reason  of  a  rule 
ceases,  so  should  the  rule  itself.'  Whenever  it  is  found  that, 
owing  to  the  physical  features  and  character  of  this  State, 
and  the  peculiarities  of  its  climate,  soil,  and  productions, 
the  application  of  a  given  common  law  rule  by  our  courts 
tends  constantly  to  cause  injustice  and  wrong,  rather  than 
the  administration  of  justice  and  right,  then  the  fundamental 
principles  of  right  and  justice  on  which  that  law  is  founded, 
and  which  its  administration  is  intended  to  promote,  requires 
that  a  different  rule  should  be  adopted,  one  which  is  cal- 
culated to  secure  persons  in  their  property  and  possessions, 
and  to  preserve  for  them  the  fruits  of  their  labors  and  ex- 
penditures. The  question  whether  or  not  the  rule  contended 
for  is  a  part  of  the  common  law  applicable  to  this  State, 
depends  on  whether  it  is  suitable  to  our  conditions  under  the 
rule  just  stated. 

"It  is  necessary,  therefore,  to  state  the  conditions  exist- 
ing in  many  parts  of  this  State  which  are  different  from 
those  existing  where  the  rule  had  its  origin. 

"In  a  large  part  of  the  State,  and  in  almost  all  the  southern 
half  of  it,  particularly  south  of  the  Tehachapi  range  of 
mountains,  aside  from  grains,  grasses,  and  some  scant  pas- 
turage, there  is  practically  no  production  by  agriculture, 
except  by  means  of  artificial  irrigation.  In  a  few  places 
favored  by  nature,  crops  are  nourished  by  natural  irrigation, 
due  to  the  existence  underneath  the  ordinary  soil  of  a  satu- 
rated layer  of  sand  or  gravel,  but  these  places  are  so  few 
that  they  are  of  no  consequence  in  any  general  view  of  the 
situation.  Irrigation  in  these  regions  has  always  been  cus- 
tomary, and  under  the  Spanish  and  Mexican  governments 
it  was  fostered  and  encouraged.  Even  in  the  earlier  periods 
of  the  settlement  of  the  country,  after  its  acquisition  by  the 


WATER   AND   WATER   RIGHTS.  811 

United  States,  and  while  the  population  was  sparse  and  scat- 
tered compared  to  the  present  time,  the  natural  supply  of 
water  from  the  surface  streams,  as  diverted  and  appUed  by 
the  crude  and  wasteful  methods  then  used,  was  not  con- 
sidered more  than  was  necessary.  As  the  population  in- 
creased, better  methods  of  diversion,  distribution,  and  appli- 
cation were  adopted,  and  the  streams  were  made  to  irrigate 
a  very  much  larger  area  of  land.  While  this  process  was 
going  on,  a  series  of  wet  years  augmented  the  streams,  and 
still  more  land  was  put  under  the  irrigating  systems.  Re- 
cently there  has  followed  another  series  of  very  dry  years, 
which  has  correspondingly  diminished  the  flow  of  the 
streams.  After  this  period  began,  it  was  soon  found  that 
the  natural  streams  were  insufficient.  The  situation  became 
critical,  and  heavy  loss  and  destruction  from  drouth  were 
imminent.  Still  the  population  continued  to  increase,  and  with 
it  the  demand  for  more  water  to  irrigate  more  land.  Re- 
course was  then  had  to  the  underground  waters.  Tunnels 
were  constructed,  more  artesian  wells  bored,  and  finally 
pumps  driven  by  electric  or  steam  power  were  put  into  gen- 
eral use  to  obtain  sufficient  water  to  keep  alive  and  productive 
the  valuable  orchards  planted  at  the  time  when  water  was 
supposed  to  be  more  abundant.  The  geological  history  and 
formation  of  the  country  is  peculiar.  Deep  borings  have 
shown  that  almost  all  of  the  valleys  and  other  places  where 
water  is  found  abundantly  in  percolation  were  formerly  deep 
canyons  or  basins,  at  the  bottoms  of  which  anciently  there 
were  surface  streams  or  lakes.  Gravel,  boulders,  and,  occa- 
sionally, pieces  of  driftwood  have  been  found  near  the  coast 
far  below  tide  level,  showing  that  these  sunken  stream-beds 
were  once  high  enough  to  discharge  water  by  gravity  into 
the  sea.  These  valleys  and  basins  are  bordered  by  high 
mountains,  upon  which  there  falls  the  more  abundant  rain. 
The  deep  canyons  or  basins  in  course  of  ages  have  become 
filled  with  the  washings  from  the  mountains,  largely  com- 
posed of  sand  and  gravel,  and  into  this  porous  material  the 
water  now  running  down  from  the  mountains  rapidly  sinks 
and  slowly  moves  through  the  lands  by  the  process  usually 


812  BUSINESS   LAWS   FOR  BUSINESS    MEN. 

termed  percolation,  forming  what  are  practically  underground 
reservoirs.  It  is  the  water  thus  held  or  stored  that  is  now 
being  taken  to  eke  out  the  supply  from  the  natural  streams. 
In  almost  every  instance  of  a  water  supply  from  the  so-called 
percolating  water,  the  location  of  the  well  or  tunnel  by  which 
it  is  collected  is  in  one  of  these  ancient  canyons  or  lake 
basins.  Outside  of  these,  there  is  no  percolating  water  in 
sufficient  quantity  to  be  of  much  importance  in  the  develop- 
ment of  the  country,  or  of  sufficient  value  to  cause  serious 
litigation.  It  is  usual  to  speak  of  the  extraction  of  this 
water  from  the  ground  as  a  development  of  a  hitherto  unused 
supply.  But  it  is  not  yet  demonstrated  that  the  process  is 
not  in  fact,  for  the  most  part,  an  exhaustion  of  the  under- 
ground sources  from  which  the  surface  streams  and  other 
supplies  previously  used  have  been  fed  and  supported.  In 
some  cases  this  has  been  proven  by  the  event.  The  danger 
of  exhaustion  in  this  way  threatens  surface  streams  as  well 
as  underground  percolations  and  reservoirs.  Many  water 
companies,  anticipating  such  an  attack  on  their  water  supply, 
have  felt  compelled  to  purchase,  and  have  purchased,  at  great 
expense,  the  lands  immediately  surrounding  the  stream  or 
source  of  supply,  in  order  to  be  able  to  protect  and  secure  the 
percolations  from  which  the  source  was  fed.  Owing  to 
the  uncertainty  in  the  law,  and  the  absence  of  legal  pro- 
tection, there  has  been  no  security  in  titles  to  water  rights. 
So  great  is  the  scarcity  of  water  under  the  present  demands 
and  conditions  that  one  who  is  deprived  of  water  which 
he  has  been  using  has  usually  no  other  source  at  hand  from 
which  he  can  obtain  another  supply. 

"The  water  thus  obtained  from  all  these  sources  is  now 
used  with  the  utmost  economy,  and  is  devoted  to  the  pro- 
duction of  citrus  and  other  extremely  valuable  orchard  and 
vineyard  crops.  The  water  itself,  owing  to  the  tremendous 
need,  the  valuable  results  from  its  application,  and  the 
constant  effort  to  plant  more  orchards  and  vineyards  to 
share  in  the  great  profits  realized  therefrom,  has  become 
very  valuable.  In  some  instances  it  has  been  known  to 
sell  at  the  rate  of  fifty  thousand  dollars  for  a  stream  flowing 


WATER  AND  WATER  RIGHTS.  813 

at  the  rate  of  one  cubic  foot  per  second.  Notwithstanding 
the  great  drain  on  the  water  supply,  the  economy  in  the 
distribution  and  appHcation,  and  the  much  larger  area  of 
land  thereby  brought  under  irrigation,  there  still  remain 
large  areas  of  rich  soil  which  are  dry  and  waste  for  want 
of  water.  This  abundance  of  land,  with  the  scarcity  and 
high  price  of  water,  furnishes  a  constant  stimulus  to  the 
further  exhaustion  of  the  limited  amount  of  underground 
water,  and  a  constant  temptation  to  invade  sources  already 
appropriated.  The  charms  of  the  climate  have  drawn,  and 
will  continue  to  draw,  immigrants  from  the  better  classes 
of  the  Eastern  States,  composed  largely  of  men  of  experi- 
ence and  means,  energetic,  enterprising,  and  resourceful. 
With  an  increasing  population  of  this  character,  it  is  mani- 
fest that  nothing  that  is  possible  to  be  done  to  secure  success 
will  be  left  undone,  and  that  there  must  ensue  in  years  to 
come  a  fierce  strife,  first  to  acquire  and  then  to  hold  every 
available  source  of  water. 

"it  is  scarcely  necessary  to  state  the  conditions  existing 
in  other  countries  referred  to,  to  show  that  they  are  vastly 
different  from  those  above  stated.  There  the  rainfall  is 
abundant,  and  water,  instead  of  being  of  almost  priceless 
value,  is  a  substance  that  in  many  instances  is  to  be  gotten 
rid  of  rather  than  preserved.  Drainage  is  there  an  impor- 
tant process  in  the  development  of  the  productive  capacity 
of  the  land,  and  irrigation  is  unknown.  The  lands  that 
from  their  situation  in  this  country  are  classed  as  damp 
lands  would  in  those  countries  be  either  covered  by  lakes 
or  would  be  swamps  and  bogs.  If  one  is  deprived  of  water 
in  those  regions,  there  is  usually  little  difficulty  in  obtaining 
a  sufficent  supply  nearby,  and  at  small  expense.  The  country 
is  interlaced  with  streams  of  all  sizes,  from  the  smallest 
brooklet  up  to  large,  navigable  rivers,  and  the  question  of 
the  water  supply  has  but  little  to  do  with  the  progress  or 
prosperity  of  the  country. 

"It  is  clear  also  that  the  difficulties  arising  from  the  scarcity 
of  water  in  this  country  are  by  no  means  ended,  but,  on 
the  contrary,  are  probably  just  beginning.     The  application 


814  BUSINESS   LAWS   FOR   BUSINESS    MEN. 

of  the  rule  contended  for  by  the  defendants  will  tend  to 
aggravate  these  difficulties  rather  than  solve  them.  Traced 
to  its  true  foundation,  the  rule  contended  for  is  simply  this: 
'that  owing  to  the  difficulties  the  courts  will  meet  in  secur- 
ing persons  from  the  infliction  of  great  wrong  and  injustice 
by  the  diversion  of  percolating  water,  if  any  property  right 
in  such  water  is  recognized,  the  task  must  be  abandoned 
as  impossible,  and  those  who  have  valuable  property  acquired 
by  and  dependent  on  the  use  of  such  water  must  be  left 
to  their  own  resources  to  secure  protection  for  their  prop- 
erty from  the  attacks  of  their  more  powerful  neighbors,  and, 
failing  in  this,  must  suffer  irretrievable  loss;  that  might  is  the 
only  protection. 

"  'The  good  old  rule 
Sufficeth  them,  the  simple  plan. 
That  they  should  take  who  have  the  power, 
And  they  should  keep  who  can.' 

"  'The  field  is  open  for  exploitation  to  every  man  who 
covets  the  possessions  of  another,  or  the  water  which  sus- 
tains or  preserves  them,  and  he  is  at  liberty  to  take  that 
water  if  he  has  the  means  to  do  so,  and  no  law  will  prevent 
or  interfere  with  him,  or  preserve  his  victim  from  the  at- 
tack.' THE  DIFFICULTIES  TO  BE  ENCOUNTERED 
MUST  BE  INSURMOUNTABLE  TO  JUSTIFY  THE 
ADOPTION  OR  CONTINUANCE  OF  A  RULE  WHICH 
BRINGS  ABOUT   SUCH   CONSEQUENCES. 

"We  do  not  see  how  the  doctrine  contended  for  by  de- 
fendant could  ever  become  a  rule  of  property  of  any  value. 
Its  distinctive  feature  is  the  proposition  that  no  property 
rights  exist  in  such  waters  except  while  they  remain  in  the 
soil  of  the  land-owner;  that  he  has  no  right  either  to  have 
them  continue  to  pass  into  his  land  as  they  would  under 
natural  conditions,  or  to  prevent  them  from  being  drawn 
out  of  his  land  by  an  interference  with  natural  conditions 
on  neighboring  land. 

'It  is  apparent  that  the  parties  who  have  asked  for  a 
reconsideration  of  this  case,  and  other  persons  of  the  same 


WATER   AND   WATER  RIGHTS.  815 

class,  if  the  rule  for  which  they  contend  is  the  law,  or  no- 
law,  of  the  land,  will  be  constantly  threatened  with  danger 
of  utter  destruction  of  the  valuable  enterprises  and  systems 
of  water  works  which  they  control,  and  that  all  new  enter- 
prises of  the  same  sort  will  be  subject  to  the  same  peril. 
They  will  have  absolutely  no  protection  in  law  against  others 
having  stronger  pumps,  deeper  wells,  or  a  more  favorable 
situation,  who  can  thereby  take  from  them  unlimited  quan- 
tities of  the  water,  reaching  to  the  entire  supply,  and  without 
regard  to  the  place  of  use.  We  cannot  conceive  how  a 
doctrine  offering  so  little  protection  to  the  investments  in 
and  product  of  such  enterprises,  and  offering  so  much  temp- 
tation to  others  to  capture  the  water  on  which  they  depend, 
can  tend  to  promote  developments  in  the  future  or  preserve 
those  already  made,  and,  therefore,  we  do  not  believe  that 
public  policy  or  a  regard  for  the  general  welfare  demands 
the  doctrine.  An  ordinary  difference  in  the  conditions 
would  scarcely  justify  the  refusal  to  adopt  a  rule  of  the 
common  law,  or  one  which  has  been  so  generally  supposed 
to  exist;  but  where  the  differences  are  so  radical  as  in  this 
case,  and  would  tend  to  cause  so  great  a  subversion  of  justice, 
a  different  rule  is  imperative. 

"The  doctrine  of  reasonable  use,  on  the  other  hand,  affords 
some  measure  of  protection  to  property  now  existing,  and 
greater  justification  for  the  attempt  to  make  new  develop- 
ments. It  limits  the  right  of  others  to  such  amount  of  water 
as  may  be  necessary  for  some  useful  purpose  in  connection 
with  the  land  from  which  it  is  taken.  If,  as  is  claimed  in 
the  argument,  such  water-bearing  land  is  generally  worthless 
except  for  the  water  which  it  contains,  then  the  quantity  that 
could  be  used  on  the  land  would  be  nominal,  and  injunctions 
could  not  be  obtained,  or  substantial  damages  awarded, 
against  those  who  carry  it  to  distant  lands.  So  far  as 
the  active  interference  of  others  is  concerned,  therefore,  the 
danger  to  such  undertakings  is  much  less,  and  the  incentive 
to  development  much  greater,  from  the  doctrine  of  reasonable 
use  than  from  the  contrary  rule.  No  doubt  there  will  be 
inconvenience  from  attacks  on  the  title  to  waters  appropriated 


816  BUSINESS    LAWS    FOR   BUSINESS    MEN. 

for  use  on  distant  lands  made  by  persons  who  claim  the 
right  to  the  reasonable  use  of  such  waters  on  their  own  lands. 
Similar  difficulties  have  arisen  and  now  exist  with  respect  to 
rights  in  surface  streams,  and  must  always  be  expected  to 
attend  claims  to  rights  in  a  substance  so  movable  as  water. 
But  the  courts  can  protect  this  particular  species  of  property 
in  water  as  effectually  as  water  rights  of  any  other 
description. 

"It  may,  indeed,  become  necessary  to  make  new  appli- 
cations of  old  principles  to  the  new  conditions ;  and  in  view 
of  the  novelty  of  the  doctrine,  and  the  scope  of  the  argu- 
ment, it  is  not  out  of  place  to  indicate  to  some  extent 
how  it  should  be  done,  although  otherwise  it  would  not  be 
necessary  to  the  decision  of  the  case.  The  controversies 
arising  will  naturally  divide  into  classes. 

"There  will  be  disputes  between  persons  or  corporations 
claiming  rights  to  take  such  waters  from  the  same  strata  or 
source  for  use  on  distant  lands.  There  is  no  statute  on  this 
subject,  as  there  now  is  concerning  appropriations  of  surface 
streams,  but  the  case  is  not  without  precedent.  When  the 
pioneers  of  1849  reached  this  State,  they  found  no  laws  in 
force  governing  rights  to  take  waters  from  surface  streams 
for  use  on  non-riparian  lands.  Yet  it  was  found  that  the 
principles  of  the  common  law,  although  not  previously  applied 
to  such  cases,  could  be  adapted  thereto,  and  were  sufficient 
to  define  and  protect  such  rights  under  the  new  conditions. 
The  same  condition  existed  with  respect  to  rights  to  mine 
on  public  land,  and  a  similar  solution  was  found.  The 
principles  which,  before  the  adoption  of  the  Civil  Code,  were 
applied  to  protect  appropriations  and  possessory  rights  in 
visible  streams  will,  in  general,  be  found  applicable  to  such 
appropriations  of  percolating  waters,  either  for  public  or 
private  use,  and  will  suffice  for  their  protection  as  against 
other  appropriators.  Such  rights  are  usufructuary  only,  and 
the  first  taker  who  with  diligence  puts  the  water  in  use  will 
have  the  better  right.  And  in  ordinary  cases  of  this  character 
the  law  of  prescriptive  titles  and  rights  and  the  statute  of 
limitations  will  apply. 


WATER   AND   WATER   RIGHTS.  817 

"In  controversies  between  an  appropriator  for  use  on  dis- 
tant land  and  those  who  own  land  overlying  the  water- 
bearing- strata,  there  may  be  two  classes  of  such  land- 
owners; those  who  have  used  the  water  on  their  land  before 
the  attempt  to  appropriate,  and  those  who  have  not  pre- 
viously used  it,  but  who  claim  the  right  afterwards  to  do 
so.  Under  the  decision  in  this  case  the  rights  of  the  first 
class  of  land-owners  are  paramount  to  that  of  the  one  who 
takes  the  water  to  distant  land;  but  the  land-owner's  right 
extends  only  to  the  quantity  of  water  that  is  necessary  for 
use  on  his  land,  and  the  appropriator  may  take  the  surplus. 
As  to  those  land-owners  who  begin  the  use  after  the  appro- 
priation, and  who,  in  order  to  obtain  the  water  must  re- 
strict, or  restrain,  the  diversion  to  distant  lands  or  places, 
it  is  perhaps  best  not  to  state  a  positive  rule.  Such  rights 
are  limited  at  most  to  the  quantity  necessary  for  use,  and 
the  disputes  will  not  be  so  serious  as  those  between  rival 
appropriators. 

"Disputes  between  overlying  land-owners,  concerning 
water  for  use  on  the  land,  to  which  they  have  an  equal 
right,  in  cases  where  the  supply  is  insufficient  for  all,  are 
to  be  settled  by  giving  to  each  a  fair  and  just  proportion. 
And  here  again  we  leave  for  future  settlement  the  question 
as  to  the  priority  of  rights  between  such  owners  who  begin 
the  use  of  the  waters  at  different  times.  The  parties  in- 
terested in  the  question  are  not  before  us. 

"In  addition  there  are  some  general  rules  to  be  applied. 
In  cases  involving  any  class  of  rights  in  such  waters,  pre- 
liminary injunctions  must  be  granted,  if  at  all,  only  upon 
the  clearest  showing  that  there  is  imminent  danger  of 
irreparable  and  substantial  injury,  and  that  the  diversion 
complained  of  is  the  real  cause.  Where  the  complainant 
has  stood  by  while  the  development  was  made  for  public 
use,  and  has  suffered  it  to  proceed  at  large  expense  to  suc- 
cessful operation,  having  reasonable  cause  to  believe  it 
would  affect  his  own  water  supply,  the  injunction  should 
be  refused  and  the  party  left  to  his  action  for  such  damages 
as  he  can  prove.     If"a  party  makes  no  use  of  the  water  on 


818  BUSINESS   LAWS   FOR   BUSINESS    MEN. 

his  own  land,  or  elsewhere,  he  should  not  be  allowed  to 
enjoin  its  use  by  another  who  draws  it  out,  or  intercepts 
it,  or  to  whom  it  may  go  by  percolation,  although,  perhaps, 
he  may  have  the  right  to  a  decree  settling  his  right  to  use 
it  when  necessary  on  his  own  land,  if  a  proper  case  is  made. 

"The  objection  that  this  rule  of  correlative  rights  will 
throw  upon  the  court  a  duty  impossible  of  performance, 
that  of  apportioning  an  insufficient  supply  of  water  among 
a  large  number  of  users,  is  largely  conjectural.  No  doubt 
cases  can  be  imagined  where  the  task  would  be  extremely 
difficult,  but  if  the  rule  is  the  only  just  one,  as  we  think 
has  been  shown,  the  difficulty  in  its  application  in  extreme 
cases  is  not  a  sufficient  reason  for  abandoning  it  and  leaving 
property  without  any  protection  from  the  law. 

"It  does  not  necessarily  follow  that  a  rule  for  the  govern- 
ment of  rights  in  percolating  water  must  also  be  followed 
as  to  underground  seepages  or  percolations  of  mineral  oil. 
Oil  is  not  extracted  for  use  in  agriculture,  or  upon  the  land 
from  which  it  is  taken,  but  solely  for  sale  as  an  article  of 
merchandise,  and  for  use  in  commerce  and  manufactures. 
The  conditions  under  which  oil  is  found  and  taken  from 
the  earth  in  this  State  are  in  no  important  particulars  dif- 
ferent from  those  present  in  other  countries  where  it  is 
produced.  There  is  no  necessary  parallel  between  the  con- 
ditions respecting  the  use  and  development  of  water  and 
those  affecting  the  production  of  oil.  Whether  in  a  contest 
between  two  oil  producers  concerning  the  drawing  out  by 
one  of  the  oil  from  under  the  land  of  the  other  we  should 
follow  the  rule  adopted  by  the  courts  of  other  oil-producing 
States,  or  apply  a  rule  better  calculated  to  protect  oil  not 
actually  developed,  is  a  question  not  before  us  and  which 
need  not  be  considered."  (Decided  by  the  Supreme  Court 
of  California  in  the  case  of  Katz  vs.  Walkinshaw,  which  decis- 
ion is  printed  in  Volume  26  of  California  Decisions,  page  820.) 

Section  1029.— WATER  COMPANIES.— Water  com- 
panies are  incorporated  under  the  general  laws  applying 
to   corporations    in    California,    to    supply    cities    and    towns 


WATER   AND   WATER   RIGHTS.  819 

with  water.  The  law  provides,  however,  that  no  corpora- 
tion formed  to  supply  any  city  and  county,  or  city  or  town, 
with  water  must  do  so  unless  previously  authorized  by 
an  ordinance,  or  unless  it  is  done  under  a  contract;  that 
notwithstanding  any  such  contract,  the  municipality  shall 
retain  the  right  to  regulate  the  rate  to  be  charged  for 
water;  that  no  exclusive  right  shall  be  granted  to  any 
water  company;  and  that  no  contract  or  franchise  shall  be 
made  for  a  term  exceeding  fifty  years. 
Civil  Code,  Section  548. 

(a) — Water  in  Case  of  Fire. — The  means  of  extinguish- 
ing fires  in  a  city  or  town,  the  fire  apparatus  and  the  fire 
company,  are  under  the  direction  and  control  of  the  munici- 
pality. And  a  water  company,  as  a  condition  of  the  privi- 
lege granted  to  it  to  supply  the  inhabitants  with  water, 
must  supply  the  municipality  with  water  to  the  extent  of 
its  means  in  case  of  fire,  free  of  charge. 
Civil  Code,  Section  545. 

(b) — Water  Rates. — The  Board  of  Supervisors  of  a  city 
and  county,  or  the  Board  of  Trustees  of  a  city  or  town, 
are  compelled  to  annually  fix  the  rates  to  be  charged  and 
collected  by  any  water  company  supplying  water  to  the 
inhabitants  or  the  municipality.  The  rates  thus  fixed  hold 
good  for  one  year. 

General  Laws  of  California,  page  1268. 

(c) — Duty  to  Furnish  Water. — All  corporations  formed 
to  supply  water  to  cities  or  towns  must  furnish  pure,  fresh 
water  to  all  the  inhabitants  for  domestic  purposes,  so  long 
as  the  supply  permits,  at  reasonable  rates,  and  without  dis- 
tinction of  persons,  upon  proper  demand  therefor.  If  a 
water  company  refuses  to  supply  an  inhabitant  of  a  town 
with  water,  upon  demand  and  tender  of  the  charge,  the 
company  may  be  compelled  to  do  so,  by  a  suit  in  the  Su- 
perior Court. 

Civil  Code,  Section  549. 

(d) — Water  Company  Not  Liable  for  Loss  by  Fire. — A 
very   important  decision  was  made   by  the   Supreme   Coujt 


820  BUSINESS   LAWS   FOR   BUSINESS    MEN. 

of  California,  in  February,  1904,  the  first  case  of  the  kind 
in  the  United  States.  A  fire  occurred  in  the  town  of  Ukiah, 
and  at  the  time,  through  the  negligence  of  the  water  com- 
pany, there  was  not  sufficient  water  in  the  mains  to  extin- 
guish it,  or  to  keep  it  from  spreading.  A  part  of  the  Town 
Hall  and  other  city  property  was  destroyed.  The  town 
sued  the  water  company  for  damages.  On  appeal  to  the 
Supreme  Court,  the  decision  was  in  favor  of  the  water 
company,  the  Court  holding  that  where  a  water  company 
furnishes  water  to  a  municipality  for  general  fire  purposes, 
it  cannot  be  held  liable  for  the  value  of  property  destroyed 
by  fire,  although  the  loss  may  be  due  to  the  negligence  of 
the  company.  A  water  company  is  not  an  insurer  against 
loss  by  fire.  To  be  liable  at  all,  in  any  event,  for  loss  of 
property  by  fire,  there  would  have  to  be  an  express  con- 
tract between  the  owner  and  the  company  by  which  the 
latter  agreed  to  pay  for  certain  property,  if  destroyed  by 
fire  through  its  failure  to  supply  water.  A  franchise  to 
supply  water  for  general  fire  purposes  does  not  create  such 
contract,  and  a  water  company  is  not  liable  in  California 
for  loss  by  fire.  (Decided  by  the  Supreme  Court  of  Cali- 
fornia in  the  case  of  Town  of  Ukiah  vs.  Ukiah  Water  and 
Improvement  Company,  which  decision  is  printed  in  Vol- 
ume 27  of  the  California  Decisions,  page  353.) 

(e) — Water  Rates  Must  be  Reasonable. — The  rates  fixed 
annually  must  be  reasonable,  sufficient  in  amount  to  afford 
the  water  company  a  fair  and  just  compensation  for  the 
services  rendered  by  it  in  furnishing  water  to  the  city  and 
its  inhabitants.  But  in  making  an  estimate  of  what  will 
be  a  fair  rate,  the  city  cannot  include  interest  on  the  com- 
pany's indebtedness,  nor  the  sum  the  plant  will  depreciate 
annually  aside  from  the  sum  requisite  for  its  maintenance 
and  repair.  (Decided  by  the  Supreme  Court  of  California 
in  the  case  of  Redlands  Domestic  Water  Co.  vs.  City  of 
Redlands,  which  decision  is  printed  in  Volume  121  of  the 
California  Reports,  page  365.) 


WATER  AND   WATER   RIGHTS.  821 

(f) — Damages  for  Failure  to  Supply  Water. — In  an  ac- 
tion for  the  failure  of  a  water  company  to  furnish  plaintiff 
with  water,  plaintiff  cannot  recover  the  profits  he  would 
have  realized  from  crops  that  he  would  have  raised  had 
the  water  been  furnished  by  defendant,  less  the  cost  of 
planting,  etc.,  as  such  profits  are  too  remote  and  speculative; 
but  the  proper  damages  are  the  difference  between  the 
rental  value  of  the  land  with  water  and  its  rental  value 
without  it.  .(Decided  by  the  Supreme  Court  of  California 
in  the  case  of  Crow  vs.  San  Joaquin  Canal  Co.,  which 
decision  is  printed  in  Volume  130  of  the  California  Reports, 
page  309.) 

(g) — Duty  to  Fix  Reasonable  Rates  Can  be  Compelled. 

— Where  a  city  Board  have  arbitrarily,  without  investiga- 
tion, and  without  any  exercise  of  judgment  or  discretion, 
fixed  water  rates,  without  any  reference  to  what  they 
should  be,  without  reference  either  to  the  expense  neces- 
sary to  furnish  water  or  to  what  is  a  fair  and  reasonable 
compensation  therefor,  so  as  to  render  it  impossible  to 
furnish  water  without  loss,  and  so  low  as  to  amount  to  a 
practical  confiscation  of  the  property  invested  in  the  busi- 
ness, it  is  within  the  jurisdiction  of  a  court  of  equity  to 
set  aside  such  ordinance  and  direct  the  Board  to  fix  fair 
and  reasonable  rates.  (Decided  by  the  Supreme  Court  of 
California  in  the  case  of  Spring  Valley  Water  Works  vs. 
City  and  County  of  San  Francisco,  which  decision  is  printed 
in  Volume  82  of  the  California  Reports,  page  286.) 

Section      1030.— POLLUTION      OF      WATER.— The 

courts  will  interfere  to  prevent  the  pollution  of  the  waters  of 
a  stream,  from  deposits  of  offensive  matter.  For  instance, 
where  there  are  lower  riparian  owners,  one  has  no  right  to 
pollute  the  waters  of  a  stream  by  maintaining  a  cow  stable 
and  hog  pen  on  its  banks,  but  must  keep  his  stock  at  a  rea- 
sonable distance  away  from  the  stream.  (Decided  by  the 
Supreme  Court  of  California  in  the  case  of  People  vs.  Elk 
River  Mill  Co.,  which  decision  is  printed  in  Volume  107 
of  the  California  Reports,  page  221.) 


822  BUSINESS   LAWS   FOR   BUSINESS    MEN. 

Section  1031.— CONDEMNATION  OF  WATER  FOR 
PUBLIC  USE. — The  riparian  owner's  property  in  the 
water  of  a  stream  may  be  condemned  for  public  use ;  as, 
to  supply  the  inhabitants  of  a  city  or  town.  But  upon  any 
such  condemnation,  which  is  by  a  suit  in  the  Superior 
Court,  the  judgment  will  direct  the  payment  to  the  owner 
of  the  value  of  the  water  to  him,  and  such  damages  as  he 
may  sustain  from  being  deprived  of  the  water.  This  is 
done  as  a  compensation  to  him  for  the  loss  of  his  riparian 
rights.  The  amount  of  damages  which  will  justly  com- 
pensate for  the  taking  of  the  water  for  public  use  will  be 
determined  in  each  case  by  a  jury  selected  for  the  purpose. 

Section  1032.— ARTESIAN  WELLS.— The  Legislature 
of  1907  passed  a  law  to  prevent  the  waste  of  water  from 
artesian  wells.  This  law  provides  that  any  artesian  well 
which  is  not  capped,  equipped,  or  furnished  with  such 
mechanical  appliance  as  will  readily  and  effectively  prevent 
the  flow  of  any  water  therefrom  is  to  be  deemed  a  public 
nuisance.  The  owner,  tenant,  or  occupant  of  land  upon 
which  an  artesian  well  is  situated,  who  causes  or  permits 
a  waste  of  water  therefrom,  is  guilty  of  a  misdemeanor. 
The  water  must  not  be  allowed  to  run  from  the  well  into 
any  river,  creek,  or  other  natural  water  course  or  channel, 
or  into  any  bay  or  pond,  or  into  street,  road  or  highway, 
unless  thereafter  taken  out  and  used  for  the  beneficial  pur- 
poses of  irrigation  of  land  or  domestic  use;  and  whenever 
water  from  an  artesian  well  is  used  to  irrigate  land,  not 
more  than  five  per  cent  of  it  must  be  allowed  to  escape. 
The  punishment  for  wasting  water  from  an  artesian  well, 
or  for  failure  to  keep  the  well  capped  and  protected,  is  by 
a  fine  of  not  less  than  $25  nor  more  than  $500,  or  imprison- 
ment in  the  county  jail  for  a  period  of  not  more  than  six 
months,  or  both  such  fine  and  imprisonment. 

Act  of  the  Legislature,  approved  March  6,  1907. 

Act  of  the  Legislature,  approved  March  25,  1909. 


WATER   AND   WATER   RIGHTS.  823 

Section  1033.— FLOOD  WATERS.— When  usually  re- 
curring floods  or  freshets  are  accustomed  to  swell  the  banks 
of  a  river  beyond  the  low  water  mark  of  dry  seasons  and 
overflow  them,  but  such  waters  flow  in  a  continuous  body 
with  the  rest  of  the  water  in  the  stream  and  along-  well- 
defined  boundaries,  they  constitute  a  single  natural  water- 
course. It  is  immaterial  that  the  boundaries  of  such  stream 
vary  with  the  seasons  or  that  they  do  not  consist  of  visible 
banks.  It  is  only  necessary  that  there  be  natural  and  accus- 
tomed limits  to  the  channel.  Water  flowing  under  such  cir- 
cumstances as  these,  notwithstanding  they  may  consist  of  a 
large  expanse  of  water  on  either  side  of  the  main  channel, 
constitute  but  a  single  watercourse,  and  riparian  rights  per- 
tain to  the  whole  of  them.  (Decided  by  the  Supreme  Court 
of  California,  in  the  case  of  Miller  &  Lux  vs.  Madera  Canal 
and  Irrigation  Company,  which  decision  is  printed  in  Volume 
34  of  California  Decisions,  page  339.) 


PART  X. 

ADMINISTRATION    OF    ESTATES    OF 
DECEASED    PERSONS. 

Section    1034.— SETTLEMENT    OF    ESTATES.— Of 

interest  to  all  is  the  subject  of  the  administration  and  settle- 
ment of  estates  in  the  State  of  California.  Under  this 
head  will  be  shown  the  various  steps  to  be  taken  in  the  ap- 
pointment of  executors  or  administrators,  the  management  of 
the  property  of  an  estate,  the  selling  of  property  under 
orders  of  the  Court,  the  rights  of  heirs  and  legatees,  and 
the  final  settlement  and  distribution. 

Section  1035.— EXECUTORS  AND  ADMINISTRA- 
TORS.— An  executor  is  appointed  where  there  is  a  will,  and 
is  either  appointed  by  the  Court  or  named  in  the  will. 

An  administrator  is  appointed  by  the  Court  where  there 
is  no  will. 

Authority  to  an  executor  is  given  by  an  appointment  of 
the  Superior  Court,  and  called  Letters  Testamentary. 

Authority  to  an  administrator  is  given  by  the  same  Court, 
and  called  Letters  of  Administration. 

Section  1036.— WHERE  LETTERS  WILL  BE 
GRANTED. — Letters  testamentary  to  an  executor,  or  let- 
ters of  administration  to  an  administrator,  must  be  granted, 
(1)  in  the  county  of  which  deceased  was  a  resident  at 
the  time  of  his  death,  no  matter  where  he  died;  or,  (2)  in 
the  county  in  which  he  died,  leaving  property  in  that 
county,  and  not  being  a  resident  of  the  State;  or,  (3)  in 
the  county  in  which  any  part  of  his  estate  may  be,  when 
he  dies  out  of  this  State  and  was  not  a  resident  here  at  the 
(824) 


ADMINISTRATION  OF  ESTATES  OF  DECEASED  PERSONS.        825 

time  of  his  death;  or,  (4)  in  the  county  in  which  any  part 
of  the  estate  may  be,  the  decedent  not  being  a  resident  of 
the  State,  and  not  leaving  estate  in  the  county  in  which  he 
died;  or,  (5)  in  all  other  cases,  in  the  county  where  appli- 
cation for  letters  is  first  made. 

When  the  estate  of  the  decedent  is  in  more  than  one 
county,  he  having  died  out  of  the  State,  and  not  having 
been  a  resident  thereof  at  the  time  of  his  death,  or  being 
such  non-resident,  and  dying  within  the  State,  and  not 
leaving  estate  in  the  county  where  he  died,  the  Superior 
Court  of  that  county  in  which  application  is  first  made  for 
letters  testamentary  or  of  administration  has  exclusive  juris- 
diction of  the  settlement  of  the  estate. 

Code  of  Civil  Procedure,  Sections  1294,  1295. 

Section  1037.— PROOF  OF  WILL.— Any  person  having 
a  will  in  his  possession  must  produce  and  deliver  it  to  the 
Superior  Court,  or  the  executor  named  in  the  will,  within 
thirty  days  after  he  receives  information  that  the  maker 
is  dead;  and  if  he  fails  to  do  this  he  will  be  responsible  for 
all  damages  sustained  by  any  one  thereby. 

Code  of  Civil  Procedure,  Section  1298. 

Section  1038.— WHO  MAY  PETITION  FOR  PRO- 
BATE OF  WILL. — Any  executor,  devisee,  or  legatee 
named  in  any  will,  or  any  other  person  interested  in  the 
estate,  may,  at  any  time  after  the  death  of  the  testator, 
petition  the  Superior  Court  to  have  the  will  proved. 
Code  of  Civil  Procedure,  Section  1299. 

Section  1039.— WHEN  EXECUTOR  FORFEITS 
RIGHT  TO  LETTERS.— If  the  person  named  in  a  will 
as  executor  wilfully  fails,  for  thirty  days  after  he  has  knowl- 
edge of  the  death  of  the  testator  and  that  he  is  named  as 
executor,  to  petition  the  proper  court  for  the  probate  of  the 
will,  he  will  forfeit  his  rights  as  executor  under  the  will. 
Code  of  Civil  Procedure,  Section  1301. 


826  BUSINESS    LAWS    FOR   BUSINESS    MEN. 

Section  1040.— EXECUTOR  MAY  DECLINE  TO 
ACT. — An  executor  named  in  a  will  may  decline  to  act, 
by  filing  a  written  notice  that  he  renounces  his  appointment 
and  declines  to  act  as  such,  at  the  same  time  that  he  files 
the  will. 

Section  1041.— PROOF  OF  WILL.— When  a  will  is 
presented  for  probate,  the  Superior  Court  will  hear  the 
proofs  and  issue  a  certificate  of  probate.  The  persons 
who  signed  the  will  as  witnesses  are  examined  as  to  their 
knowledge  of  its  execution,  and  to  show  that  it  is  really  the 
will  of  the  testator. 

When  one  of  the  witnesses  to  a  will  is  examined,  and  the 
others  are  dead  or  insane,  or  their  residence  unknown,  other 
testimony,  of  the  handwriting  of  the  testator,  and  other 
circumstances,  will  be  taken  sufficient  to  prove  that  the  in- 
strument produced  is  really  the  last  will  and  testament  of 
the  deceased. 

If  all  the  witnesses  to  the  will  are  dead,  or  insane,  or 
not  residing  in  the  county,  the  Court  will  allow  the  will 
to  be  proved  by  other  evidence — the  handwriting  of  the 
testator,  the  surrounding  circumstances,  the  handwriting 
of  the  subscribing  witnesses,  etc. 

Code  of  Civil  Procedure,  Section  1315. 

When  a  will  is  presented  which  is  all  in  the  handwriting 
of  the  testator,  an  olographic  will,  it  will  be  proved  by  the 
testimony  of  persons  who  know  his  handwriting. 

Section  1042.— RECORDING  WILL.— The  will  and  a 
certificate  of  the  proof  thereof  must  be  filed  and  recorded 
by  the  clerk  of  the  court. 

Code  of  Civil  Procedure,  Section  1318. 

Section  1043.— PROOF  OF  LOST  OR  DESTROYED 
WILL. — The  Superior  Court  has  power  to  take  proof  of  a 
will,  although  the  paper  itself  be  lost  or  destroyed.  But 
no  will  can  be  proved  as  a  lost  or  destroyed  will,  unless  the 


ADMINISTRATION  OF  ESTATES  OF  DECEASED  PERSONS.        827 

proof  shows  that  the  will  was  in  existence  at  the  time  of 
the  death  of  the  testator,  or  was  fraudulently  or  by  public 
calamity  destroyed  in  his  life-time;  provided,  if  the  testator 
be  committed  to  any  state  hospital  for  the  insane,  and  after 
such  commitment  his  will  is  destroyed  by  public  calamity, 
and  the  testator  is  never  restored  to  competency,  then  after 
his  death  the  will  may  be  probated  as  though  it  were  in  exist- 
ence at  the  time  of  his  death.  The  provisions  of  a  lost  or 
destroyed  will  must  be  clearly  and  distinctly  proved  by  at 
least  two  credible  witnesses. 

Code  of  Civil  Procedure,  Section  1339. 

Section  1044.— PROOF  OF  FOREIGN  WILL.— Wills 

probated  in  any  other  State  or  Territory  of  the  United 
States,  or  in  any  foreign  country  or  state,  are  admitted  to 
probate  in  this  State  on  the  production  of  a  copy  and  the 
original  record  of  probate  in  another  country. 

Section  1045.— LETTERS  TESTAMENTARY.— After 

probate  of  a  will,  letters  testamentary  will  be  granted  to 
the  persons  therein  named  as  executors.  If  there  are  two  or 
more  executors  named  in  the  will,  and  some  decline  to  act, 
letters  will  be  granted  to  those  who  remain. 

Any  person  interested  in  a  will  may  file  objections  in 
writing  to  the  granting  of  letters  testamentary  to  any  of  the 
persons  named  as  executors,  and  the  objections  will  be 
heard  and  determined  by  the  court. 

If  the  executor  named  in  the  will  be  a  minor  or  absent 
from  the  State,  letters  will  be  granted  to  some  other  person, 
who  will  hold  the  trust  until  the  executor  named  in  the 
will  becomes  of  age  or  returns  to  the  State.  If  two  execu- 
tors are  named  in  the  will,  and  one  of  them  is  a  minor  or 
absent  from  the  State,  the  one  who  can  qualify  will  act  as 
executor  alone  until  such  time  as  the  other  becomes  of  age 
or  returns  to  the  State.  The  latter  will  then  have  the  right 
to  act  as  joint  executor. 

Code  of  Civil  Procedure,   Sections   1349,   1354,   1355. 


828  BUSINESS   LAWS   FOR   BUSINESS    MEN. 

Section  1046.— REVOCATION  OF  LETTERS.— If  an 

executor  or  administrator  becomes  of  unsound  mind,  or  is 
convicted  of  felony  or  infamous  crime,  or  becomes  a  habitual 
drunkard,  or  mismanages  or  wastes  the  estate,  he  will  be 
removed  by  the  Superior  Court  and  another  will  be  appointed 
in  his  place. 

Section  1047.— MARRIED  WOMAN  OR  CORPORA- 
TION MAY  ACT. — A  married  woman  may  act  as  execu- 
trix of  a  will,  or  as  administratrix  of  an  estate. 

A  corporation  may  act  as  executor  or  administrator,  if 
authorized  by  its  articles  of  incorporation  so  to  do. 

Code  of  Civil  Procedure,   Sections   1348,   1350,   1352. 

Section    1048.— LETTERS   OF   ADMINISTRATION. 

If  a  person  dies  without  making  a  will,  the  Superior  Court 
will  grant  letters  of  administration  of  his  estate.  If  a  per- 
son dies  leaving  a  will,  but  the  will  does  not  name  any  ex- 
ecutor, the  court  will  appoint  an  administrator,  called  an 
"administrator  with  the  will  annexed,"  who  will  have  power 
to  carry  out  the  provisions  of  the  will  in  the  same  manner 
as  he  would  if  named  in  the  will. 

Section  1049.— WHO  ARE  ENTITLED  TO  LET- 
TERS OF  ADMINISTRATION.— The  persons  entitled 
to  letters  of  administration  are  as  follows: 

(1)  The  surviving  husband  or  wife,  or  some  competent 
person  whom  he  or  she  may  request  to  have  appointed; 

(2)  The  children; 

(3)  The  father  and  mother; 

(4)  The  brothers; 

(5)  The  sisters; 

(6)  The  grandchildren; 

.  (7)  The  next  of  kin  entitled  to  share  in  the  distribution 
of  the  estate; 

(8)  The  public  administrator; 

(9)  The  creditors; 

(10)  Any  person  legally  competent. 


ADMINISTRATION  OF  ESTATES  OF  DECEASED  PERSONS.        829 

If  the  deceased  was  a  member  of  a  partnership  at  the 
time  of  his  death,  the  surviving  partner  cannot  be  appointed 
administrator  of  the  estate. 

Act  of  the  Legislature,  in  effect  May  18,  1907. 

Section  1050.— WHO  ARE  INCOMPETENT  TO 
ACT    AS    EXECUTOR    OR    ADMINISTRATOR.— A 

person  may  be  entitled  to  letters  of  administration,  as  pro- 
vided in  the  preceding  section,  and  at  the  same  time  be  in- 
competent for  personal  reasons.  For  the  law  provides  that 
in  the  following  cases  the  persons  otherwise  entitled  must 
not  be  appointed:  (1)  When  the  person  is  under  the  age  of 
majority;  or,  (2)  has  been  convicted  of  an  infamous  crime; 
or,  (3)  when  he  is  adjudged  by  the  court  incompetent  to 
execute  the  duties  of  the  trust  by  reason  of  drunkenness, 
improvidence,  or  want  of  understanding  or  integrity. 
Code  of  Civil  Procedure,  Sections  1350,  1369. 

Section  1051.— OATH  OF  EXECUTOR  OR  ADMIN- 
ISTRATOR.— The  executor  or  administrator  must  take 
and  subscribe  an  oath,  that  he  will  perform,  according  to 
law,  the  duties  of  his  trust.  This  oath  is  in  writing  and 
is  recorded  by  the  clerk  of  the  court  with  the  letters  of  ad- 
ministration. 

Code  of  Civil  Procedure,  Section   1387. 

Section  1052.— BOND  OF  EXECUTOR  OR  ADMIN- 
ISTRATOR.— Executors  or  administrators  in  the  State  of 
California  must  give  a  bond,  for  the  faithful  discharge  of 
their  duties,  in  an  amount  equal  to  twice  the  value  of  the 
personal  property  belonging  to  the  estate,  and  twice  the 
probable  value  of  the  rents,  profits,  and  issues  of  the  real 
property.  The  court  ascertains  these  values  by  examining 
on  oath  the  party  applying  for  letters,  or  any  other  person. 
The  bond  must  be  signed  by  two  or  more  sureties,  to  be 
approved  by  the  judge  of  the  court. 

Code  of  Civil  Procedure,  Section  1388. 

J 


830  BUSINESS   LAWS   FOR   BUSINESS   MEN. 

An  additional  bond  must  be  given  whenever  the  sale  of 
any  real  estate  is  to  be  made  by  order  of  the  court;  but  no 
additional  bond  is  necessary  when  it  appears  that  the 
amount  of  the  bond  already  given  is  twice  the  value  of  the 
personal  property  remaining  in  or  that  may  come  into  the 
possession  of  the  executor  or  administrator  (including  the 
annual  rents,  profits,  and  issues  of  the  real  estate),  and 
twice  the  probable  amount  to  be  realized  on  the  sale  of  the 
real  estate  ordered  to  be  sold. 

Code  of  Civil  Procedure,  Section  1389. 

Section    1053.— SEPARATE    BONDS.— When    two    or 

more  persons  are  appointed  executors  or  administrators, 
the  Court  must  require  and  take  a  separate  bond  from  each 
of  them. 

Code  of  Civil  Procedure,  Section  1391. 

Section  1054.— WHEN  EXECUTOR  MAY  ACT 
WITHOUT  BONDS.— A  will  may  expressly  provide  that 
the  executor  named  in  it  shall  act  without  giving  bonds. 
Where  a  will  does  so  provide,  the  executor  will  have  power 
to  administer  the  estate,  including  the  sale  of  property, 
without  giving  any  bonds  whatever.  If  the  estate  is  not 
managed  properly,  however,  the  Court  has  power  to  demand 
a  bond  of  the  executor,  even  where  the  will  declares  that 
no  bond  shall  be  given.  It  is  the  duty  of  the  Court,  no 
matter  what  the  provisions  of  the  will  may  be,  to  see  that 
the  estate  is  properly  managed,  without  waste  or  unneces- 
sary or   wilful  losses. 

Code  of  Civil  Procedure,  Section  1396. 

Section  1055.— SPECIAL  ADMINISTRATOR.— When 

there  is  delay  in  application  for  or  the  granting  of  letters 
to  an  executor  or  administrator,  or  when  no  sufficient  bond 
is  filed,  or  when  an  executor  or  administrator  dies  or  is 
suspended  or  removed,  the  Court  may  appoint  a  special 
administrator,  to  act  for  the  time  being,  and  whose  duty 
it  shall  be  to  take  charge  of  and  preserve  the  estate  until 


ADMINISTRATION  OF  ESTATES  OF  DECEASED  PERSONS.        831 

such  time  as  a  regular  executor  or  administrator  shall  be 
appointed  and  qualified  to  act.  The  special  administrator 
must  give  a  bond  in  the  same  manner  as  other  admin- 
istrators. 

Code  of  Civil  Procedure,  Section  1411. 

Section  1056.— RELEASE  OF  BONDSMEN.— The 
bondsmen  of  an  executor  or  administrator  may  be  released 
by  the  court.  When  a  surety  of  any  executor  or  adminis- 
trator desires  to  be  released  from  the  bond,  and  from 
future  responsibility,  he  must  make  an  application  there- 
for to  the  Superior  Court.  The  court  will  then  require 
the  executor  or  administrator  to  appear  and  give  a  bond 
with  new  sureties,  and  if  he  neglects  to  do  so  his  letters 
will  be  revoked,  and  a  new  executor  or  administrator  ap- 
pointed. If  new  sureties  are  given  to  the  satisfaction  of  the 
judge,  the  surety  who  applied  for  release  will  not  be  liable 
on  the  bond  for  any  subsequent  act,  default,  or  misconduct 
of  the  executor  or  administrator. 

Code  of  Civil  Procedure,   Sections   1403,   1404,   1405. 

Section  1057.— RESIGNATION  OF  EXECUTOR  OR 
ADMINISTRATOR. — An  executor  or  administrator  may 
resign  if  he  wishes  to  do  so.  He  may  do  this  by  filing  in 
the  Superior  Court  a  written  notice  that  he  resigns  his  ap- 
pointment. But,  before  his  resignation  can  be  accepted  by 
the  court  he  must  file  his  accounts  and  have  them  allowed 
and  settled  by  the  court.  The  court  can  then  make  an  order 
allowing  and  accepting  the  resignation. 

If    there    are    a    number    of    executors    or    administrators, 
and  one  of  them  resigns,  it  will  be  the  duty  of  those  who. 
remain  to  administer  and  settle  up  the  estate. 
Code  of  Civil  Procedure,  Section  1427. 

Section  1058.— SUIT  AGAINST  BONDSMEN.— If  the 

letters  of  an  executor  or  administrator  are  revoked,  or  if 
he  resigns  or  dies,  and  it  is  discovered  that  he  has  been 
faithless  to  his  trust,  any  person  injured  by  his  bad  conduct 


832  BUSINESS   LAWS   FOR   BUSINESS    MEN. 

may  bring  a  suit  against  his  bondsmen  to  make  good  the 
losses  sustained. 

Section  1059.— INVENTORY  AND  APPRAISE- 
MENT.— As  soon  as  an  executor  or  administrator  has  quali- 
fied, he  is  entitled  to  the  immediate  possession  of  the  real 
estate  and  personal  property  of  the  deceased.  He  may 
receive  the  rents  and  profits  of  the  real  estate,  until  the 
estate  is  settled.  And,  as  he  has  possession  and  charge  of 
the  estate,  the  law  requires  him  to  show  to  the  court  what 
property  the  estate  consists  of,  and  its  location  and  condi- 
tion. This  he  does  by  having  an  inventory  and  appraise- 
ment made,  which  is  filed  with  the  court.  The  inventory 
is  made  by  the  executor  or  administrator,  under  oath,  con- 
taining a  true  statement  of  the  real  and  personal  estate  of 
the  deceased  which  has  come  to  his  possession  or  knowl- 
edge, and  must  be  made  and  filed  within  three  months 
after  his  appointment.  Attached  to  the  inventory  must  be 
an  appraisement  of  the  value  of  the  property. 

To  make  the  appraisement,  the  court,  or  a  judge  thereof, 
must  appoint  three  disinterested  persons,  one  of  whom 
must  be  one  of  the  inheritance  tax  appraisers  provided  for 
by  law  (any  two  of  which  appraisers  may  act)  ;  provided, 
that  the  court  may,  in  its  discretion,  appoint  said  inheritance 
tax  appraiser  as  sole  appraiser  to  appraise  said  estate. 

Said  appraisers  are  entitled  to  receive  a  reasonable  com- 
pensation for  their  services,  not  to  exceed  five  dollars  per 
day,  to  be  allowed  by  the  court  or  judge. 

The  appraisers  or  appraiser  must,  with  the  inventory,  file 
a  verified  account  of  their  or  his  services  and  disbursements. 

If  any  part  of  the  estate  is  in  any  other  county  than 
that  in  which  letters  issued,  an  appraiser  or  appraisers 
thereof  may  in  the  same  manner  as  above  provided,  be  ap- 
pointed, either  by  the  court  or  judge  having  jurisdiction  of 
the  estate,  or  by  the  court  or  judge  of  such  other  county, 
on  request  of  the  court  or  judge  having  jurisdiction.  No 
clerk  or  deputy,  nor  any  person  related  by  consanguinity 
or   affinity  to  or  connected   by   marriage   with,   or   being   a 


ADMINISTRATION  OF  ESTATES  OF  DECEASED  PERSONS.        833 

partner  or  employee  of  the  judge  of  the  court,  shall  be 
appointed  or  shall  be  competent  to  act  as  appraiser  in  any 
estate,  or  matter  or  proceeding  pending  before  said  judge 
or  in  said  court. 

Act  of  the  Legislature,  approved  April  7,  1911. 

Section  1060.— WHEN  ADDITIONAL  INVENTORY 
REQUIRED. — Whenever  property  not  mentioned  in  the 
first  inventory  comes  to  the  possession  or  knowledge  of  the 
executor  or  administrator,  he  must  make  and  file  another 
inventory  and  appraisement  covering  such  property. 

Code  of  Civil  Procedure,  Sections  1443,  1446,  1451. 

Section  1061.— WHEN  NO  APPRAISEMENT  RE- 
QUIRED.— If  the  whole  estate  consists  of  money,  there 
need  not  be  an  appraisement,  but  an  inventory  must  be  made 
and  returned  by  the  executor  or  administrator,  as  in  other 
cases. 

Act  of  the  Legislature,  approved  April  21,  1909. 

Section  1062.— MONEY  IN  BANK.— The  surviving  hus- 
band or  wife  of  any  deceased  person,  or,  if  no  husband  or 
wife  is  living,  then  the  children  of  such  decedent,  may, 
without  procuring  letters  of  administration,  collect  of  any 
bank  any  sum  which  the  deceased  may  have  left  on  deposit 
in  such  bank  at  the  time  of  his  or  her  death;  provided,  such 
deposit  does  not  exceed  the  sum  of  $500.  An  affidavit  must 
be  made  that  the  whole  amount  left  on  deposit  by  decedent 
in  any  and  all  banks  did  not  exceed  the  sum  of  $500. 
Act  of  the  Legislature,  in  effect  May  16,  1907. 

Section  1063.— PROBATE  HOMESTEAD  AND 
FAMILY  ALLOWANCE.— The  court  will  set  aside  a 
homestead  for  the  use  of  the  widow  and  children,  whether 
there  was  a  homestead  during  the  life  of  the  decedent  or  not. 
This  homestead  will  be  set  aside  out  of  the  community  prop- 
erty, if  there  be  any,  or  out  of  the  separate  property  of  the 


834  BUSINESS   LAWS   FOR   BUSINESS    MEN. 

deceased,  if  there  is  no  community  property.  The  home- 
stead will  be  exempt  from  all  claims  against  the  estate, 
whether  individual  debts  of  the  deceased,  or  community 
debts.  The  homestead  is  for  the  use  and  support  of  the 
widow,  child,  or  children,  of  the  deceased,  and  is  not  an 
asset  of  the  estate  for  the  payment  of  debts. 

When  a  homestead  is  set  apart  to  the  use  of  the  family, 
the  property,  with  one  exception  stated  below,  is  the  prop- 
erty of  the  surviving  widow,  if  there  is  no  minor  child.  If 
the  decedent  left  also  a  minor  child  or  children,  the  one 
half  of  such  homestead  belongs  to  the  widow,  and  the 
remainder  to  the  child,  or  in  equal  shares  to  the  children,  if 
there  are  more  than  one.  If  there  is  no  wife  surviving,  the 
whole  property  belongs  to  the  minor  child  or  children.  If 
the  property  set  apart  is  a  homestead  selected  from  the  sep- 
arate property  of  the  decedent,  the  court  can  set  it  apart 
only  for  a  limited  period,  and,  subject  to  such  homestead 
right,  the  title  vests  in  the  heirs  of  the  deceased  or  devisees. 
Act  of  the  Legislature,  approved  February   16,   1911. 

Section  1064.— EXEMPT  PROPERTY.— In  addition 
to  the  homestead,  the  law  provides  that  the  court  must  set 
apart  for  the  use  of  the  family  all  the  property  of  the  estate 
which  is  by  law  exempt  from  execution. 

Section  1065.— EXTRA  ALLOWANCE.— If  the  amount 
set  apart  be  insufficient  for  the  support  of  the  widow  and 
minor  children,  the  court  will  make  such  further  reasonable 
allowance  out  of  the  estate  as  shall  be  necessary  for  the 
maintenance  of  the  family,  according  to  their  circumstances, 
during  the  progress  of  the  settlement  of  the  estate.  Any  such 
allowance  made  by  the  court  must  be  paid  by  the  executor  or 
administrator  in  preference  to  all  other  charges,  except 
funeral  charges,  and  expenses  of  administration;  and  any 
such  allowance,  whenever  made,  may,  in  the  discretion  of 
the  court,  take  effect  from  the  death  of  the  decedent. 

Code  of  Civil   Procedure,  Sections   1465,   1466,    1467, 
1468. 


ADMINISTRATION  OF  ESTATES  OF  DECEASED  PERSONS.        835 

Section  1066.— ADMINISTRATION  WHEN  ES- 
TATE DOES  NOT  EXCEED  FIFTEEN  HUN- 
DRED DOLLARS.— If  it  appears  from  the  inventory  that 
the  value  of  the  whole  estate  does  not  exceed  the  sum  of 
fifteen  hundred  dollars,  over  and  above  liens  and  incum- 
brances existing  at  the  date  of  the  death  of  the  deceased, 
the  court  must  make  an  order  assigning  to  the  widow 
of  the  deceased,  or  if  there  be  no  widow  then  to  the 
minor  children,  the  whole  of  the  estate.  And  the  title 
to  the  property  will  vest  absolutely  in  such  widow  or  minor 
children,  after  the  payment  of  the  expenses  of  the  last 
illness  of  the  deceased,  funeral  charges,  and  expenses  of 
administration.  The  property  will  still  be  subject,  how- 
ever, to  whatever  mortgages,  liens,  or  incumbrances  there 
may  have  been  upon  it  at  the  time  of  the  death  of  the 
deceased.  After  property  wprth  not  more  than  fifteen  hun- 
dred dollars  is  assigned  by  the  court  as  above  stated,  there 
can  be  no  further  proceedings  in  the  administration,  unless 
other  property  is  afterwards  discovered. 

Code  of  Civil  Procedure,  Section  1469. 

Section  1067.— CLAIMS  AGAINST  THE  ESTATE.— 

After  property  has  been  appropriated  from  the  estate  for  the 
support  of  the  widow  or  minor  children,  as  provided  by  law, 
the  claims  of  creditors  are  to  be  next  considered. 

Section     1068.— NOTICE     TO     CREDITORS.— Every 

executor  or  administrator  must  publish  a  notice  to  creditors, 
immediately  after  his  appointment,  requiring  all  persons  hav- 
ing claims  against  the  decedent  to  present  them,  with  the 
necessary  vouchers,  to  the  executor  or  administrator,  at  the 
place  of  his  residence  or  business,  to  be  specified  in  the 
notice;  provided,  his  residence  or  place  of  business  must 
be  in  the  county  where  the  estate  is  being  settled.  The  notice 
to  creditors  must  be  published  in  some  newspaper  in  the 
county,  if  there  is  one,  or  if  not,  then  in  a  newspaper  des- 
ignated by  the  court.  The  notice  must  be  published  as 
often  as  the  court  deems  necessary,  but  not  less  than  once 


836  BUSINESS    LAWS   FOR   BUSINESS    MEN. 

a  week  for  four  successive  weeks.  The  time  expressed  in 
the  notice,  within  which  claims  against  the  estate  shall 
be  presented,  must  be  ten  months  after  its  first  publication, 
when  the  estate  exceeds  in  value  the  sum  of  ten  thousand 
dollars,  and  four  months  when  it  does  not  exceed  the  sum 
of  ten  thousand  dollars. 

Act  of  the  Legislature,  approved  March  21,  1911. 

Section  1069.— CLAIMS  BARRED  IF  NOT  PRE- 
SENTED IN  TIME. — All  claims  arising  upon  contracts, 
whether  the  same  be  due,  not  due,  or  contingent,  must 
be  presented  to  the  executor  or  administrator  within  the 
time  limited  in  the  legal  notice  to  creditors,  and  any  claim 
not  so  presented  is  barred  forever.  But,  when  it  is  made 
to  appear  to  the  satisfaction  of  the  court  by  the  affidavit  of 
the  creditor,  that  the  creditor  was  out  of  the  State  when  the 
notice  was  published,  the  claim  may  be  presented  at  any 
time  before  a  decree  of  distribution  is  entered. 

Section    1070.— CLAIMS    MUST    BE    VERIFIED.— 

Every  claim  presented  to  the  administrator  or  executor  must 
be  sworn  to  by  the  claimant  or  some  one  on  his  behalf,  who 
must  make  affidavit  that  the  amount  is  justly  due,  that  no 
payments  have  been  made  thereon  which  are  not  credited, 
and  that  there  are  no  offsets  to  the  claim  within  the  knowl- 
edge of  the  affiant.  The  oath  may  be  taken  before  any 
officer  authorized  to  administer  oaths.  The  executor  or 
administrator  may  also  require  satisfactory  vouchers  to  be 
produced  in  support  of  the  claim. 

Section  1071.— ALLOWANCE  AND  REJECTION 
OF  CLAIMS. — When  a  claim  has  been  presented  to  the 
executor  or  administrator,  he  must  indorse  thereon  his  allow- 
ance or  rejection,  with  the  day  and  date.  If  he  allows  the 
claim,  it  must  be  presented  to  the  judge  of  the  court,  who 
must  in  the  same  manner  indorse  on  it  his  allowance  or 
rejection.  If  the  executor  or  administrator,  or  the  judge, 
refuse  or  neglect  to  indorse  such  allowance  or  rejection  for 


ADMINISTRATION  OF  ESTATES  OF  DECEASED  PERSONS.   837 

ten  days  after  the  claim  has  been  presented  to  him,  such 
refusal  or  neglect  may,  at  the  option  of  the  claimant,  be 
deemed  equivalent  to  a  rejection  on  the  tenth  day;  and  if 
the  presentation  be  made  by  a  notary,  the  certificate  of  such 
notary,  under  seal,  will  be  prima  facie  evidence  of  such 
presentation  and  the  date  thereof. 

If  the  claim  be  presented  to  the  executor  or  administrator 
before  the  expiration  of  the  time  limited  for  the  presentation 
of  claims,  it  will  be  presented  in  time,  though  acted  upon 
by  the  executor  or  administrator,  and  by  the  judge,  after 
the  expiration  of  such  time. 

Every  claim  which  has  been  allowed  by  the  executor 
or  administrator  and  the  judge  must  be  filed  in  the  court, 
within  thirty  days  thereafter,  and  will  then  rank  among 
the  acknowledged  debts  of  the  estate,  to  be  paid  in  due 
course  of  administration. 

Section  1072.— SUIT  ON  REJECTED  CLAIM.— If  a 

claim  is  rejected  by  the  executor  or  administrator  or  by  the 
court,  the  holder  must  bring  suit  against  the  executor  or 
administrator  within  three  months  after  written  notice  of 
its  rejection,  if  the  claim  be  then  due,  or  within  two  months 
after  it  becomes  due.  If  he  does  not  bring  suit  within  such 
time,  the  claim  will  be  barred  forever. 

Section    1073.— CLAIM    WHEN    SUIT    PENDING.— 

If  a  suit  is  pending  against  a  person  at  the  time  of  his 
death,  the  claim  must  be  presented  to  the  administrator  or 
executor,  the  same  as  if  no  suit  had  been  commenced.  If 
the  claim  is  not  so  presented,  no  recovery  can  be  had  in  the 
suit. 

Section  1074.— PAYMENT  OF  JUDGMENTS.— When 

any  judgment  has  been  rendered  against  a  person  in  his 
lifetime,  no  execution  can  be  issued  on  the  judgment  after 
his  death,  but  it  must  be  presented  to  the  executor  or  admin- 
istrator  in   the   same   manner   as   any   other   claim;   and,    if 


838  BUSINESS   LAWS   FOR  BUSINESS    MEN. 

justly  due  and  unsatisfied,  it  must  be  paid  in  due  course  of 
administration. 

Section  1075.— ALLOWANCE  OF  CLAIM  IN  PART. 

— Whenever  any  claim  is  presented  to  an  executor  or  ad- 
ministrator or  to  a  judge,  and  he  is  willing  to  allow  the 
claim  in  part,  he  must  state  in  his  indorsement  the  amount 
he  is  willing  to  allow.  If  the  creditor  refuses  to  accept  the 
amount  allowed  in  satisfaction  of  his  claim,  and  sues  upon 
it,  he  will  not  be  allowed  any  costs  unless  he  recovers  a 
greater  amount. 

Section    1076.— STATUTE    OF   LIMITATIONS.— No 

claim  can  be  allowed  by  the  executor  or  administrator,  or 
by  a  judge  of  the  Superior  Court,  which  is  barred  by  the 
statute  of  limitations. 

No  claim  against  any  estate,  which  has  been  presented 
and  allowed,  is  affected  by  the  statute  of  limitations  pend- 
ing the  proceedings  for  the  settlement  of  the  estate. 

Section  1077.— CLAIM  OF  EXECUTOR  OR  ADMIN- 
ISTRATOR.— If  the  executor  or  administrator  is  himself 
a  creditor,  his  claim,  duly  authenticated  by  affidavit,  must 
be  presented  for  allowance  or  rejection  to  the  judge  of  the 
court.  The  judge  may  allow  or  reject  the  claim.  Its  allow- 
ance by  the  judge  is  sufficient  evidence  of  its  correctness. 
If  the  claim  of  an  executor  or  administrator  is  rejected 
by  the  judge,  he  may  sue  the  estate,  and  summons  in  the 
suit  can  be  served  upon  the  judge. 

Section  1078.— FAILURE  TO  PRESENT  MORT- 
GAGE CLAIM. — If  a  mortgagee  fails  to  present  his  claim 
against  the  estate  to  the  executor  or  administrator,  within 
the  time  required  by  law,  he  will  not  altogether  lose  his  debt. 
He  may  still  sue  upon  the  mortgage,  because  it  was  a  lien 
upon  the  property  of  the  deceased  during  his  Hfetime.  But, 
not  having  presented  his  claim  as  required  by  law,  he  must 


ADMINISTRATION  OF  ESTATES  OF  DECEASED  PERSONS.        839 

look  only  to  the  property  of  the  estate  covered  by  his  mort- 
gage for  the  collection  of  the  amount  due  him.  He  will  get 
it  all,  if  the  property  will  sell  for  enough  to  pay  it.  But  if 
the  money  cannot  be  got  out  of  the  mortgaged  property, 
by  failure  to  present  the  mortgage  claim  he  loses  the 
right  to  have  other  property  of  the  estate  applied  to  the 
payment  of  the  deficiency.  Where  a  mortgage  claim  is 
not  presented  against  the  estate,  the  debt  must  be  collected 
out  of  the  mortgaged  property,  or  not  at  all ;  and  no  attor- 
ney fees  can  be  recovered  upon  such  a  claim  not  presented, 
even  though  the  mortgage  may  have  provided  for  attor- 
ney fees. 

Code  of  Civil  Procedure,   Sections   1490,   1491,   1493, 
1494,  1496,  1497,  1498,  1499,  1500,  1502,  1503,  1505. 

Section  1079.— SALE  OR  MORTGAGE  OF  PROP- 
ERTY.— No  sale  or  mortgage  of  any  property  of  an  estate 
is  valid  unless  made  under  order  of  the  court. 

Section   1080.— SALE  OF  PERSONAL  PROPERTY. 

— At  any  time  after  receiving  letters  the  executor  or  admin- 
istrator may  apply  to  the  court  for  an  order  to  sell  the  per- 
ishable property  of  the  estate,  and  other  personal  property 
likely  to  depreciate  in  value,  or  which  will  incur  loss  or 
expense  by  being  kept,  and  so  much  other  personal  property 
as  may  be  necessary  to  pay  the  family  allowance. 

If  claims  against  the  estate  have  been  allowed,  or  money 
is  necessary  for  the  payment  of  the  expenses  of  admin- 
istration, or  to  pay  legacies,  the  court  may  make  an  order 
to  sell  so  much  of  the  personal  property  as  may  be  neces- 
sary. Partnership  interests  may  also  be  ordered  sold,  when 
it  appears  to  be  for  the  best  interest  of  the  estate. 
■  Sales  of  personal  property  must  be  made  at  public  auc- 
tion, unless  the  court  expressly  orders  a  private  sale.  Sales 
of  personal  property  can  only  be  had  after  notice  given  of 
at  least  ten  days,  by  posting  notices  in  three  public  places  in 
the  county,  or  by  publication  in  a  newspaper. 


840  BUSINESS   LAWS    FOR   BUSINESS    MEN. 

Section  1081.— SALE  OR  MORTGAGE  OF  REAL 
PROPERTY. — When  the  personal  estate  in  the  hands  of 
the  executor  or  administrator  is  insufficient  to  pay  the  family 
allowance,  and  the  debts  and  charges  of  administration,  or 
the  claims  outstanding  against  the  decedent,  or  legacies;  or 
when  it  appears  to  the  satisfaction  of  the  court  that  it  is 
for  the  advantage,  benefit,  and  best  interest  of  the  estate  and 
those  interested  therein,  that  the  real  estate  or  some  part 
thereof  be  sold;  the  executor  or  administrator  may  sell  any 
real  as  well  as  personal  property  of  the  estate,  upon  the 
order  of  the  court.  The  court  may  order  all  or  a  part  of 
the  real  estate  sold. 

The  land  may  be  mortgaged,  instead  of  being  sold,  if  the 
court  shall  be  satisfied  that  a  mortgage  will  be  best  for  the 
estate  and  for  all  concerned. 

If  a  sale  be  ordered,  it  may  be  either  for  cash,  or  on  credit 
not  exceeding  one  year. 

The  land  may  be  sold  in  one  parcel  or  in  subdivisions, 
as  the  executor  or  administrator  shall  judge  most  beneficial 
to  the  estate,  unless  the  court  otherwise  specially  directs. 

The  sale  of  real  estate  may  be  at  public  auction,  or  at 
private  sale,  as  the  court  may  direct. 

Sales  at  public  auction  must  be  made  in  the  county 
where  the  land  is  situated;  but  when  the  land  is  situated  in 
two  or  more  counties,  it  may  be  sold  in  either.  The  sale 
must  be  made  between  the  hours  of  nine  o'clock  in  the 
morning  and  the  setting  of  the  sun  on  the  same  day. 

If  the  sale  is  at  private  sale,  bids  must  be  presented  to 
the  executor  or  administrator  in  writing,  or  the  bids  may 
be  filed  in  the  office  of  the  clerk  of  the  court.  Notice  of 
receiving  bids  must  be  given  as  directed  by  the  court. 

Section  1082.— CONFIRMATION  OF  SALE.— The 
sale  of  real  estate  must  be  confirmed  by  the  Superior  Court. 
The  executor  or  administrator  must  make  a  report  to  the 
court  after  the  sale,  and  if  the  court  is  of  the  opinion  that 
the  proceedings  were  unfair,  or  that  the  property  was  sold 
for  less  than  its  value,  and  that  a  new  oflFer  exceeding  the 


ADMINISTRATION  OF  ESTATES  OF  DECEASED  PERSONS.        841 

selling  price  at  least  ten  per  cent,  exclusive  of  expenses  of  a 
new  sale,  may  be  obtained,  the  court  will  refuse  to  confirm 
the  sale,  and  will  order  another  sale.  On  the  contrary,  if  it 
appears  to  the  court  that  the  sale  was  legally  made  and 
fairly  conducted,  and  that  ten  per  cent  more  cannot  be 
obtained,  an  order  will  be  made  confirming  the  sale  and 
directing  conveyances  to  be  executed ;  and  such  sale  from 
that  time  becomes  confirmed  and  valid.  But  even  if  the 
sale  was  not  fair,  and  was  made  for  less  than  the  value  of 
the  property,  the  court  is  not  absolutely  required  to  order 
another  sale;  for  if  an  offer  of  ten  per  cent  more  in  amount 
than  that  named  in  the  return  of  the  first  sale  be  made  to 
the  court,  in  writing,  by  a  responsible  person,  it  is  in  the 
discretion  of  the  court  to  accept  such  offer  and  confirm  the 
sale  to  such  person,  without  ordering  a  new  sale. 

Code  of  Civil  Procedure,   Sections   1536,   1542,   1544, 
1547,  1548,  1549,  1552,  1554. 

Section  1083.— SALE  UNDER  A  WILL.— When  prop- 
erty is  directed  by  will  to  be  sold,  or  authority  is  given  in 
the  will  to  sell  property,  the  executor  may  sell  any  property 
of  the  estate  without  the  order  of  the  court,  and  either  by 
public  or  private  sale,  and  with  or  without  notice;  but  the 
executor  must  make  a  return  to  the  court  of  such  sales,  as 
in  other  cases;  and  if  directions  are  made  in  the  will  as  to 
the  mode  of  selling,  or  the  particular  property  to  be  sold, 
such  directions  must  be  observed.  In  either  case  no  title 
passes  unless  the  sale  is  confirmed  by  the  court. 
Code  of  Civil  Procedure,  Section  1561. 

Section  1084.— COMPENSATION  OF  EXECUTORS 
AND  ADMINISTRATORS.— When  no  compensation  is 
provided  by  the  will,  or  the  executor  renounces  all  claim 
thereto,  he  must  be  allowed  commissions  upon  the  amount 
of  estate  accounted  for  by  him,  as  follows :  For  the  first 
thousand  dollars,  at  the  rate  of  seven  per  cent;  for  the  next 
nine  thousand  dollars,  at  the  rate  of  four  per  cent;  for  the 
next  ten  thousand  dollars,  at  the  rate  of  three  per  cent;  for 


842  BUSINESS   LAWS   FOR   BUSINESS    MEN. 

the  next  thirty  thousand  dollars,  at  the  rate  of  two  per 
cent;  for  the  next  fifty  thousand  dollars,  at  the  rate  of 
one  per  cent;  and  for  all  above  one  hundred  thousand  dol- 
lars, at  the  rate  of  one  half  of  one  per  cent.  If  there  are 
two  or  more  executors  the  compensation  shall  be  apportioned 
among  them  by  the  court  according  to  the  services  actually 
rendered  by  them  respectively.  The  same  commissions  shall 
be  allowed  to  administrators.  'In  all  cases,  such  further  allow- 
ance may  be  made  as  the  court  may  deem  just  and  reason- 
able for  any  extraordinary  service,  but  the  total  amount  of 
such  extra  allowance  must  not  exceed  one  half  the  amount  of 
commissions  allowed  by  this  section.  Where  the  property  of 
the  estate  is  distributed  in  kind,  and  involves  no  labor  be- 
yond the  custody  and  distribution  of  the  same,  the  com- 
mission shall  be  computed  on  all  the  estate  above  the  value 
of  twenty  thousand  dollars,  at  one  half  of  the  rates  fixed 
in  this  section.  Public  administrators  shall  receive  the  same 
compensation  and  allowances  as  are  allowed  in  this  title 
to  other  administrators.  All  contracts  between  an  executor 
or  administrator  and  an  heir,  devisee  or  legatee,  for  a 
higher  compensation  than  that  allowed  by  this  section,  shall 
be  void. 

Code  of  Civil  Procedure,  Section  1618. 

Section  1085.— ATTORNEY  FEES.— Executors  and 
administrators  must  be  allowed,  for  fees  of  their  attorneys, 
for  conducting  the  ordinary  probate  proceedings,  the  same 
amounts  specified  in  the  preceding  sections  as  commissions 
for  their  own  services. 

In  all  cases,  such  further  allowance  may  be  made  as  the 
court  may  deem  just  and  reasonable,  for  any  extraordinary 
service,  such  as  sales  or  mortgages  of  real  estate,  con- 
tested or  litigated  claims  against  the  estate,  litigation  in 
regard  to  the  property  of  the  estate,  and  such  other  litiga- 
tion as  it  may  become  necessary  for  the  executor  or  admin- 
istrator to  prosecute  or  defend. 

Code  of  Civil  Procedure,  Section  1619. 


ADMINISTRATION  OF  ESTATES  OF  DECEASED  PERSONS.        843 

Section  1086.— PARTIAL  ALLOWANCE  TO  EXE- 
CUTOR,   ADMINISTRATOR    OR    ATTORNEY.— At 

any  time  after  one  year  from  the  admission  of  a  will  to  pro- 
bate, or  the  granting  of  letters  of  administration,  any  exe- 
cutor, or  administrator,  may,  upon  such  notice  to  the  other 
parties  interested  in  the  estate  as  the  court  shall  by  order 
require,  apply  to  the  court  for  an  allowance  to  himself  upon 
his  commissions,  and  the  court  shall  on  the  hearing  of  such 
application  make  an  order  allowing  such  executor  or  admin- 
istrator such  portion  of  his  commissions  as  to  the  court 
shall  seem  proper,  and  the  portion  so  allowed  may  be 
thereupon  charged  against  the  estate. 

Any  attorney  who  has  rendered  services  to  an  executor  or 
administrator  may  at  any  time  during  the  administration, 
and  upon  such  notice  to  the  other  parties  interested  in  the 
estate  as  the  court  shall  by  order  require,  apply  to  the  court 
for  an  allowance  to  himself  of  compensation  therefor,  and 
the  court  shall  on  the  hearing  of  such  application  make  an 
order  requiring  the  executor  or  administrator  to  pay  to  such 
attorney  out  of  the  estate  such  compensation  on  account  of 
services  rendered  by  such  attorney  up  to  the  date  of  such 
order  as  to  the  court  shall  seem  proper,  and  such  payment 
shall  be  forthwith  made. 

Act  of  the  Legislature,  approved  April  7,  1911. 

Section  1087.— ACCOUNTS  OF  EXECUTORS  AND 
ADMINISTRATORS.— When  required  by  the  court, 
either  upon  its  own  motion  or  upon  the  application  of  any 
person  interested  in  the  estate,  the  executor  or  administra- 
tor must  render  an  account  under  oath,  showing  the  amount 
of  money  received  and  expended  by  him,  the  amount  of 
all  claims  presented  against  the  estate,  and  the  names  of 
the  claimants,  and  all  other  matters  necessary  to  show  the 
condition  of  its  affairs.  Objections  may  be  made  to  the 
correctness  of  the  account,  by  any  person  interested,  which 
the  court  will  hear  and  determine. 

Code  of  Civil  Procedure,  Section  1622. 


844  BUSINESS  LAWS  FOR  BUSINESS   MEN. 

Section  1088.— PAYMENT  OF  DEBTS.— The  debts  of 
the  estate  must  be  paid  in  the  following  order: 

1.  Funeral  expenses; 

2.  Expenses  of  the  last  sickness; 

3.  Debts  having  preference  by  the  laws  of  the  United 
States ; 

4.  Judgments  rendered  against  the  decedent  in  his  life 
time,  and  mortgages  and  other  liens  in  the  order  of  their 
date; 

5.  All  other  demands  against  the  estate. 

The  preference  given  to  a  mortgage  or  lien  only  extends 
to  the  proceeds  of  the  property  subject  to  the  mortgage  or 
lien. 

Code  of  Civil  Procedure,  Sections  1643,  1644. 

Section  1089.— ERECTION  OF  MONUMENT.— Ex- 
ecutors and  administrators  of  the  estates  of  deceased  per- 
sons have  authority  to  expend  a  reasonable  sum  out  of  the 
estate  to  erect  a  monument,  or  tombstone,  suitable  to  mark 
the  grave  of  the  deceased. 

Section  1090.— PARTIAL  DISTRIBUTION  OF  ES- 
TATE.— At  any  time  after  four  months  from  the  issuing 
of  letters  to  an  executor  or  administrator  any  heir,  devisee, 
or  legatee,  or  his  assignee,  grantee,  or  successor  in  interest, 
may  apply  to  the  Superior  Court  for  the  legacy  or  share 
of  the  estate  to  which  he  is  entitled.  If,  on  the  hearing 
of  the  application,  it  appears  to  the  court  that  the  estate 
is  but  little  in  debt,  and  that  the  share  of  the  party  apply- 
ing may  be  allowed  him  without  injury  to  the  creditors 
of  the  estate,  the  court  must  order  the  executor  or  admin- 
istrator to  deliver  to  him  the  whole  portion  of  the  estate 
to  which  he  may  be  entitled,  or  a  part  of  it;  provided, 
he  must  give  the  executor  or  administrator  a  bond,  to 
secure  the  payment  of  his  portion  of  the  debts  due  from  the 
estate.  Where  the  time  for  filing  or  presenting  claims 
has   expired,   and  all   claims   that   have   been   allowed   have 


ADMINISTRATION  OF  ESTATES  OF  DECEASED  PERSONS.        845 

been  paid,  or  are  secured  by  mortgage  upon  real  estate  suf- 
ficient to  pay  them,  and  the  court  is  satisfied  that  no  injury 
can  result  to  the  estate,  the  court  may  dispense  with  the 
bond. 

Act  of  the  Legislature,  approved  April  24,  1911. 

Section  1091.— FINAL  DISTRIBUTION  OF  ES- 
TATE.— Upon  the  final  settlement  of  the  accounts  of  the  ex- 
ecutor or  administrator,  or  at  any  subsequent  time,  upon  the 
application  of  the  executor  or  administrator,  or  of  any  heir, 
legatee,  devisee,  (or  his  assignee,  grantee  or  successor  in  in- 
terest), the  court  must  proceed  to  distribute  the  residue  of 
the  estate  in  the  hands  of  the  executor  or  administrator,  if 
any,  among  the  persons  who  by  law  are  entitled  thereto; 
and  if  the  decedent  has  left  a  surviving  child,  or  the  issue  of 
a  deceased  child,  and  any  of  them,  before  the  close  of  the 
administration,  have  died  while  under  age  and  not  having 
been  married,  no  administration  on  such  deceased  child's 
estate  is  necessary,  but  all  the  estate  which  such  deceased 
child  was  entitled  to  by  inheritance  must,  without  adminis- 
tration, be  distributed  as  provided  by  law.  A  statement  of 
any  receipts  and  disbursements  of  the  executor  or  adminis- 
trator, since  the  rendition  of  his  final  account,  must  be 
reported  and  filed  at  the  time  of  making  such  distribution. 
Act  of  the  Legislature,  approved  April  24,  1911. 

Section  1092.— SUCCESSION  TO  PROPERTY.— If  a 

person  dies,  leaving  a  will,  his  property  goes  to  the  per- 
sons named  therein  as  legatees. 

Who  may  make  a  will,  who  may  take  by  will,  and  what 
may  be  disposed  of  by  will,  has  been  discussed  under  the 
heading  "Last  Wills." 

We  now  consider  how  the  property  of  a  person  who  dies, 
leaving  no  will,  will  descend  upon  his  death,  and  to  whom 
it  will  go  in  succession  as  his  heirs  at  law. 

The  Code  defines  the  term  succession,  as  the  comfng  In 
of  another  to  take  the  property   of  one   who   dies   without 


846  BUSINESS   LAWS   FOR   BUSINESS    MEN. 

disposing  of  it  by  will.  The  property,  both  real  and  per- 
sonal, of  one  who  dies  without  disposing  of  it  by  will, 
passes  to  the  heirs  of  the  intestate,  subject  to  the  control 
of  the  probate  court,  and  to  the  possession  of  any  admin- 
istrator appointed  by  the  court  for  the  purposes  of  adminis- 
tration. When  a  person  dies  without  disposing  of  his 
property  by  will,  it  is  succeeded  to  and  must  be  distributed, 
subject  to  the  payment  of  his  debts,  in  the  following 
manner : 

1.     If  the  decedent  leaves  a  surviving  husband  or  wife, 
and  only  one  child,  or  the  lawful  issue  of  one  child,  in  equal 
shares  to  the  surviving  hurband,  or  wife  and  child,  or  issue 
of  such  child.    If  the  decedent  leaves  a  surviving  husband  or 
wife,   and  more  than   one   child   living,   or  one   child   living 
and  the  lawful  issue  of  one  or  more  deceased  children,  one- 
third  to  the  surviving  husband  or  wife,  and  the  remainder 
in  equal  shares  to  his  children  and  to  the  lawful  issue  of 
any  deceased  child,  by  right  of  representation;  but  if  there 
is  no  child  of  decedent  living  at  his   death,  the   remainder 
goes    to   all    of    his    lineal    descendants;    and    if   all    of    the 
descendants  are  in  the  same  degree  of  kindred  to  the   de- 
cedent,  they   share    equally,    otherwise   they   take   according 
to  the   right   of   representation.      If   the   decedent   leaves   no 
surviving  husband  or  wife,  but  leaves  issue,  the  whole  es- 
tate goes  to  such  issue;  and  if  such  issue  consists  of  more 
than   one   child   living,   or   one   child   living   and   the    lawful 
issue    of   one    or   more    deceased    children,    then    the    estate 
goes  in  equal  shares  to  the  children  living,  or  the  child  liv- 
ing and  the  issue  of  the  deceased  child  or  children  by  right 
of  representation; 

2.  If  the  decedent  leaves  no  issue,  the  estate  goes  one- 
half  to  the  surviving  husband  or  wife,  and  the  other  half 
to  the  decedent's  father  and  mother  in  equal  shares,  and 
if  either  is  dead  the  whole  of  said  half  goes  to  the  other. 
If  there  is  no  father  or  mother,  then  one-half  goes  in  equal 
shares  to  the  brothers  and  sisters  of  decedent  and  to  the 
children  or  grandchildren  of  any  deceased  brother  or  sister 
by  right  of  representation.     If  the  decedent  leaves  no  issue, 


ADMINISTRATION  OF  ESTATES  OF  DECEASED  PERSONS.        847 

nor  husband  nor  wife,  the  estate  must  go  to  his  father  and 
mother  in  equal  shares,  or  if  either  is  dead  then  to  the 
other ; 

3.  If  there  is  neither  issue,  husband,  wife,  father,  nor 
mother,  then  in  equal  shares  to  the  brothers  and  sisters  of 
decedent  and  to  the  children  or  grandchildren  of  any  de- 
ceased brother  or  sister,  by  right  of  representation; 

4.  If  the  decedent  leaves  a  surviving  husband  or  wife, 
and  neither  issue,  father,  mother,  brother,  sisier,  nor  the 
children  nor  grandchildren  of  a  deceased  brother  or  sister, 
the  whole  estate  goes  to  the  surviving  husband  or  wife; 

5.  If  the  decedent  leaves  neither  issue,  husband,  wife, 
father,  mother,  brother  nor  sister,  the  estate  must  go  to 
the  next  of  kin,  in  equal  degree,  excepting  that,  when  there 
are  two  or  more  collateral  kindred,  in  equal  degree,  but 
claiming  through  different  ancestors,  those  who  claim  through 
the  nearest  ancestor  must  be  preferred  to  those  claiming 
through  an  ancestor  more  remote; 

6.  If  the  decedent  leaves  several  children,  or  one  child 
and  the  issue  of  one  or  more  children,  and  any  such  sur- 
viving child  dies  under  age  and  not  having  been  married, 
all  the  estate  that  came  to  the  deceased  child  by  inheritance 
from  such  decedent  descends  in  equal  shares  to  the  other 
children  of  the  same  parent  and  to  the  issue  of  any  such 
other  children  who  are  dead,  by  right  of  representation; 

7.  If,  at  the  death  of  such  child,  who  dies  under  age, 
not  having  been  married,  all  the  other  children  of  his  par- 
ents are  also  dead,  and  any  of  them  has  left  issue,  the 
estate  that  came  to  such  child  by  inheritance  from  his 
parent  descends  to  the  issue  of  all  other  children  of  the 
same  parent;  and  if  all  the  issue  are  in  the  same  degree  of 
kindred  to  the  child,  they  share  the  estate  equally,  other- 
wise they  take  according  to  the  right  of  representation; 

8.  If  the  deceased  is  a  widow,  or  widower,  and  leaves 
no  issue,  and  the  estate,  or  any  portion  thereof,  was  com- 
mon property  of  such  decedent  and  his  or  her  deceased 
spouse,  while  such  spouse  was  living,  such  property  goes 
in   equal    shares   to   the   children    of   such    deceased    spouse 


848  BUSINESS   LAWS   FOR   BUSINESS    MEN. 

and  to  the  descendants  of  such  children  by  right  of  repre- 
sentation, and  if  none,  then  one-half  of  such  common  prop- 
erty goes  to  the  father  and  mother  of  such  decedent  in 
equal  shares,  or  to  the  survivor  of  them  if  either  be  dead, 
or  if  both  be  dead,  then  in  equal  shares  to  the  brothers  and 
sisters  of  such  decedent  and  to  the  descendants  of  any 
deceased  brother  or  sister  by  right  of  representation,  and 
the  other  half  goes  to  the  father  and  mother  of  such  de- 
ceased spouse  in  equal  shares,  or  to  the  survivor  of  them 
if  either  be  dead,  or  if  both  be  dead,  then  in  equal  shares 
to  the  brothers  and  sisters  of  such  deceased  spouse  and  to 
the  descendants  of  any  deceased  brother  or  sister  by  right 
of  representation. 

If  the  estate,  or  any  portion  thereof,  was  separate  prop- 
erty of  such  deceased  spouse,  while  living,  and  came  to 
such  decedent  from  such  spouse  by  descent,  devise,  or 
bequest,  such  property  goes  in  equal  shares  to  the  children 
of  such  spouse  and  to  the  descendants  of  any  deceased 
child  by  right  of  representation,  and  if  none,  then  to  the 
father  and  mother  of  such  spouse,  in  equal  shares,  or  to 
the  survivor  of  them  if  either  be  dead,  or  if  both  be  dead, 
then  in  equal  shares  to  the  brothers  and  sisters  of  such 
spouse  and  to  the  descendants  of  any  deceased  brother  or 
sister  by  right  of  representation. 

9.     If  the  decedent  leaves  no  husband,  wife,  or  kindred, 

and  there  are  no  heirs   to   take   his   estate   or   any   portion 

thereof,  under  subdivisions  eight  of  this   section,   the   same 

escheats  to  the  State  for  the  support  of  the  common  schools. 

Act  of  the  Legislature,  in  effect  May  18,  1907. 

Section  1093.— INHERITANCE  OF  HUSBAND  AND 
WIFE  FROM  EACH  OTHER.— The  above  provisions 
of  this  law,  as  to  the  inheritance  of  the  husband  and 
wife  from  each  other,  apply  only  to  the  separate  property 
of  the  decedent. 

Section  1094.— DISTRIBUTION  OF  COMMUNITY 
PROPERTY  ON  DEATH  OF  HUSBAND.— Upon  the 

death  of  the  husband,  one-half  of  the  community  property 


ADMINISTRATION  OF  ESTATES  OF  DECEASED  PERSONS.        849 

goes  to  the  surviving  wife,  and  the  other  half  is  subject  to 
the  testamentary  disposition  of  the  husband,  and  in  the 
absence  of  such  disposition,  goes  to  his  descendants  equally, 
if  such  descendants  are  in  the  same  degree  of  kindred  to 
the  deceased,  otherwise  according  to  the  right  of  repre- 
sentation; and  in  the  absence  of  both  such  testamentary  dis- 
position and  such  descendants,  is  subject  to  distribution  in 
the  same  manner  as  the  separate  property  of  the  husband. 
In  case  of  the  dissolution  of  the  comraunity  by  the  death 
of  the  husband,  the  entire  community  property  is  equally 
subject  to  his  debts,  the  family  allowance,  and  the  charges 
and  expenses  of  administration. 

Section  1095.— DISTRIBUTION  OF  COMMUNITY 
PROPERTY  ON  DEATH  OF  WIFE.— Upon  the  death 
of  the  wife,  the  entire  community  property,  without  admin- 
istration, belongs  to  the  surviving  husband.  If  any  portion 
of  the  community  property  has  been  set  apart  for  the  wife 
by  judicial  decree,  for  her  support  and  maintenance,  this 
portion  does  not  go  to  her  husband  upon  her  death,  but 
may  be  willed  away  by  her;  and  in  the  absence  of  her  tes- 
tamentary disposition,  it  will  go  to  her  heirs,  exclusive  of 
her  husband. 

Civil  Code,  Sections  1400,  1401,  1402. 

Section  1096.— R  I  G  H  T  S  OF  ILLEGITIMATE 
CHILD. — Every  illegitimate  child  is  an  heir  of  the  person 
who,  in  writing,  signed  in  the  presence  of  a  competent  wit- 
ness, acknowledges  himself  to  be  the  father  of  such  child. 
An  illegitimate  child  is  in  all  cases  the  heir  of  his  mother, 
whether  the  father  acknowledges  him  or  not.  An  illegiti- 
mate child  cannot  claim  any  part  of  the  estate  of  any  de- 
ceased children  or  other  heirs  of  his  father  or  mother,  un- 
less his  parents  marry,  and  his  father  after  such  marriage 
acknowledges  him  and  adopts  him  into  his  family. 
Civil  Code,  Section  1387. 


850  BUSINESS   LAWS   FOR  BUSINESS   MEN. 

Section  1097.— ADVANCEMENTS.— Any  estate,  real 
or  personal,  that  may  have  been  given  by  the  decedent  in 
his  lifetime  as  an  advancement  to  any  child  or  other  heir, 
is  considered  a  part  of  the  estate,  so  far  as  regards  its 
division  and  distribution,  and  must  be  taken  by  the  person 
receiving  it  toward  his  share  of  the  estate.  If  the  amount 
of  the  advancement  exceeds  the  share  of  the  heir,  he  will 
be  excluded  from  any  further  portion  in  the  division  and 
distribution  of  the-  estate,  but  he  will  not  be  required  to 
refund  any  part  of  his  advancement.  If  the  amount  ad- 
vanced be  less  than  his  share,  he  will  be  entitled  to  so 
much  more  as  will  give  him  his  full  share  of  the  estate. 
All  gifts  and  grants  are  deemed  to  have  been  made  as  an 
advancement,  if  expressed  in  the  gift  or  grant  to  be  so 
made,  or  if  charged  in  writing  by  the  deceased  as  an  ad- 
vancement, or  acknowledged  in  writing  as  such  by  the  child 
or  other  heir. 

Civil  Code,  Sections  1395,   1396,  1397. 

Section  1098.— CONTRACT  TO  CONVEY  REAL 
ESTATE. — If  any  person,  who  is  bound  by  a  contract  in 
writing  to  convey  any  real  property,  dies  before  making 
the  conveyance,  the  Superior  Court  may  make  a  decree 
authorizing  his  executor  or  administrator  to  make  a  deed 
of  the  land  to  the  person  entitled  thereto.  The  person  en- 
titled to  the  deed  has  the  right  to  file  a  petition  in  court 
showing  the  contract,  and  will  then  be  allowed  to  prove  it. 
If  he  proves  his  right  to  the  deed,  it  will  be  made  to  him 
by  order  of  the  court,  and  will  convey  the  same  title  which  a 
deed  signed  by  the  deceased  would  have  conveyed  if 
made  in  his  lifetime. 

Section  1099.— DISCHARGE  OF  ADMINISTRATOR 
OR  EXECUTOR.— When  the  estate  has  been  fully  ad- 
ministered upon,  and  it  is  shown,  by  the  executor  or  admin- 
istrator, by  the  production  of  satisfactory  vouchers,  that 
he  has  paid  all  sums  of  money  due  from  him,  and  delivered 


ADMINISTRATION  OF  ESTATES  OF  DECEASED  PERSONS.        851 

up  under  order  of  the  court  all  property  of  the  estate  to  the 
persons  entitled  thereto,  the  court  will  make  a  decree  dis- 
charging him  from  all  liability  to  be  incurred  thereafter. 

Section  1100.— CLAIMS  PAID  WITHOUT  VOUCH- 
ERS.— On  the  settlement  of  his  account  the  executor  or 
administrator  may  be  allowed  any  item  of  expenditure  not 
exceeding  twenty  dollars,  for  which  no  voucher  is  pro- 
duced, if  such  item  be  supported  by  his  own  uncontradicted 
oath  positive  to  the  fact  of  payment,  specifying  when,  where, 
and  to  whom  it  .was  made;  but  such  allowances  in  the 
whole  must  not  exceed  five  hundred  dollars  against  any  one 
estate,  provided,  that,  if  it  appears  by  the  oath  to  the  ac- 
count and  is  proven  by  competent  evidence,  to  the  satisfac- 
tion of  the  court,  that  a  voucher  for  any  disbursement 
or  disbursements  whatsoever,  has  been  lost  or  destroyed, 
and  that  it  is  impossible  to  obtain  a  duplicate  thereof,  and 
that  such  item  or  items  were  paid  in  good  faith  and  for  the 
best  interests  of  the  estate,  and  such  item  or  items  were  legal 
charges  against  said  estate,  then  the  executor  or  administra- 
tor shall  be  allowed  such  item  or  items. 

If,  upon  such  settlement  of  accounts,  it  appears  that  debts 
against  the  deceased  have  been  paid  without  the  affidavit  and 
allowance  prescribed  by  statute,  and  it  shall  be  proven 
by  competent  evidence  to  the  satisfaction  of  the  court  that 
such  debts  were  justly  due,  were  paid  in  good  faith,  that  the 
amount  paid  was  the  true  amount  of  such  indebtedness  over 
and  above  all  payments  or  set-offs,  and  that  the  estate  is  sol- 
vent, it  shall  be  the  duty  of  the  said  court  to  allow  the  said 
sums  so  paid  in  the  settlement  of  said  accounts. 

Act  of  the  Legislature,  approved  April  5,  1911. 

Section  1101.— DISTRIBUTION  WHEN  DECED- 
ENT   WAS    NOT   A   RESIDENT    OF    THE    STATE. 

— Upon  application  for  distribution,  after  final  settlement 
of  the  accounts  of  administration,  if  the  decedent  was  a 
non-resident  of  this  state,  leaving  a  will  which  has  been 
duly  proved  or  allowed  in  the  state  of  his  residence,  and  an 


852  BUSINESS   LAWS   FOR   BUSINESS    MEN. 

authenticated  copy  thereof  has  been  admitted  to  probate  in 
this  state,  or  if  the  decedent  died  intestate,  and  an  adminis- 
trator has  been  duly  appointed  and  qualified  in  the  state  of 
his  residence,  and  it  is  necessary,  in  order  that  the  estate,  or 
any  part  thereof,  may  be  distributed  according  to  the  will, 
or  if  the  court  is  satisfied  that  it  is  for  the  best  interests  of  the 
estate,  that  the  estate  in  this  state  should  be  delivered  to  the 
executor  or  administrator  in  the  state  or  place  of  the 
decedent's  residence,  the  court  may  order  such  delivery  to  be 
made,  and,  if  necessary,  order  a  sale  of  the  real  estate,  and  a 
like  delivery  of  the  proceeds.  The  delivery,  in  accordance 
with  the  order  of  the  court,  is  a  full  discharge  of  the  executor 
or  administrator  with  the  will  annexed  or  administrator,  in 
this  state,  in  relation  to  all  property  embraced  in  such  order, 
which,  unless  reversed  on  appeal,  binds  and  concludes  all 
parties  in  interest.  Sales  of  real  estate,  ordered  by  virtue 
of  this  section,  must  be  made  in  the  same  manner  as  other 
sales  of  real  estate  of  decedents  by  order  of  the  court. 
Act  of  the  Legislature,  approved  April  7,  1911. 

Section    1102.— INHERITANCE   TAX   LAW.— A   tax 

shall  be  and  is  hereby  imposed  upon  the  transfer  of  any 
property,  real,  personal  or  mixed,  or  of  any  interest  therein 
or  income  therefrom,  in  trust  or  otherwise,  to  persons,  insti- 
tutions or  corporations,  not  hereinafter  exempted,  to  be  paid 
to  the  treasurer  of  the  proper  county,  as  hereinafter  directed, 
for  the  use  of  the  state,  in  the  following  cases: 

(1)  By  Will  of  Resident. — When  the  transfer  is  by 
will  or  by  the  intestate  or  homestead  laws  of  this  state,  from 
any  person  dying  seized  or  possessed  of  the  property  while 
a  resident  of  the  state,  or  by  any  probate  homestead  set 
apart  from  said  property. 

(2)  By  Will  of  Non-resident.— When  the  transfer  is 
by  will  or  intestate  laws  of  property  within  this  state  and 
the  decedent  was  a  non-resident  of  the  state  at  the  time  of 
his  death. 


ADMINISTRATION  OF  ESTATES  OF  DECEASED  PERSONS.        853 

(3)  Transfer  Without  Adequate  Consideration. — ^When 
the  transfer  is  of  property  made  by  a  resident,  or  by  a 
non-resident  when  such  non-resident's  property  is  within 
this  state,  by  deed,  grant,  bargain,  sale,  assignment  or  gift, 
made  without  valuable  and  adequate  consideration  in  con- 
templation of  the  death  of  the  grantor,  vendor,  assignor  or 
donor,  or  intended  to  take  effect  in  possession  or  enjoyment 
at  or  after  such  death.  When  any  such  person,  institution 
or  corporation  becomes  beneficially  entitled  in  possession  or 
expectancy  to  any  property  or  the  income  therefrom,  by  any 
such  transfer,  whether  made  before  or  after  the  passage  of 
this  act. 

(4)  Taxes  to  be  Lien  Against  Property. — Such  taxes 
shall  be  and  remain  a  lien  upon  the  property  passed  or 
transferred  until  paid,  and  the  person  to  whom  the  property 
passes  or  is  transferred,  and  all  administrators,  executors, 
and  trustees  of  every  estate  so  transferred  or  passed,  shall 
be  liable  for  any  and  all  such  taxes  until  the  same  shall 
have  been  paid  as  hereinafter  directed ;  provided,  that  unless 
sued  for  within  five  years  after  they  are  due  and  legally 
demandable,  such  taxes  shall  cease  to  be  a  lien  as  against 
any  bona  fide  purchaser  of  real  property;  and  provided  that 
no  such  lien  shall  cease  within  five  years  from  the  date  of  the 
passage  of  this  act.  The  tax  so  imposed  shall  be  upon  the 
market  value  of  such  property  at  the  rates  hereinafter  pre- 
scribed and  only  upon  the  excess  over  the  exemptions  herein- 
after granted. 

(5)  Exercise  of  Power  of  Appointment  Deemed 
Transfer. — Whenever  any  person  or  corporation  shall  exercise 
a  power  of  appointment  derived  from  any  disposition  of 
property  made  either  before  or  after  the  passage  of  this  act, 
such  appointment,  when  made,  shall  be  deemed  a  transfer 
taxable  under  the  provisions  of  this  act,  in  the  same  manner 
as  though  the  property  to  which  such  appointment  relates 
belonged  absolutely  to  the  donee  of  such  power,  and  had  been 
bequeathed  or  devised  by  such  donee  by  will;  and  whenever 


854  BUSINESS  LAWS  FOR  BUSINESS   MEN. 

any  person  or  corporation  possessing  such  power  of  appoint- 
ment so  derived  shaU  omit  or  fail  to  exercise  the  same 
within  the  time  provided  therefor,  in  whole  or  in  part,  a 
transfer  taxable  under  the  provisions  of  this  act  shall  be 
deemed  to  take  place  to  the  extent  of  such  omission  or  failure, 
in  the  same  manner  as  though  the  persons  or  corporations 
thereby  becoming  entitled  to  the  possession  or  enjoyment 
of  the  property  to  which  such  power  related  had  succeeded 
thereto  by  a  will  of  the  donee  of  the  power  failing  to  exer- 
cise such  power,  taking  effect  at  the  time  of  such  omission 
or  failure. 

(a)  Rates  of  Tax. — When  the  property  or  any  beneficial 
interest  therein  so  passed  or  transferred  exceeds  in  value 
the  exemption  hereinafter  specified  and  shall  not  exceed  in 
value  twenty-five  thousand  dollars  the  tax  hereby  imposed 
shall  be: 

(1)  When  Beneficiary  Is  Husband,  Etc. — Where  the 
person  or  persons  entitled  to  any  beneficial  interest  in  such 
property  shall  be  the  husband,  wife,  lineal  issue,  lineal  an- 
cestor of  the  decedent  or  any  child  adopted  as  such  in  con- 
formity with  the  laws  of  this  state,  or  any  child  to  whom 
such  decedent  for  not  less  than  ten  years  prior  to  such 
transfer  stood  in  the  mutually  acknowledged  relation  of  a 
parent;  protided,  however,  such  relationship  began  at  or 
before  the  child's  fifteenth  birthday,  and  was  continuous  for 
said  ten  years  thereafter,  or  any  lineal  issue  of  such  adopted 
or  mutually  acknowledged  child,  at  the  rate  of  one  per 
centum  of  the  clear  value  of  such  interest  in  such  property. 

(2)  When  Brother,  Etc. — Where  the  person  or  persons 
entitled  to  any  beneficial  interest  in  such  property  shall  be 
the  brother  or  sister  or  a  descendant  of  a  brother  or  sister 
of  the  decedent,  a  wife  or  widow  of  a  son,  or  the  husband 
of  a  daughter  of  the  decedent,  at  the  rate  of  two  per  centum 
of  the  clear  value  of  such  interest  in  such  property. 

(3)  When  Brother  of  Father,  etc. — Where  the  person 
or  persons  entitled  to  any  beneficial  interest  in  such  property 


ADMINISTRATION  OF  ESTATES  OF  DECEASED  PERSONS.        855 

shall  be  the  brother  or  sister  of  the  father  or  mother  or  a 
descendant  of  a  brother  or  sister  of  the  father  or  mother  of 
the  decedent,  at  the  rate  of  three  per  centum  of  the  clear 
value  of  such  interest  in  such  property. 

(4)  When  Brother  of  Grandfather,  etc. — Where  the 
person  or  persons  entitled  to  any  beneficial  interests  in  such 
property  shall  be  the  brother  or  sister  of  the  grandfather  or 
grandmother  or  a  descendant  of  the  brother  or  sister  of  the 
grandfather  or  grandmother  of  the  decedent,  at  the  rate  of 
four  per  centum  of  the  clear  value  of  such  interest  in  such 
property. 

(5)  Other  degrees  of  Consanguinity. — Where  the  per- 
son or  persons  entitled  to  any  beneficial  interest  in  such 
property  shall  be  in  any  other  degree  of  collateral  consanguin- 
ity than  is  hereinbefore  stated,  or  shall  be  a  stranger  in 
blood  to  the  decedent,  or  shall  be  a  body  politic  or  corporate, 
at  the  rate  of  five  per  centum  of  the  clear  value  of  such  inter- 
est in  such  property. 

(b)  Rates  on  Property  in  Excess  of  $25,000. — The  fore- 
going rates  are  for  convenience  termed  the  primary  rates. 
When  the  market  value  of  such  property  or  interest  exceeds 
twenty-five  thousand  dollars,  the  rates  of  tax  upon  such 
excess  shall  be  as  follows : 

(1)  Upon  all  in  excess  of  $25,000  and  up  to  $50,000,  two 
times  the  primary  rates. 

(2)  Upon  all  in  excess  of  $50,000  and  up  to  $100,000, 
three  times  the  primary  rates. 

(3)  Upon  all  in  excess  of  $100,000  and  up  to  $500,000, 
four  times  the  primary  rates. 

(4)  Upon  all  in  excess  of  $500,000,  five  times  the  primary 
rates. 

(c)  Property  Exempt  from  Tax. — ^The  following  exemp- 
tions from  the  tax  are  hereby  allowed: 

(1)  All  property  transferred  to  societies,  corporations,  and 
institutions  now  or  hereafter  exempted  by  law  from  taxation, 
or  to  any  public  corporation,  or  to  any  society,  corporation, 


856  BUSINESS   LAWS  FOR  BUSINESS   MEN. 

institution,  or  association  of  persons  engaged  in  or  devoted 
to  any  charitable,  benevolent,  educational,  public,  or  other 
like  work  (pecuniary  profit  not  being  its  object  or  purpose), 
or  to  any  person,  society,  corporation,  institution,  or  associa- 
tion of  persons  in  trust  for  or  to  be  devoted  to  any  charitable, 
benevolent,  educational,  or  public  purpose,  by  reason  whereof 
any  such  person  or  corporation  shall  become  beneficially  en- 
titled, in  possession  or  expectancy,  to  any  such  property  or 
to  the  income  thereof. 

(2)  Property  of  the  clear  value  of  twenty- four  thousand 
($24,000)  dollars,  transferred  to  the  widow  or  to  a  minor 
child  of  the  decedent,  and  of  ten  thousand  ($10,000)  dollars 
transferred  to  each  of  the  other  persons  described  in  the  first 
subdivision  of  section  (a)   shall  be  exempt. 

(3)  Property  of  the  clear  value  of  two  thousand  ($2,000) 
dollars  transferred  to  each  of  the  persons  described  in  the 
second  subdivision  of  section  (a)  shall  be  exempt. 

(4)  Property  of  the  clear  value  of  one  thousand  five  hun- 
dred ($1,500)  dollars  transferred  to  each  of  the  persons 
described  in  the  third  subdivision  of  section  (a)  shall  be 
txempt. 

(5)  Property  of  the  clear  value  of  one  thousand  ($1,(X30) 
dollars  transferred  to  each  of  the  persons  described  in  the 
fourth  subdivision  of  section  (a)  shall  be  exempt. 

(6)  Property  of  the  clear  value  of  five  hundred  ($500) 
dollars  transferred  to  each  of  the  persons  and  corporations 
described  in  the  fifth  subdivision  of  section  (a)  shall  be 
exempt. 

(d)  Tax  on  Life  Estate  Becomes  Due  Immediately 
After  Death  of  Decedent. — When  any  grant,  gift,  legacy, 
devise  or  succession  upon  which  a  tax  is  imposed  by  section 
one  of  this  act  shall  be  an  estate,  income,  or  interest  for  a 
term  of  years,  or  for  life,  or  determinable  upon  any  future 
or  contingent  event,  or  shall  be  a  remainder,  reversion,  or 
other  expectancy,  real  or  personal,  the  entire  property  or  fund 
by  which  such  estate,  income,  or  interest  is  supported,  or  of 
which  it  is  a  part,  shall  be  appraised  immediately  after  the 


ADMINISTRATION  OF  ESTATES  OF  DECEASED  PERSONS.        857 

death  of  the  decedent,  and  the  market  value  thereof  deter- 
mined, in  the  manner  provided  in  section  fifteen  of  this  act, 
and  the  tax  prescribed  by  this  act  shall  be  immediately  due 
and  payable  to  the  treasurer  of  the  proper  county,  and, 
together  with  the  interest  thereon,  shall  be  and  remain  a  lien 
on  said  property  until  the  same  is  paid;  provided,  that  the 
person  or  persons,  or  body  politic  or  corporate,  beneficially 
interested  in  the  property  chargeable  with  said  tax,  may 
elect  not  to  pay  the  same  until  they  shall  come  into  the 
actual  possession  or  enjoyment  of  such  property,  and  in 
that  case  such  person  or  persons,  or  body  politic  or  cor- 
porate, shall  execute  a  bond  to  the  people  of  the  State  oi 
California,  in  a  penalty  of  twice  the  amount  of  the  tax  aris- 
ing upon  personal  estate,  with  such  sureties  as  the  said 
superior  court  may  approve,  conditioned  for  the  payment  of 
said  tax,  and  interest  thereon,  at  such  time  or  such  period 
as  they  or  their  representatives  may  come  into  the  actual 
possession  or  enjoyment  of  such  property,  which  bond  shall 
be  filed  in  the  office  of  the  county  clerk  of  the  proper  county, 
and  a  certified  copy  thereof  shall  be  immediately  transmitted 
to  the  state  controller ;  provided  further,  that  such  person 
shall  make  a  full  and  verified  return  of  such  property  to  said 
court,  and  file  the  same  in  the  office  of  the  county  clerk 
within  one  year  from  the  death  of  the  decedent,  and  within 
that  period  enter  into  such  security,  and  renew  the  same  every 
five  years. 

(e)  Bequests  to  Executors. — Whenever  a  decedent  ap- 
points or  names  one  or  more  executors  or  trustees,  and 
makes  a  bequest  or  devise  of  property  to  them  in  lieu  oi 
commissions  or  allowances,  which  otherwise  would  be  liable 
to  said  tax,  or  appoints  them  his  residuary  legatees,  and 
said  bequest,  devises,  or  residuary  legacies  exceed  what  would 
be  a  reasonable  compensation  for  their  services,  such  excess 
over  and  above  the  exemptions  herein  provided  for  shall  be 
liable  to  said  tax ;  and  the  superior  court  in  which  the  probate 
proceedings  are  pending  shall  fix  the  compensation. 


868  BUSINESS   LAWS   FOR  BUSINESS    MEN. 

(f)  When  Taxes  Are  Due. — All  taxes  imposed  by  this 
act,  unless  otherwise  herein  provided  for,  shall  be  due  and 
payable  at  the  death  of  the  decedent,  and  if  the  same  are 
paid  within  eighteen  months,  no  interest  shall  be  charged  and 
collected  thereon,  but  if  not  so  paid,  interest  at  the  rate  of 
ten  per  centum  per  annum  shall  be  charged  and  collected 
from  the  time  said  tax  accrued;  provided,  that  if  said  tax  is 
paid  within  six  months  from  the  accruing  thereof  a  discount  of 
five  per  centum  shall  be  allowed  and  deducted  from  said  tax. 
And  in  all  cases  where  the  executors,  administrators,  or 
trustees  do  not  pay  such  tax  within  eighteen  months  from 
the  death  of  the  decedent,  they  shall  be  required  to  give  a 
bond  in  the  form  and  to  the  effect  prescribed  in  section  five 
of  this  act  for  the  payment  of  said  tax,  together  with  interest. 

(g)  When  Penalty  for  Non-payment  of  Tax  May  Be 
Suspended. — The  penalty  of  ten  per  cent  per  annum  im- 
posed by  section  seven  hereof,  for  the  non-payment  of  said 
tax,  shall  not  be  charged  in  cases  where,  in  the  judgment 
of  the  court,  by  reason  of  claims  made  upon  the  estate,  neces- 
sary litigation,  or  other  unavoidable  cause  of  delay,  the 
estate  of  any  decedent,  or  a  part  thereof,  cannot  be  settled 
at  the  end  of  eighteen  months  from  the  death  of  the  decedent ; 
but  in  such  cases  seven  per  cent  per  annum  shall  be  charged 
upon  the  said  tax  from  the  expiration  of  said  eighteen 
months  until  the  cause  of  such  delay  is  removed,  after  which 
ten  per  cent  interest  per  annum  shall  again  be  charged  until 
the  tax  is  paid;  but  litigation  to  defeat  the  payment  of  the 
tax  shall  not  be  considered  necessary  litigation. 

(h)  Executor  to  Deduct  Tax  from  Property  Before 
Delivery  to  Legatee.  —  Any  administrator,  executor,  or 
trustee  having  in  charge  or  trust  any  legacy  or  property 
for  distribution,  subject  to  the  said  tax,  shall  deduct  the 
tax  therefrom,  or  if  the  legacy  or  other  property  be  not 
money  he  shall  collect  the  tax  thereon,  upon  the  market  value 
thereof,  from  the  legatee  or  person  entitled  to  such  property, 
and  he  shall  not  deliver,  or  be  compelled  to  deliver,  any 
specific  legacy  or  property  subject  to  tax  to  any  person  until 


ADMINISTRATION  OF  ESTATES  OF  DECEASED  PERSONS.   859 

he  shall  have  collected  the  tax  thereon;  and  whenever  any 
such  legacy  shall  be  charged  upon  or  payable  out  of  real 
estate,  the  executor,  administrator,  or  trustee  shall  collect 
said  tax  from  the  distributee  thereof,  and  the  same  shall 
remain  a  charge  on  such  real  estate  until  paid;  if,  however, 
such  legacy  be  given  in  money  to  any  person  for  a  limited 
period,  the  executor,  administrator,  or  trustee  shall  retain  the 
tax  upon  the  whole  amount;  but  if  it  be  not  in  money  he 
shall  make  application  to  the  superior  court  to  make  an 
apportionment,  if  the  case  require  it,  of  the  sum  to  be  paid 
into  his  hands  by  such  legatees,  and  for  such  further  order 
relative  thereto  as  the  case  may  require. 

(i)  Executors  to  Sell  Enough  Property  to  Pay  Tax. — 

All  executors,  administrators,  and  trustees  shall  have  full 
power  to  sell  so  much  of  the  property  of  the  decedent  as 
will  enable  them  to  pay  said  tax,  in  the  same  manner  as  they 
may  be  enabled  by  law  to  do  for  the  payment  of  debts  of 
the  estate,  and  the  amount  of  said  tax  shall  be  paid  as  herein- 
after directed. 

(j)  Tax  Paid  to  County  Treasurer. — Every  sum  of 
money  retained  by  an  executor,  administrator,  or  trustee,  or 
paid  into  his  hands,  for  any  tax  on  property,  shall  be  paid 
by  him,  within  thirty  days  thereafter,  to  the  treasurer  of  the 
county  in  which  the  probate  proceedings  are  pending.  Upon 
the  payment  to  any  county  treasurer  of  any  tax  due  under 
this  act,  such  treasurer  shall  issue  a  receipt  therefor  in  trip- 
licate, one  copy  of  which  he  shall  deliver  to  the  person  paying 
said  tax,  and  the  original  and  one  copy  thereof  he  shall 
immediately  send  to  the  controller  of  state,  whose  duty  it  shall 
be  to  charge  the  treasurer  so  receiving  the  tax  with  the 
amount  thereof,  and  said  controller  shall  retain  one  of  said 
receipts  and  the  other  he  shall  countersign  and  seal  with 
the  seal  of  his  office,  and  immediately  transmit  to  the  clerk 
of  the  court  fixing  such  tax.  And  an  executor,  administra- 
tor, or  trustee  shall  not  be  entitled  to  credits  in  his  accounts, 
nor  be  discharged  from  liability  for  such  tax,  nor  shall  said 


860  BUSINESS    LAWS    FOR   BUSINESS    MEN. 

estate  be  distributed,  unless  a  receipt  so  sealed  and  counter- 
signed by  the  controller,  or  a  copy  thereof,  certified  by  him, 
shall  have  been  filed  with  the  court. 

Any  person  shall,  upon  payment  to  the  county  treasurer 
of  the  sum  of  fifty  cents,  be  entitled  to  a  duplicate,  or  copy, 
of  any  receipt  that  may  have  been  given  by  said  treasurer 
for  the  payment  of  any  tax  under  this  act. 

(k)  Refund  of  Tax  Paid  Before  Debts  Are  Proven. — 

Whenever  any  debts  shall  be  proven  against  the  estate  of  a 
decedent  after  the  payment  of  legacies  or  distribution  of 
property  from  which  the  said  tax  has  been  deducted,  or  upon 
which  it  has  been  paid,  and  a  refund  is  made  by  the  legatee, 
devisee,  heir,  or  next  of  kin,  a  proportion  of  the  tax  so  de- 
ducted or  paid  shall  be  repaid  to  him  by  the  executor,  ad- 
ministrator, or  trustee,  if  the  said  tax  has  not  been  paid  to 
the  county  treasurer  or  to  the  state  treasurer,  or  by  said 
county  treasurer,  or  said  state  treasurer  (on  warrant  of  the 
state  controller)  if  it  has  been  so  paid. 

(1)  When  Stock  Is  Transferred  by  Foreign  Executor 
Tax  Shall  Be  Paid. — If  a  foreign  executor,  administrator 
or  trustee  shall  assign  or  transfer  any  stock  or  obligation  in 
this  state  standing  in  the  name  of  a  decedent,  or  in  trust  for 
a  decedent,  liable  to  any  such  tax,  the  tax  shall  be  paid  to 
the  treasurer  of  the  proper  county  on  the  transfer  thereof. 
No  safe  deposit  company,  trust  company,  corporation,  bank 
or  other  institution,  person  or  persons  having  in  possession 
or  under  control  securities,  deposits,  or  other  assets  belong- 
ing to  or  standing  in  the  name  of  a  decedent  who  was  a 
resident  or  non-resident  or  belonging  to,  or  standing  in  the 
joint  names  of  such  a  decedent  and  one  or  more  persons,  in- 
cluding the  shares  of  the  capital  stock  of,  or  other  interests 
in,  the  safe  deposit  company,  trust  company,  corporation, 
bank  or  other  institution  making  the  delivery  or  transfer 
herein  provided,  shall  deliver  or  transfer  the  same  to  the 
executors,  administrators  or  legal  representatives  of  said 
decedent,  or  to  the  survivor  or  survivors  when  held  in  the 
joint  names  of  a  decedent  and  one  or  more  persons,  or  upon 


ADMINISTRATION  OF  ESTATES  OF  DECEASED  PERSONS.        861 

their  order  or  request,  unless  notice  of  the  time  and  place  of 
such  intended  delivery  or  transfer  be  served  upon  the  state 
controller  and   county  treasurer   at   least  ten   days   prior   to 
said   delivery  or  transfer;   nor   shall   any   such   safe   deposit 
company,  trust  company,  corporation,  bank  or  other  institu- 
tion,  person   or   persons    deliver   or   transfer   any    securities, 
deposits  or  other  assets  belonging  to  or  standing  in  the  name 
of  a  decedent,  or  belonging  to,  or  standing  in  the  joint  names 
of  a  decedent  or  one  or  more  persons,  including  the  shares 
of  the  capital  stock  of,  or  other  interests  in,  the  safe  deposit 
company,  trust  company,  corporation,  bank  or  other  institu- 
tion  making   the   delivery  ^r   transfer,    without   retaining   a 
sufficient  portion  or  amount  thereof  to  pay  any  tax  and  inter- 
est which  may  thereafter  be  assessed  on  account  of  the  de- 
livery or  transfer  of  such  securities,  deposits  or  other  assets, 
including  the  shares  of  the  capital  stock  of,  or  other  inter- 
ests in,  the  safe  deposit  company,  trust  company,  corporation, 
bank  or  other   institution   making  the   deliver}^   or   transfer, 
under  the  provisions  of  this  act,  unless  the  state  controller, 
or  person  by  him  in  writing  authorized  so  to  do,  consents 
thereto   in   writing.     Arid   it   shall    be   lawful    for   the   state 
controller  or  the  county  treasurer,   personally  or  by   repre- 
sentatives, to  examine  said  securities,   deposits  or  assets  at 
the    time    of   such    delivery    or    transfer.      Failure    to    serve 
such  notice  or  failure  to  allow  such  examination,  or  failure 
to   retain   a   sufficient  portion   or   amount   to   pay    such   tax 
and  interest  as  herein  provided,  or  violation  of  the  provisions 
of  this  section,  shall  render  said  safe  deposit  company,  trust 
company,   corporation,   bank   or  other   institution,   person   or 
persons  liable  to  the  payment  of  the  amount  of  the  tax  and 
interest  due  or  thereafter  to  become  due  upon  said  securities, 
deposits  or  other  assets,  including  the  shares  of  the  capital 
stock  of,  or  other  interests  in,  the  safe  deposit  company,  trust 
company,  corporation,  bank  or  other  institution  making  the 
deHvery  or  transfer,  and  in  addition  thereto,  a  penalty  of  not 
less  than  one  thousand  nor  more  than  twenty  thousand  dol- 
lars; and  the  payment  of  such  tax  and  interest  thereon,  or 
of  the  penalty  above  prescribed,  or  both,  may  be  enforced  in 


BUSINESS  LAWS  FOR  BUSINESS   MEN. 

an  action  brought  by  the  state  controller  or  county  treasurer 
in  any  court  of  competent  jurisdiction. 

(m)  Inheritance  Tax  Appraisers. — The  state  controller 
shall  appoint,  and  may  at  his  pleasure  remove,  one  or  more 
persons  in  each  county  of  the  state  to  act  as  inheritance  tax 
appraisers  therein.  Every  such  inheritance  tax  appraiser  (in 
addition  to  any  fees  paid  him  as  appraiser  under  section  1444 
of  the  Code  of  Civil  Procedure)  shall  be  paid  by  the  county 
treasurer,  out  of  any  funds  that  he  may  have  in  his  hands 
on  account  of  said  tax,  on  presentation  of  a  sworn  itemized 
account  and  on  the  certificate  of  the  superior  court,  at  the 
rate  of  five  dollars  per  day  for  every  day  actually  and 
necessarily  employed  in  said  inheritance  tax  appraisement, 
together  with  his  actual  and  necessary  traveling  and  other 
incidental  expenses,  and  the  fees  paid  such  witnesses  as  he 
shall  subpoena  before  him,  which  fees  shall  be  the  same  as 
those  now  paid  witnesses  subpoenaed  to  attend  in  courts  of 
record.  Any  such  appraiser  who  shall  take  any  fee  or  re- 
ward, other  than  such  as  may  be  allowed  him  by  law,  from 
any  executor,  administrator,  trustee,  legatee,  next  of  kin,  or 
heir  of  any  decedent,  or  from  any  other  person  liable  to  pay 
said  tax,  or  any  portion  thereof,  shall  be  guilty  of  a  mis- 
demeanor, and  upon  conviction  thereof  shall  be  fined  not 
less  than  two  hundred  and  fifty  dollars  nor  more  than  five 
hundred  dollars,  or  be  imprisoned  in  the  county  jail  ninety 
days,  or  both,  and  in  addition  thereto  the  court  shall  dismiss 
him  from  such  service. 

(n)  Superior  Court  to  Order  Valuation  of  Property. — 

The  superior  court  having  jurisdiction  to  determine  any  such 
tax,  either  upon  its  own  motion  or  upon  the  application 
of  any  interested  person,  including  the  state  controller  or 
county  treasurer,  shall  by  order  direct  the  person,  or  one 
of  the  persons,  appointed  pursuant  to  this  act  to  fix  the 
clear  market  value  of  property  of  persons  whose  estates 
shall  be  subject  to  the  payment  of  any  tax  under  this  act. 
Every  such  appraiser  shall  forthwith  give  notice  by  mail  to 
all  persons  known  to  have  a  claim  or  interest  in  the  property 


ADMINISTRATION  OF  ESTATES  OF  DECEASED  PERSONS.        863 

to  be  appraised,  including  the  state  controller  and  the  treas- 
urer of  the  county  in  which  such  tax  is  to  be  paid,  and  to 
such  person  or  persons  as  the  superior  court  may  by  order 
direct,  of  the  time  and  place  when  he  will  hear  all  persons 
interested  in  the  appraisement  of  such  estate.  He  shall  there- 
upon appraise  the  said  property  at  its  fair  market  value  as 
herein  prescribed;  and  for  the  purpose  of  making  said  ap- 
praisement the  said  appraiser  is  hereby  authorized  to  issue 
subpoenas  and  compel  the  attendance  of  witnesses  before  him, 
to  administer  oaths,  and  to  take  the  evidence  of  such  witnesses 
under  oath  concerning  such  property  and  the  value  thereof; 
and  he  shall  make  report  thereof  and  of  such  value  in  writing 
to  the  said  superior  court,  together  with  the  depositions  of 
the  witnesses  examined,  and  such  other  facts  in  relation 
thereto  as  said  superior  court  may  order  or  require;  and  the 
value  of  every  future  or  contingent  or  limited  estate,  income, 
or  interest  shall,  for  the  purposes  of  this  act,  be  determined 
by  the  rule,  method,  and  standards  of  mortality  and  of  value 
that  are  set  forth  in  the  actuaries'  combined  experience  tables 
of  mortality  for  ascertaining  the  value  of  policies  of  life 
insurance  and  annuities,  and  for  the  determination  of  the 
liabilities  of  life  insurance  companies,  save  that  the  rate  of  inter- 
est to  be  assessed  in  computing  the  present  value  of  all  future 
interests  and  contingencies  shall  be  five  per  centum  per  annum. 

(o)  Insurance  Commissioner  to  Determine  Value  of 
Contingent  Estate. — The  insurance  commissioner  shall,  on  the 
application  of  any  superior  court,  determine  the  value  of  any 
future  or  contingent  estates,  income  or  interest  therein  limited, 
contingent,  dependent  or  determinable  upon  the  life  or  lives 
of  persons  in  being,  upon  the  facts  contained  in  any  such 
appraiser's  report,  or  other  facts  to  him  submitted  by  said 
court,  and  certify  the  same  to  the  superior  court,  and  his 
certificate  shall  be  conclusive  evidence  that  the  method  of 
computation  adopted  therein  is  correct. 

(p)  No  Allowance  on  Account  of  Contingent  Incum- 
brance.— In  estimating  the  value  of  any  estate  or  interest  in 
property,  to  the  beneficial  enjoyment  or  possession  whereof 


864  BUSINESS   LAWS   FOR   BUSINESS    MEN. 

there  are  persons  or  corporations  presently  entitled  thereto, 
no  allowance  shall  be  made  on  account  of  any  contingent 
incumbrance  thereon,  nor  on  account  of  any  contingency 
upon  the  happening  of  which  the  estate  or  property  or  some 
part  thereof  or  interest  therein  might  be  abridged,  defeated 
or  diminished;  provided,  however,  that  in  the  event  of  such 
incumbrance  taking  effect  as  an  actual  burden  upon  the 
interest  of  the  beneficiary,  or  in  the  event  of  the  abridgment, 
defeat  or  diminution  of  said  estate  or  property  or  interest 
therein  as  aforesaid,  a  return  shall  be  made  to  the  person 
properly  entitled  thereto  of  a  proportionate  amount  of  such 
tax  on  account  of  the  incumbrance  when  taking  effect,  or  so 
much  as  will  reduce  the  same  to  the  amount  which  would 
have  been  assessed  on  account  of  the  actual  duration  or  ex- 
tent of  the  estate  or  interest  enjoyed. 

(q)  Increase  Deemed  a  Transfer  and  Taxable. — Where 
any  property  shall,  after  the  passage  of  this  act,  be  trans- 
ferred subject  to  any  charge,  estate  or  interest,  determinable 
by  the  death  of  any  person,  or  at  any  period  ascertainable 
only  by  reference  to  death,  the  increase  accruing  to  any  per- 
son or  corporation  upon  the  extinction  or  determination 
of  such  charge,  estate  or  interest,  shall  be  deemed  a  transfer 
of  property  taxable  under  the  provisions  of  this  act  in  the 
same  manner  as  though  the  person  or  corporation  beneficially 
entitled  thereto  had  then  acquired  such  increase  from  the 
person  from  whom  the  title  to  their  respective  estates  or 
interests  is  derived. 

(r)  Highest  Rate  on  Property  Dependent  on  Variable 
Contingencies. — When  property  is  transferred  in  trust  or 
otherwise,  and  the  rights,  interest  or  estates  of  the  transferees 
are  dependent  upon  contingencies  or  conditions  whereby  they 
may  be  wholly  or  in  part  created,  defeated,  extended  or 
abridged,  a  tax  shall  be  imposed  upon  said  transfer  at  the 
highest  rate  which,  on  the  happening  of  any  of  the  said  contin- 
gencies or  conditions,  would  be  possible  under  the  provisions 


ADMINISTRATION  OF  ESTATES  OF  DECEASED  PERSONS.        865 

of  this  act,  and  such  tax  so  imposed  shall  be  due  and  payable 
forthwith  by  the  executors  or  trustees  out  of  the  property 
transferred;  provided,  however,  that  on  the  happening  of  any 
contingency  whereby  the  said  property,  or  any  part  thereof, 
is  transferred  to  a  person  or  corporation  exempt  from  tax- 
ation under  the  provisions  of  this  act,  or  to  any  person  taxable 
at  a  rate  less  than  the  rate  imposed  and  paid,  such  person 
or  corporation  shall  be  entitled  to  a  return  of  so  much  of 
the  tax  imposed  and  paid  as  is  the  difference  between  the 
amount  paid  and  the  amount  which  said  person  or  corporation 
should  pay  under  the  provisions  of  this  act. 

(s)  Estates  in  Expectancy  to  Be  Appraised  at  Full 
Value. — Estates  in  expectancy  which  are  contingent  or  de- 
feasible and  in  which  proceedings  for  the  determination  of 
the  tax  have  not  been  taken  or  where  the  taxation  thereof 
has  been  held  in  abeyance,  shall  be  appraised  at  their  full, 
undiminished  value  when  the  persons  entitled  thereto  shall 
come  into  the  beneficial  enjoyment  or  possession  thereof, 
without  diminution  for  or  on  account  of  any  valuation  there- 
tofore made  of  the  particular  estates  for  purposes  of  taxation, 
upon  which  said  estates  in  expectancy  may  have  been  limited. 

Where  an  estate  for  life  or  for  years  can  be  divested  by 
the  act  or  omission  of  the  legatee  or  devisee  it  shall  be  taxed 
as  if  there  were  no  possibility  of  such  divesting. 

The  report  of  the  appraiser  shall  be  made  in  duplicate,  one 
of  which  duplicates  shall  be  filed  with  the  clerk  of  said  court 
and  the  other  in  the  office  of  the  state  controller. 

(t)  Superior  Court  to  Fix  Value  of  Property  and 
Amount  of  Tax. — From  such  report  of  appraisal  and  other 
proof  relating  to  any  such  estate,  or  property,  before  the 
superior  court,  said  court  shall,  by  order,  forthwith  assess 
and  fix  the  market  value  of  such  property  and  the  amount  of 
tax  to  which  the  same  is  liable,  and  the  clerk  of  said  court 
shall  immediately  give  notice  thereof  by  mail  to  the  county 


866  BUSINESS   LAWS   FOR   BUSINESS    MEN. 

treasurer  and  the  state  controller,  and  to  all  interested  per- 
sons who  shall  have  furnished  said  clerk  with  their  names 
and  addresses  for  the  purpose  of  receiving  such  notice. 

(u)  Court  May  Fix  Tax  Without  Appointing  Appraiser. 
— ^The  superior  court  may  determine  such  tax  or  taxes  without 
appointing  an  inheritance  tax  appraiser;  provided,  that  in 
such  determination,  said  court  shall  first  fix  a  day  upon 
which  it  will  hear  all  parties  interested  in  said  property  and 
in  said  tax,  and  said  court  shall  order  the  clerk  thereof  to 
give  notice  of  said  hearing  for  such  time,  not  less  than  ten 
days,  and  in  such  manner  as  said  court  shall  direct,  and  said 
clerk  shall  at  least  ten  days  before  said  hearing  mail  a  copy 
of  such  notice  to  the  county  treasurer  and  a  copy  to  the 
state  controller. 

(v)  Superior  Court  to  Have  Jurisdiction. — The  superior 
court  in  the  county  in  which  is  situate  the  real  property 
of  a  decedent  who  was  not  a  resident  of  the  state,  or  if 
there  be  no  real  property,  then  in  the  county  in  which  any 
of  the  personal  property  of  such  non-resident  is  situate,  or  in 
the  county  of  which  the  decedent  was  a  resident  at  the  time 
.of  his  death,  shall  have  jurisdiction  to  hear  and  determine 
all  questions  in  relation  to  the  tax  arising  under  the  pro- 
visions of  this  act,  and  the  court  first  acquiring  jurisdiction 
hereunder  shall  retain  the  same,  to  the  exclusion  of  every 
other. 

(w)  Court  to  Cite  Persons  to  Appear  When  Transfer 
Has  Been  Made  and  Tax  Not  Paid.— If  it  shall  appear  to 
the  superior  court  upon  petition  of  the  state  controller  or 
the  county  treasurer  or  any  other  interested  person  that  any 
transfer  has  been  made  within  the  meaning  of  this  act  and 
the  taxability  thereof  and  the  liability  for  such  tax  and  the 
amount  thereof  have  not  been  determined,  and  that  no  pro- 
ceedings are  pending  in  any  court  in  this  state  wherein  the 
taxability  of  such  transfer,  the  liability  therefor  and  the 
amount  thereof  may  be  determined,  said  court  shall  issue  a 
citation,  citing  the  persons  who  may  appear  liable  therefor, 
or  known  to  own  any  interest  in  or  part  of  the  property 


ADMINISTRATION  OF  ESTATES  OF  DECEASED  PERSONS.        867 

transferred,  to  appear  before  the  court  on  a  day  certain, 
not  more  than  ten  weeks  from  the  date  of  such  citation, 
and  show  cause  why  said  tax  should  not  be  determined 
and  paid.  The  superior  court  may  hear  the  said  cause  upon 
the  relation  of  the  parties  and  the  testimony  of  witnesses, 
and  evidence  produced  in  open  court,  and,  if  the  court  shall 
find  said  property  is  not  subject  to  any  tax,  as  herein  pro- 
vided, the  court  shall,  by  order,  so  determine;  but  if  it  shall 
appear  that  said  property,  or  any  part  thereof,  is  subject 
to  any  such  tax,  the  same  shall  be  appraised  and  taxed  as 
in  other  cases. 

(x)  After  Eighteen  Months  District  Attorney  to  Bring 
Suit  to  Collect  Tax. — If,  after  the  expiration  of  eighteen 
months  from  the  accrual  of  any  tax  under  this  article, 
such  tax  shall  remain  due  and  unpaid,  after  the  refusal 
or  neglect  of  the  persons  liable  therefor  to  pay  the  same,  the 
county  treasurer  shall  notify,  or  the  state  controller  may 
notify,  the  district  attorney  of  the  county  in  writing  of  such 
failure  or  neglect,  and  such  district  attorney  shall  bring  and 
prosecute  an  action  or  actions  in  the  name  of  the  state  as 
plaintiff,  for  the  recovery  of  such  tax  and  for  the  purpose 
of  enforcing  any  lien  or  liens  against  all  or  any  of  the  prop- 
erty subject  thereto.  In  any  such  action  the  owner  of  any 
property  or  of  any  interest  in  property  against  which  the 
lien  of  any  such  tax  is  sought  to  be  enforced,  and  any  prede- 
cessor in  interest  of  any  such  owner  whose  title  or  interest 
was  deraigned  through  any  such  decedent  by  will  or  succes- 
sion or  by  decree  of  distribution  of  the  estate  of  such  de- 
cedent, and  any  lienor,  or  incumbrancer  subsequent  to  the 
lien  of  such  tax,  may  be  made  a  party  defendant.  The 
enumeration  in  this  section  of  the  persons  who  may  be 
made  defendants  shall  not  be  deemed  to  be  exclusive,  but 
the  joinder  or  non-joinder  of  parties,  except  when  otherwise 
herein  provided,  shall  be  governed  by  the  rules  in  equity  in 
similar  cases. 

(y)  Actions  Against  State  to  Quiet  Title. — ^Actions 
may  be  brought  against  the  state  for  the  purpose  of  quieting 


868  BUSINESS   LAWS   FOR   BUSINESS    MEN. 

title  to  any  property,  against  the  lien  or  claim  of  lien  of  any 
tax  or  taxes  under  this  act,  or  for  the  purpose  of  having  it 
determined  that  any  property  is  not  subject  to  any  lien  for 
taxes    under   this    act.     'In    any    such    action,    the    plaintiffs 
may    be    any    administrator    or    executor    of    the    estate    or 
will   of   any   decedent,    whether   the    said   estate    shall    have 
been  fully  administered  and  the  estate  settled  and  closed  or 
not,  and  any  heir,  legatee  or  devisee  of  any  such  decedent, 
or  trustee  of  the  estate  or  of  any  part  of  the  estate  of  such 
decedent,  or  distributee  of  the  estate  or  of  any  part  of  the 
estate  of  any  such  decedent,  and  any  assignee,  grantee  or 
successor  in  interest  of  any  of  such  persons,  and  all  or  any 
other  persons  who  might  be  made  parties  defendant  in  any 
action   brought   by    the    state    under   the    provisions    of    this 
section,  and  notwithstanding  that  all  or  any  of  the  persons 
enumerated    in    this    section    shall    or    may    have    assigned, 
granted,  conveyed  or  otherwise  parted  with  all  or  any  inter- 
est in  or  title  to  the  property,  or  any  thereof,  involved  in 
any  such  claim  of  lien  before  the   commencement  of  such 
action.     All  or  any  of  the  persons  in  this  act  enumerated 
may  be  joined  or  united  as  parties  plaintiff.    The  enumeration 
in  this  section  of  the  persons  who  may  be  made  parties  shall 
not  be  deemed  to  be  exclusive,  but  the  joinder  or  non- joinder 
of  parties,  except  when  otherwise  herein  provided,  shall  be 
governed  by  the  rules  in  equity  in  similar  cases.  In  all  cases  any 
person  who  might  properly  be  a  party  plaintiff  in  any  such 
action  who  refuses  to  join  as  plaintiff  may  be  made  a  defendant. 

(z)  County  Treasurer  to  Notify  District  Attorney  of 
Transfer  Without  Tax  Being  Paid. — Whenever  the  treas- 
urer of  any  county  shall  have  reason  to  believe  that  any 
transfer  has  been  made  within  the  meaning  of  this  act  and 
that  a  tax  due  thereon  remains  undetermined  and  unpaid,  he 
shall  notify  the  district  attorney  in  writing  of  such  transfer, 
and  the  district  attorney,  if  he  have  probable  cause  to  believe 
a  tax  is  due,  and  remains  undetermined,  shall  prosecute  the 
necessary  proceeding  in  the  superior  court  to  determine  and 
fix  such  tax  and  for  the  enforcement  and  collection  thereof. 


ADMINISTRATION  OF  ESTATES  OF  DECEASED  PERSONS.        869 

(aa)    Amounts   County   Treasurers   May   Retain. — The 

treasurer  of  each  county  shall  be  allowed  to  retain,  on  all 
taxes  paid  and  accounted  for  by  him  each  year  under  this  act, 
in  addition  to  his  salary  or  fees  now  allowed  by  law,  three 
per  centum  on  the  first  fifty  thousand  dollars  so  paid  and 
accounted  for  by  him,  one  and  one-half  per  centum  on  the 
next  fifty  thousand  dollars  so  paid  and  accounted  for  by  him, 
and  one-half  of  one  per  centum  on  all  additional  sums  so 
paid  and  accounted  for  by  him;  provided,  that  no  county 
treasurer  shall  be  entitled  to  retain  to  his  own  use  more  than 
the  sum  of  two  hundred  dollars  out  of  the  inheritance  taxes 
paid  on  account  of  any  transfer  or  transfers  made  by,  or 
resulting  from  the  death  of,  any  one  decedent. 

(bb)  Definition  of  Terms  Used. — The  words  "estate" 
and  "property"  as  used  in  this  act  shall  be  taken  to  mean  the 
real  and  personal  property  or  interest  therein  of  the  testator, 
intestate,  grantor,  bargainor,  vendor,  or  donor  passing  or 
transferred  to  individual  legatees,  devisees,  heirs,  next  of  kin, 
grantees,  donees,  vendees,  or  successors,  and  shall  include 
all  personal  property  within  or  without  the  state.  The  word 
"transfer"  as  used  in  this  act  shall  be  taken  to  include  the 
passing  of  property  or  any  interest  therein,  in  possession 
or  enjoyment,  present  or  future,  by  inheritance,  descent,  de- 
vise, succession,  bequest,  grant,  deed,  bargain,  sale,  gift,  or 
appointment  in  the  manner  herein  described.  The  word 
"decedent"  as  used  in  the  act  shall  include  the  testator, 
intestate,  grantor,  bargainor,  vendor,  or  donor. 

The  words  "contemplation  of  death"  as  used  in  this  act 
shall  be  taken  to  include  that  expectancy  of  death  which 
actuates  the  mind  of  a  person  on  the  execution  of  his  will, 
and  in  nowise  shall  said  words  be  limited  and  restricted  to 
that  expectancy  of  death  which  actuates  the  mind  of  a  person 
in  making  a  gift  causa  mortis ;  and  it  is  hereby  declared  to 
be  the  intent  and  purpose  of  this  act  to  tax  any  and  all 
transfers  which  are  made  in  lieu  of  or  to  avoid  the  passing 
of  the  property  transferred  by  testate  or  intestate  laws. 
Act  of  the  Legislature,  approved  April  7,   1911. 


PART  XI. 

UNITED    STATES    BANKRUPT    LAWS. 

Section  1103.— JURISDICTION    OF    COURTS.— The 

District  Courts  of  the  United  States  have  jurisdiction  of  all 
proceedings  brought  under  the  United  States  bankruptcy  law. 

Section   1104.— ACTS    OF    BANKRUPTCY.— Acts  of 

bankruptcy  by  a  person  consist  of  his  having  (1)  conveyed, 
transferred,  concealed,  or  removed,  or  permitted  to  be  con- 
cealed or  removed,  any  part  of  his  property  with  intent  to 
hinder,  delay,  or  defraud  his  creditors,  or  any  of  them; 
or  (2)  transferred,  while  insolvent,  any  portion  of  his  prop- 
erty to  one  or  more  of  his  creditors  with  intent  to  prefer 
such  creditors  over  his  other  creditors;  or  (3)  suffered  or 
permitted,  while  insolvent,  any  creditor  to  obtain  a  prefer- 
ence through  legal  proceedings,  and  not  having  at  least  five 
days  before  a  sale  or  final  disposition  of  any  property  affected 
by  such  preference  vacated  or  discharged  such  preference; 
or  (4)  made  a  general  assignment  for  the  benefit  of  his 
creditors,  or,  being  insolvent,  applied  for  a  receiver  or 
trustee  of  his  property,  or,  because  of  insolvency,  a  receiver 
or  trustee  has  been  put  in  charge  of  his  property;  or  (5)  ad- 
mitted in  writing  his  inability  to  pay  his  debts  and  his  will- 
ingness to  be  adjudged  a  bankrupt  on  that  ground. 

A  petition  may  be  filed  against  a  person  who  is  insolvent 
and  who  has  committed  an  act  of  bankruptcy  within  four 
months  after  the  commission  of  such  act.  Such  time  shall 
not  expire  until  four  months  after  the  date  of  the  re- 
cording or  registering  of  the  transfer  or  assignment  when 
the  act  consists  in  having  made  a  transfer  of  any  of  his 
property  with  intent  to  hinder,  delay,  or  defraud  his  creditors 
(870) 


UNITED   STATES   BANKRUPT   LAWS.  871 

or  for  the  purpose  of  giving  a  preference  as  hereinbefore 
provided,  or  a  general  assignment  for  the  benefit  of  his 
creditors,  if  by  law  such  recording  or  registering  is  required 
or  permitted,  or,  if  it  is  not,  from  the  date  when  the  bene- 
ficiary takes  notorious,  exclusive  or  continuous  possession 
of  the  property,  unless  the  petitioning  creditors  have  received 
actual  notice  of  such  transfer  or  assignment. 

It  will  be  a  complete  defense  to  any  proceedings  in  bank- 
ruptcy instituted  under  the  first  subdivision  of  this  section 
to  allege  and  prove  that  the  party  proceeded  against  was 
not  insolvent  as  defined  in  this  act  at  the  time  of  the  filing 
the  petition  against  him,  and  if  solvency  at  such  date  is 
proved  by  the  alleged  bankrupt  the  proceedings  must  be 
dismissed,  and  under  said  subdivision  one  the  burden  of 
proving  solvency  shall  be  on  the  alleged  bankrupt. 

Whenever  a  person  against  whom  a  petition  has  been 
filed  as  hereinbefore  provided  under  the  second  and  third 
subdivisions  of  this  section  takes  issue  with  and  denies  the 
allegation  of  his  insolvency,  it  shall  be  his  duty  to  appear  in 
court  on  the  hearing,  with  his  books,  papers,  and  accounts, 
and  submit  to  an  examination,  and  give  testimony  as  to  all 
matters  tending  to  establish  solvency  or  insolvency,  and  in 
case  of  his  failure  to  so  attend  and  submit  to  examination 
the  burden  of  proving  his  solvency  shall  rest  upon  him. 

Whenever  a  petition  is  filed  by  any  person  for  the  pur- 
pose of  having  another  adjudged  a  bankrupt,  and  an  appli- 
cation is  made  to  take  charge  of  and  hold  the  property  of 
the  alleged  bankrupt,  or  any  part  of  the  same,  prior  to  the 
adjudication  and  pending  a  hearing  on  the  petition,  the 
petitioner  or  applicant  must  file  in  the  same  court  a  bond 
with  at  least  two  good  and  sufficient  sureties  who  shall 
reside  within  the  jurisdiction  of  said  court,  to  be  approved 
by  the  court  or  a  judge  thereof,  in  such  sum  as  the  court 
shall  direct,  conditioned  for  the  payment,  in  case  such  petition 
is  dismissed,  to  the  respondent,  his  or  her  personal  repre- 
sentatives, all  costs,  expenses,  and  damages  occasioned  by 
such  seizure,  taking,  and  detention  of  the  property  of  the 
alleged  bankrupt. 


872  BUSINESS   LAWS   FOR   BUSINESS   MEN. 

If  such  petition  be  dismissed  by  the  court  or  withdrawn 
by  the  petitioner,  the  respondent  or  respondents  shall  be 
allowed  all  costs,  counsel  fees,  expenses,  and  damages  occa- 
sioned by  such  seizure,  taking,  or  detention  of  such  prop- 
erty. Counsel  fees,  costs,  expenses,  and  damages  shall  be 
fixed  and  allowed  by  the  court,  and  paid  by  the  obligors  in 
such  bond. 

United  States  Compiled  Statutes,  page  3423. 

Amendments  of  1909,  page  1309. 

Section  1105.— WHO  MAY  BECOME  BANKRUPTS. 

— Any  person,  except  a  municipal,  railroad,  insurance,  or 
banking  corporation,  shall  be  entitled  to  the  benefits  of  this 
act  as  a  voluntary  bankrupt. 

Any  natural  person,  except  a  wage-earner  or  a  person  en- 
gaged chiefly  in  farming  or  the  tillage  of  the  soil,  any  un- 
incorporated company,  and  any  moneyed,  business,  or  com- 
mercial corporation,  except  a  municipal,  railroad,  insurance, 
or  banking  corporation,  owing  debts  to  the  amount  of  one 
thousand  dollars  or  over,  may  be  adjudged  an  involuntary 
bankrupt  upon  default  or  an  impartial  trial,  and  shall  be 
subject  to  the  provisions  and  entitled  to  the  benefits  of  this 
act.  The  bankruptcy  of  a  corporation  shall  not  release  its 
officers,  directors,  or  stockholders,  as  such,  from  any  liability 
under  the  laws  of  a  State  or  Territory  or  of  the  United 
States. 

Act  of  Congress,  Amendments  of  1910. 

Section  1106.— PARTNERS.— A  partnership,  during  the 
continuation  of  the  partnership  business,  or  after  its  dissolu- 
tion and  before  the  final  settlement  thereof,  may  be  adjudged 
a  bankrupt. 

The  creditors  of  the  partnership  shall  appoint  the  trustee; 
the  court  of  bankruptcy  which  has  jurisdiction  of  one  of  the 
partners  may  have  jurisdiction  of  all  the  partners  and  of 
the  administration  of  the  partnership  and  individual  property. 

The  trustee  shall  keep  separate  accounts  of  the  partner- 
ship property  and  of  the  property  belonging  to  the  individual 
partners. 


UNITED   STATES   BANKRUPT    LAWS.  873 

The  expenses  shall  be  paid  from  the  partnership  property 
and  the  individual  property  in  such  proportions  as  the  court 
shall  determine. 

The  net  proceeds  of  the  partnership  property  shall  be  ap- 
propriated to  the  payment  of  the  partnership  debts,  and  the 
net  proceeds  of  the  individual  estate  of  each  partner  to  the 
payment  of  his  individual  debts.  Should  any  surplus  remain 
of  the  property  of  any  partner  after  paying  his  individual 
debts,  such  surplus  shall  be  added  to  the  partnership  assets 
and  be  applied  to  the  payment  of  the  partnership  debts. 
Should  any  surplus  of  the  partnership  property  remain  after 
paying  the  partnership  debts,  such  surplus  shall  be  added 
to  the  assets  of  the  individual  partners  in  the  proportion  of 
their  respective  interests  in  the  partnership. 

The  court  may  permit  the  proof  of  the  claim  of  the  part- 
nership estate  against  the  individual  estates,  and  vice  versa, 
and  may  marshal  the  assets  of  the  partnership  estate  and 
individual  estates  so  as  to  prevent  preferences  and  secure 
the  equitable  distribution  of  the  property  of  the  several 
estates. 

In  the  event  of  one  or  more  but  not  all  of  the  members 
of  a  partnership  being  adjudged  bankrupt,  the  partnership 
property  shall  not  be  administered  in  bankruptcy,  unless 
by  consent  of  the  partner  or  partners  not  adjudged  bank- 
rupt; but  such  partner  or  partners  not  adjudged  bankrupt 
shall  settle  the  partnership  business,  as  expeditiously  as  its 
nature  will  permit,  and  account  for  the  interest  of  the  partner 
or  partners  adjudged  bankrupt. 

Compiled  Statutes  of  the  United  States,  page  3424. 

Section  1107.  — EXEMPTIONS  OF  BANKRUPTS.— 

This  law  does  not  affect  the  allowance  to  bankrupts  of  the 
exemptions  which  are  prescribed  by  the  State  laws,  in  force 
at  the  time  of  the  filing  of  the  petition,  in  the  State  wherein 
they  have  had  their  domicile  for  six  months  or  the  greater 
portion  thereof  immediately  preceding  the  filing  of  the 
petition. 

Compiled  Statutes  of  the  United  States,  page  3424. 


874  BUSINESS   LAWS   FOR   BUSINESS    MEN. 

Section  1108— DUTIES  OF  BANKRUPTS.— The  bank- 
rupt shall  (1)  attend  the  first  meeting  of  his  creditors,  if 
directed  by  the  court  or  a  judge  thereof  to  do  so,  and  the 
hearing  upon  his  application  for  a  discharge,  if  filed;  (2) 
comply  with  all  lawful  orders  of  the  court;  (3)  examine  the 
correctness  of  all  proofs  of  claims  filed  against  his  estate; 
(4)  execute  and  deliver  such  papers  as  shall  be  ordered  by 
the  court;  (5)  execute  to  his  trustee  transfers  of  all  his 
property  in  foreign  countries;  (6)  immediately  inform  his 
trustee  of  any  attempt,  by  his  creditors  or  other  persons,  to 
evade  the  provisions  of  the  law,  coming  to  his  knowledge; 
(7)  in  case  of  any  person  having  to  his  knowledge  proved 
a  false  claim  against  his  estate,  disclose  that  fact  immedi- 
ately to  his  trustee;  (8)  prepare,  make  oath  to,  and  file  in 
court  within  ten  days,  unless  further  time  is  granted,  after 
the  adjudication,  if  an  involuntary  bankrupt,  and  with  the 
petition  if  a  voluntary  bankrupt,  a  schedule  of  his  property, 
showing  the  amount  and  kind  of  property,  the  location 
thereof,  its  money  value  in  detail,  and  a  list  of  his  creditors, 
showing  thheir  residences,  if  known,  if  unknown,  that  fact 
to  be  stated,  the  amounts  due  each  of  them,  the  consideration 
thereof,  the  security  held  by  them,  if  any,  and  a  claim  for  such 
exemptions  as  he  may  be  entitled  to,  all  in  triplicate,  one  copy  of 
each  for  the  clerk,  one  for  the  referee,  and  one  for  the  trustee ; 
and  (9)  when  present  at  the  first  meeting  of  his  creditors,  and 
at  such  other  times  as  the  court  shall  order,  submit  to  an  exam- 
ination concerning  the  conducting  of  his  business,  the  cause  of 
his  bankruptcy,  his  dealings  with  his  creditors  and  other 
persons,  the  amount,  kind,  and  whereabouts  of  his  property, 
and,  in  addition,  all  matters  which  may  affect  the  administra- 
tion and  settlement  of  his  estate ;  but  no  testimony  given  by 
him  shall  be  offered  in  evidence  against  him  in  any  criminal 
proceeding. 

Provided,  however,  that  he  shall  not  be  required  to  attend 
a  meeting  of  his  creditors,  or  at  or  for  an  examination  at  a 
place  more  than  one  hundred  and  fifty  miles  distant  from 
his  home  or  principal  place  of  business,  or  to  examine  claims 
except  when  presented  to  him,  unless  ordered  by  the  court, 


UNITED   STATES   BANKRUPT  LAWS.  875 

or  a  judge  thereof,  for  cause  shown;  and  the  bankrupt  shall 
be  paid  his  actual  expenses  from  the  estate  when  examined 
or  required  to  attend  at  any  place  other  than  the  city,  town, 
or  village  of  his  residence. 

Compiled  Statutes  of  the  United  States,  pages  3424, 
3425. 

Section  1109.— DEATH  OR  INSANITY  OF  BANK- 
RUPTS.— The  death  or  insanity  of  a  bankrupt  shall  not  abate 
the  proceedings,  but  the  same  shall  be  conducted  and  con- 
cluded in  the  same  manner,  so  far  as  possible,  as  though  he 
had  not  died  or  become  insane;  provided,  that  in  case  of 
death,  the  widow  and  children  shall  be  entitled  to  all  rights 
of  dower  and  allowance  fixed  by  the  laws  of  the  State  of  the 
bankrupt's  residence. 

Compiled  Statutes  of  the  United  States,  page  3425. 

Section  1110.  — PROTECTION  AND  DETENTION 
OF  BANKRUPTS.— A  bankrupt  is  exempt  from  arrest 
upon  civil  process  except  in  the  following  cases:  (1)  When 
issued  from  a  court  of  bankruptcy  for  contempt  or  disobedi- 
ence of  its  lawful  orders;  (2)  when  issued  from  a  State  court 
having  jurisdiction,  and  served  within  such  State,  upon  a 
debt  or  claim  from  which  his  discharge  in  bankruptcy  would 
not  be  a  release;  and  in  such  case  he  will  be  exempt  from 
such  arrest  when  in  attendance  upon  a  court  of  bankruptcy 
or  engaged  in  the  performance  of  a  duty  imposed  by  law. 

The  judge  may,  at  any  time  after  the  filing  of  a  petition 
by  or  against  a  person,  and  before  the  expiration  of  one 
month  after  the  qualification  of  the  trustee,  upon  satisfac- 
tory proof  by  the  affidavits  of  at  least  two  persons  that  such 
bankrupt  is  about  to  leave  the  district  in  which  he  resides 
or  has  his  principal  place  of  business  to  avoid  examination, 
and  that  his  departure  will  defeat  the  proceedings  in  bank- 
ruptcy, issue  a  warrant  to  the  marshal,  directing  him  to  bring 
such  bankrupt  forthwith  before  the  court  for  examination. 
If  upon  hearing  the  evidence  of  the  parties  it  shall  appear 
to  the  court  or  a  judge  thereof  that  the  allegations  are  true 


876  BUSINESS   LAWS   FOR   BUSINESS    MEN. 

and  that  it  is  necessary,  he  shall  order  such  marshal  to  keep 
such  bankrupt  in  custody  not  exceeding  ten  days,  but  not 
imprison  him,  until  he  shall  be  examined  and  released  or 
give  bail  conditioned  for  his  appearance  for  examination, 
from  time  to  time,  not  exceeding  in  all  ten  days,  as  required 
by  the  court,  and  for  his  obedience  to  all  lawful  orders  made 
in  reference  thereto. 

Compiled  Statutes  of  the  United  States,  pages  3425, 
3426. 

Section  1111.— SUITS  BY  AND  AGAINST  BANK- 
RUPTS.— A  suit  which  is  founded  upon  a  claim  from  which 
a  discharge  would  be  a  release,  and  which  is  pending  against 
a  person  at  the  time  of  the  filing  of  a  petition  against  him, 
shall  be  stayed  until  after  an  adjudication  or  the  dismissal 
of  the  petition;  if  such  person  is  adjudged  a  bankrupt,  such 
action  may  be  further  stayed  until  twelve  months  after  the 
date  of  such  adjudication,  or,  if  within  that  time  such  person 
applies  for  a  discharge,  then  until  the  question  of  such  dis- 
charge is  determined. 

The  court  may  order  the  trustee  to  enter  his  appearance 
and  defend  any  pending  suit  against  the  bankrupt. 

A  trustee  may,  with  the  approval  of  the  court,  be  per- 
mitted to  prosecute  as  trustee  any  suit  commenced  by  the 
bankrupt  prior  to  the  adjudication,  with  like  force  and  effect 
as  though  it  had  been  commenced  by  him. 

Suits  shall  not  be  brought  by  or  against  a  trustee  of  a 
bankrupt  estate  subsequent  to  two  years  after  the  estate  has 
been  closed. 

Compiled  Statutes  of  the  United  States,  page  3426. 

Section  1112.—  COMPOSITIONS  WITH  CREDI- 
TORS.— A  bankrupt  may  offer  terms  of  composition  to  his 
creditors  after,  but  not  before,  he  has  been  examined  in  open 
court  or  at  a  meeting  of  his  creditors  and  filed  in  court  the 
schedule  of  his  property  and  list  of  his  creditors,  required 
to  be  filed  by  bankrupts. 


UNITED   STATES   BANKRUPT   LAWS.  877 

An  application  for  the  confirmation  of  a  composition  may 
be  filed  in  the  court  of  bankruptcy  after,  but  not  before,  it 
has  been  accepted  in  writing  by  a  majority  in  number  of  all 
creditors  whose  claims  have  been  allowed,  which  number 
must  represent  a  majority  in  amount  of  such  claims,  and 
the  consideration  to  be  paid  by  the  bankrupt  to  his  creditors, 
and  the  money  necessary  to  pay  all  debts  which  have  priority 
and  the  cost  of  the  proceedings,  have  been  deposited  in  such 
place  as  shall  be  designated  by  and  subject  to  the  order  of 
the  judge. 

A  date  and  place,  with  reference  to  the  convenience  of 
the  parties  in  interest,  shall  be  fixed  for  the  hearing  upon 
each  application  for  the  confirmation  of  a  composition,  and 
such  objections  as  may  be  made  to  its  confirmation. 

The  judge  shall  confirm  a  composition  if  satisfied  that 
(1)  it  is  for  the  best  interests  of  the  creditors;  (2)  the  bank- 
rupt has  not  been  guilty  of  any  of  the  acts  or  failed  to  per- 
form any  of  the  duties  which  would  be  a  bar  to  his  dis- 
charge; and  (3)  the  offer  and  its  acceptance  are  in  good 
faith  and  have  not  been  made  or  procured  except  as 
herein  provided,  or  by  any  means,  promises,  or  acts  herein 
forbidden. 

Upon  the  confirmation  of  a  composition,  the  consideration 
shall  be  distributed  as  the  judge  shall  direct,  and  the  case  dis- 
missed. Whenever  a  composition  is  not  confirmed,  the  estate 
shall  be  administered  in  bankruptcy. 

The  judge  may,  upon  the  application  of  parties  in  interest 
filed  at  any  time  within  six  months  after  a  composition  has 
been  confirmed,  set  the  same  aside  and  reinstate  the  case, 
if  it  shall  be  made  to  appear  upon  a  trial  that  fraud  was 
practiced  in  the  procuring  of  such  composition,  and  that  the 
knowledge  thereof  has  come  to  the  petitioners  since  the 
confirmation  of  such  composition. 

Compiled  Statutes  of  the  United  States,  pages  3426, 
3427. 


878  BUSINESS   LAWS   FOR  BUSINESS    MEN. 

Section    1113.— WHEN    DISCHARGE    GRANTED.— 

Any  person  may,  after  the  expiration  of  one  month  and 
within  the  next  twelve  months  subsequent  to  being  adjudged 
a  bankrupt,  file  an  application  for  a  discharge  in  the  court 
of  bankruptcy  in  which  the  proceedings  are  pending;  or  if 
it  shall  be  made  to  appear  to  the  judge  that  the  bankrupt 
was  unavoidably  prevented  from  filing  it  within  such  time, 
it  may  be  filed  within  but  not  after  the  expiration  of  the 
next  six  months. 

The  judge  shall  hear  the  application  for  a  discharge,  and 
such  proofs  and  pleas  as  may  be  made  in  opposition  thereto 
by  parties  in  interest,  at  such  time  as  will  give  parties  in 
interest  a  reasonable  opportunity  to  be  fully  heard,  and  in- 
vestigate the  merits  of  the  application,  and  discharge  the 
applicant;  unless  he  has  (1)  committed  an  offense  punish- 
able by  imprisonment  as  herein  provided;  or  (2)  with  intent 
to  conceal  his  financial  condition,  destroyed,  concealed,  or 
failed  to  keep  books  of  account  or  records  from  which  such 
condition  might  be  ascertained;  or  (3)  obtained  property 
on  credit  from  any  person  upon  a  materially  false  statement 
in  writing  made  to  such  person  for  the  purpose  of  obtain- 
ing such  property  on  credit;  or  (4)  at  any  time  subsequent 
to  the  first  day  of  the  four  months  immediately  preceding 
the  filing  of  the  petition  transferred,  removed,  destroyed, 
or  concealed,  or  permitted  to  be  removed,  destroyed,  or 
concealed  any  of  his  property  with  intent  to  hinder,  delay, 
or  defraud  his  creditors;  or  (5)  in  voluntary  proceedings 
been  granted  a  discharge  in  bankruptcy  within  six  years;  or 
(6)  in  the  course  of  the  proceedings  in  bankruptcy  refused 
to  obey  any  lawful  order  of  or  to  answer  any  material  ques- 
tion approved  by  the  court. 

The  confirmation  of  a  composition  shall  discharge  the 
bankrupt  from  his  debts,  other  than  those  agreed  to  be  paid 
by  the  terms  of  the  composition  and  those  not  affected  by 
a  discharge. 

The  judge  may,  upon  the  application  of  parties  in  interest 
who  have  not  been  guilty  of  undue  laches,  filed  at  any  time 
within  one  year  after  a  discharge  shall  have  been  granted, 


UNITED   STATES   BANKRUPT   LAWS.  879 

revoke  it  upon  a  trial,  if  it  shall  be  made  to  appear  that  it 
was  obtained  through  the  fraud  of  the  bankrupt,  and  that 
the  knowledge  of  the  fraud  has  come  to  the  petitioners  since 
the  granting  of  the  discharge,  and  that  the  actual  facts  did 
not  warrant  the  discharge. 

United  States  Compiled  Statutes,  pages  3427,  3428. 

Amendments  of  1909,  page  1310. 

Section  1114.— CO-DEBTORS  OF  BANKRUPT.— The 

liability  of  a  person  who  is  a  co-debtor  with,  or  guarantor 
or  in  any  manner  a  surety  for  a  bankrupt,  is  not  altered  by 
the  discharge  of  such  bankrupt. 

Section  1115.— DEBTS  NOT  AFFECTED  BY  A  DIS- 
CHARGE.— A  discharge  in  bankruptcy  shall  release  a  bank- 
rupt from  all  of  his  provable  debts,  except  such  as  (1)  are 
due  as  a  tax  levied  by  the  United  States,  the  State,  county, 
district,  or  municipality  in  which  he  resides;  (2)  are  liabilities 
for  obtaining  property  under  false  pretenses  or  false  repre- 
sentations, or  for  wilful  and  malicious  injuries  to  the  person 
or  property  of  another,  or  for  alimony  due  or  to  become 
due,  or  for  maintenance  or  support  of  wife  or  child,  or 
for  seduction  of  an  unmarried  female,  or  for  criminal  con- 
versation; (3)  have  not  been  duly  scheduled  in  time  for 
proof  and  allowance,  with  the  name  of  the  creditor  if  known 
to  the  bankrupt,  unless  such  creditor  had  notice  or  actual 
knowledge  of  the  proceedings  in  bankruptcy;  or  (4)  were 
created  by  fraud,  embezzlement,  misappropriation,  or  defalca- 
tion while  acting  as  an  officer  or  in  any  fiduciary  capacity. 
Amendments  of  1909,  pages  1310,  1311. 

Section   1116.— COMPROMISES    BY    TRUSTEES.— 

The  trustee  may,  with  the  approval  of  the  court,  compromise 
any  controvery  arising  in  the  administration  of  the  estate, 
upon  such  terms  as  he  may  deem  for  the  best  interests  of 
the  estate. 

United  States  Compiled  Statutes,  page  3433. 


880  BUSINESS   LAWS   FOR   BUSINESS    MEN. 

Section  1117.— OFFENSES  AND  PUNISHMENTS.— 

A  person  shall  be  punished,  by  imprisonment  for  a  period 
not  to  exceed  five  years,  upon  conviction  of  the  offense  of 
having  knowingly  and  fraudulently  appropriated  to  his  own 
use,  embezzled,  spent,  or  unlawfully  transferred  any  prop- 
erty or  secreted  or  destroyed  any  document  belonging  to  a 
bankrupt  estate  which  came  into  his  charge  as  trustee. 

A  person  shall  be  punished,  by  imprisonment  for  a  period 
not  to  exceed  two  years,  upon  conviction  of  the  offence  of 
having  knowingly  and  fraudulently  (1)  concealed  while  a 
bankrupt,  or  after  his  discharge,  from  his  trustee  any  of  the 
property  belonging  to  his  estate  in  bankruptcy;  or  (2)  made 
a  false  oath  or  account  in,  or  in  relation  to,  any  proceeding 
in  bankruptcy;  (3)  presented  under  oath  any  false  claim 
for  proof  against  the  estate  of  a  bankrupt,  or  used  any  such 
claim  in  composition  personally  or  by  agent,  proxy,  or  attor- 
ney, or  as  agent,  proxy,  or  attorney;  or  (4)  received  any 
material  amount  of  property  from  a  bankrupt  after  the  filing 
of  the  petition,  with  intent  to  defeat  this  act;  or  (5)  extorted 
or  attempted  to  extort  any  money  or  property  from  any 
person  as  a  consideration  for  acting  or  forbearing  to  act  in 
bankruptcy  proceedings. 

A  person  shall  be  punished  by  fine,  not  to  exceed  five 
hundred  dollars,  and  forfeit  his  office,  and  the  same  shall 
thereupon  become  vacant,  upon  conviction  of  the  offense  of 
having  knowingly  (1)  acted  as  a  referee  in  a  case  in  which 
he  is  directly  or  indirectly  interested;  or  (2)  purchased, 
while  a  referee,  directly  or  indirectly,  any  property  of  the 
estate  in  bankruptcy  of  which  he  is  a  referee;  or  (3)  refused, 
while  a  referee  or  trustee,  to  permit  a  reasonable  opportunity 
for  the  inspection  of  the  accounts  relating  to  the  affairs  of, 
and  the  papers  and  records  of,  estates  in  his  charge  by  parties 
in  interest  when  directed  by  the  court  so  to  do. 

A  person  shall  be  not  prosecuted  for  any  offense  arising 
under  this  law  unless  the  indictment  is  found  or  the  informa- 
tion is  filed  in  court  within  one  year  after  the  commission 
of  the  offense. 

United  States  Compiled  Statutes,  pages  3433,  3434. 


UNITED   STATES   BANKRUPT   LAWS.  881 

Section   1118.— DUTIES    OF    REFEREES.— The  law 

declares  that  referees  shall  (1)  declare  dividends  and  prepare 
and  deliver  to  trustee  dividend  sheets  showing  the  dividends 
declared  and  to  whom  payable;    (2)    examine   all   schedules 
of  property   and   lists   of   creditors   filed   by   bankrupts    and 
cause  such  as  are  incomplete  or  defective  to  be  amended; 
(3)   furnish  such  information  concerning  the  estates  in  pro- 
cess of  administration  before  them  as  may  be  requested  by 
the  parties  in  interest;    (4)    give  notices  to   creditors;    (5) 
make  up  records  embodying  the  evidence,  or  the  substance 
thereof,  as  agreed  upon  by  the  parties  in  all  contested  mat- 
ters  arising  before  them,   whenever   requested  to   do   so  by 
either   of   the   parties    thereto,   together    with    their    findings 
therein,  and  transmit  them  to  the  judges;   (6)   prepare  and 
file  the  schedules  of  property  and  lists  of  creditors  required 
to  be  filed  by  the  bankrupts,  or  cause  the  same  to  be  done, 
when  the  bankrupts   fail,   refuse,  or  neglect  to   do   so;    (7) 
safely  keep,  perfect,  and  transmit  to  the  clerks  the  records 
required  to  be  kept  by  them,  when  the  cases  are  concluded; 
(8)    transmit  to  the  clerks   such  papers  as  may  be  on  file 
before  them  whenever  the  same  are  needed  in  any  proceed- 
ings in  courts,  and  in  like  manner  secure  the  return  of  such 
papers  after  they  have  been  used,  or,  if  it  be  impracticable 
to    transmit    the    original    papers,    transmit    certified    copies 
thereof  by  mail ;  (9)  upon  application  of  any  party  in  interest, 
preserve    the    evidence    taken    or    the    substance    thereof    as 
agreed  upon  by  the  parties  before  them  when  a  stenographer 
is   not   in   attendance;   and    (10)    whenever   their    respective 
offices  are  in  the  same  cities  or  towns  where  the  courts  of 
bankruptcy  convene,  call  upon  and  receive   from  the  clerks 
all   p7,pers   filed   in   courts   of   bankruptcy   which    have   been 
referred  to  them. 

United  States  Compiled  Statutes,  page  3436. 

Section    1119.— APPOINTMENT    OF    TRUSTEES.— 

The  creditors  of  a  bankrupt  estate  shall,  at  their  first  meet- 
ing after  the  adjudication,  or  after  a  vacancy  has  occurred 
in  the  office  of  trustee,  or  after  an  estate  has  been  reopened. 


882  BUSINESS   LAWS   FOR  BUSINESS    MEN. 

or  after  a  composition  has  been  set  aside  or  a  discharge  re- 
voked, or  if  there  is  a  vacancy  in  the  office  of  trustee,  appoint 
one  trustee  or  three  trustees  to  such  estate.  If  the  creditors 
do  not  appoint  a  trustee  or  trustees  as  herein  provided,  the 
court  shall  do  so. 

Trustees  may  be  (1)  individuals  who  are  respectively 
competent  to  perform  the  duties  of  that  office,  and  reside  or 
have  an  office  in  the  judicial  district  within  which  they  are 
appointed,  or  (2)  corporations  authorized  by  their  charters 
or  by  law  to  act  in  such  capacity  and  having  an  office  in  the 
judicial  district  within  which  they  are  appointed. 

The  death  or  removal  of  a  trustee  shall  not  abate  any 
suit  or  proceeding  which  he  is  prosecuting  or  defending  at 
the  time  of  his  death  or  removal,  but  the  same  may  be  pro- 
ceeded with  or  defended  by  his  joint  trustee  or  successor, 
in  the  same  manner  as  though  the  same  had  been  com- 
menced or  was  being  defended  by  such  joint  trustee  alone 
or  by  such  successor. 

United  States  Compiled  Statutes,  page  3438. 

Section  1120.  — DUTIES  OF  TRUSTEES.— Trustees 
shall  respectively  (1)  account  for  and  pay  over  to  the  estates 
under  their  control  all  interest  received  by  them  on  property 
of  such  estates;  (2)  collect  and  reduce  to  money  the  prop- 
erty of  the  estates  for  which  they  are  trustees,  under  the 
direction  of  the  court,  and  close  up  the  estate  as  expeditiously 
as  is  compatible  with  the  best  interests  of  the  parties  in 
interest;  (3)  deposit  all  money  received  by  them  in  one  of 
the  designated  depositories;  (4)  disburse  money  -only  by 
check  or  draft  on  the  depositories  in  which  it  has  been 
deposited;  (5)  furnish  such  information  concerning  the 
estates  of  which  they  are  trustees  and  their  administration 
as  may  be  requested  by  parties  in  interest;  (6)  keep  regular 
accounts  showing  all  amounts  received  and  from  what 
sources  and  all  amounts  expended  and  on  what  accounts ; 
(7)  lay  before  the  final  meeting  of  the  creditors  detailed 
statements  of  the  administration  of  the  estates:  (8)  make 
final   reports  and  file  final   accounts   with   the   courts   fifteen  * 


UNITED   STATES    BANKRUPT   LAWS.  883 

days  before  the  day  fixed  for  the  final  meeting  of  the 
creditors;  (9)  pay  dividends  within  ten  days  after  they  are 
declared  by  the  referees;  (10)  report  to  the  courts,  in  writ- 
ing, the  condition  of  the  estates  and  the  amounts  of  money 
on  hand,  and  such  other  details  as  may  be  required  by  the 
courts,  within  the  first  month  after  their  appointment  and 
every  two  months  thereafter,  unless  otherwise  ordered  by 
the  courts ;  and  (11)  set  apart  the  bankrupt's  exemptions 
and  report  the  items  and  estimated  value  thereof  to  the  court 
as   soon  as  practicable  after  their  appointment. 

Whenever  three  trustees  have  been  appointed  for  an  estate, 
the  concurrence  of  at  least  two  of  them  shall  be  necessary 
to  the  validity  of  their  every  act  concerning  the  administra- 
tion of  the  estate. 

United  States  Compiled  Statutes,  pages  3438,  3439. 

Section  1121.— COMPENSATION  OF  TRUSTEES.— 

Trustees  shall  receive  for  their  services,  payable  after  they 
are  rendered,  a  fee  of  five  dollars  deposited  with  the  clerk 
at  the  time  the  petition  is  filed  in  each  case,  except  when 
a  fee  is  not  required  from  a  voluntary  bankrupt,  and  from 
estates  which  they  have  administered  such  commissions  on 
all  moneys  disbursed  by  them  as  may  be  allowed  by  the 
courts,  not  to  exceed  six  per  centum  on  the  first  five  hun- 
dred dollars  or  less,  four  per  centum  on  moneys  in  excess 
of  five  hundred  dollars  and  less  than  fifteen  hundred  dollars, 
two  per  centum  on  moneys  in  excess  of  fifteen  hundred 
dollars  and  less  than  ten  thousand  dollars,  and  one  per  centum 
on  moneys  in  excess  of  ten  thousand  dollars.  And  in  case 
of  the  confirmation  of  a  composition  after  the  trustee  has 
qualified  the  court  may  allow  him,  as  compensation,  not  to 
exceed  one-half  of  one  per  centum  of  the  amount  to  be  paid 
the  creditors  on  such  composition. 

In  the  event  of  an  estate  being  administered  by  three 
trustees,  instead  of  one,  or  by  successive  trustees,  the  court 
must  apportion  the  fees  and  commissions  between  them 
according   to   the   services   actually    rendered,    so   that   there 


i 


884  BUSINESS   LAWS   FOR  BUSINESS   MEN. 

shall  not  be  paid  to  trustees  for  the  administering  of  any 
estate  a  greater  amount  than  one  trustee  would  be  entitled  to. 

United  States  Statutes,  page  3439. 

Amendments  of  1909,  pages  1313,  1314. 

Section  1122.— BONDS     OF     TRUSTEES.— Trustees, 

before  entering  upon  the  performance  of  their  official  duties, 
and  within  ten  days  after  their  appointment,  or  within  such 
further  time,  not  to  exceed  five  days,  as  the  court  may  per- 
mit, shall  respectively  qualify  by  entering  into  bond  to  the 
United  States,  with  such  sureties  as  shall  be  approved  by 
the  courts,  conditioned  for  the  faithful  performance  of  their 
official  duties. 

The  creditors  of  a  bankrupt  estate,  at  their  first  meeting 
after  the  adjudication,  or  after  a  vacancy  has  occurred  in  the 
office  of  trustee,  or  after  an  estate  has  been  reopened,  or 
after  a  composition  has  been  set  aside  or  a  discharge  re- 
voked, if  there  is  a  vacancy  in  the  office  of  trustee,  shall  fix 
the  amount  of  the  bond  of  the  trustee;  they  may  at  any 
time  increase  the  amount  of  the  bond.  If  the  creditors  do 
not  fix  the  amount  of  the  bond  of  the  trustee  as  herein  pro- 
vided the  court  shall  do  so.  The  court  shall  require  evidence 
as  to  the  actual  value  of  the  property  of  sureties.  There 
shall  be  at  least  two  sureties  upon  each  bond.  The  actual 
value  of  the  properties  of  the  sureties,  over  and  above  their 
liabilities  and  exemptions,  on  each  bond  shall  equal  at  least 
the  amount  of  such  bond.  Corporations  organized  for  the 
purpose  of  becoming  sureties  upon  bonds,  or  authorized  by 
law  to  do  so,  may  be  accepted  as  sureties  upon  the  bonds  of 
trustees  whenever  the  courts  are  satisfied  that  the  rights 
of  all  parties  in  interest  will  be  thereby  amply  protected. 
United  States  Compiled  Statutes,  page  3440. 

Section    1123.— MEETINGS    OF    CREDITORS.— The 

court  shall  cause  the  first  meeting  of  the  creditors  of  a  bank- 
rupt to  be  held,  not  less  than  ten  nor  more  than  thirty  days 
after  the  adjudication,  at  the  county  seat  of  the  county  in 
which  the  bankrupt  has  had  his  principal  place  of  business. 


UNITED  STATES   BANKRUPT   LAWS.  885 

resided,  or  had  his  domicile;  or  if  that  place  would  be  mani- 
festly inconvenient  as  a  place  of  meeting  for  the  parties  in 
interest,  or  if  the  bankrupt  is  one  who  does  not  do  business, 
reside,  or  have  his  domicile  within  the  United  States,  the 
court  shall  fix  a  place  for  the  meeting  which  is  the  most  con- 
venient for  parties  in  interest.  If  such  meeting  should  by 
any  mischance  not  be  held  within  such  time,  the  court  shall 
fix  the  date,  as  soon  as  may  be  thereafter,  when  it  shall  be 
held. 

At  the  first  meeting  of  creditors  the  judge  or  referee  shall 
preside,  and,  before  proceeding  with  the  other  business,  may 
allow  or  disallow  the  claims  of  creditors  there  presented, 
and  may  publicly  examine  the  bankrupt  or  cause  him  to  be 
examined  at  the  instance  of  any  creditor. 

A  meeting  of  creditors,  subsequent  to  the  first  one,  may 
be  held  at  any  time  and  place  when  all  of  the  creditors  who 
have  secured  the  allowance  of  their  claims  sign  a  written 
consent  to  hold  a  meeting  at  such  time  and  place. 

The  court  shall  call  a  meeting  of  creditors  whenever  one- 
fourth  or  more  in  number  of  those  who  have  proven  their 
claims  shall  file  a  written  request  to  that  efifect ;  if  such 
request  is  signed  by  a  majority  of  such  creditors,  which  num- 
ber represents  a  majority  in  amount  of  such  claims,  and 
contains  a  request  for  such  meeting  to  be  held  at  a  desig- 
nated place,  the  court  shall  call  such  meeting  at  such  place 
within  thirty  days  after  the  date  of  the  filing  of  the  request. 

Whenever  the  aflfairs  of  the  estate  are  ready  to  be  closed 
a  final  meeting  of  creditors  shall  be  ordered. 

United  States  Compiled  Statutes,  page  3442. 

Section  1124.— VOTERS  AT  MEETINGS  OF  CRED- 
ITORS.— Creditors  shall  pass  upon  matters  submitted  to 
them  at  their  meetings  by  a  majority  vote  in  number  and 
amount  of  claims  of  all  creditors  whose  claims  have  been 
allowed  and  are  present,  except  as  otherwise  provided. 

Creditors  holding  claims  which  are  secured  or  have  prior- 
ity shall  not,  in  respect  to  such  claims,  be  entitled  to  vote 
at  creditors'  meetings,  nor  shall  such  claims  be  counted  in 


886  BUSINESS   LAWS   FOR   BUSINESS    MEN. 

computing  either  the  number  of  creditors  or  the  amount  of 
their  claims,  unless  the  amounts  of  such  claims  exceed  the 
values  of  such  securities  or  priorities,  and  then  only  for  such 
excess. 

United  States  Compiled  Statutes,  pages  3442,  3443. 

Section  1125.— -PROOF  AND  ALLOWANCE  OF 
CLAIMS. — Proof  of  claims  shall  consist  of  a  statement 
under  oath,  in  writing,  signed  by  a  creditor,  setting  forth  the 
claim,  the  consideration  therefor,  and  whether  any,  and,  if 
so  what,  securities  are  held  therefor,  and  whether  any,  and, 
if  so  what,  payments  have  been  made  thereon,  and  that  the 
sum  claimed  is  justly  owing  from  the  bankrupt  to  the 
creditor. 

Whenever  a  claim  is  founded  upon  an  instrument  of  writ- 
ing, such  instrument,  unless  lost  or  destroyed,  shall  be  filed 
with  the  proof  of  claim.  If  such  instrument  is  lost  or 
destroyed,  a  statement  of  such  fact  and  of  the  circumstances 
of  such  loss  or  destruction  shall  be  filed  under  oath  with  the 
claim.  After  the  claim  is  allowed  or  disallowed,  such 
instrument  may  be  withdrawn  by  permission  of  the  court, 
upon  leaving  a  copy  thereof  on  file  with  the  claim. 

Claims  after  being  proved  may,  for  the  purpose  of  allow- 
ance, be  filed  by  the  claimants  in  the  court  where  the  pro- 
ceedings are  pending,  or  before  the  referee  if  the  case  has 
been  referred. 

Claims  which  have  been  duly  proved  shall  be  allowed, 
upon  receipt  by  or  upon  presentation  to  the  court,  unless 
objection  to  their  allowance  shall  be  made  by  parties  in 
interest,  or  their  consideration  be  continued  for  cause  by 
the  court  upon  its  own  motion. 

Claims  of  secured  creditors  and  those  who  have  priority 
may  be  allowed,  to  enable  such  creditors  to  participate  in 
the  proceedings  at  creditors'  meetings  held  prior  to  the 
determination  of  the  value  of  their  securities  or  priorities, 
but  shall  be  allowed  for  such  sums  only  as  to  the  courts 
seem  to  be  owing  over  and  above  the  value  of  their  securities 
or  priorities. 


UNITED   STATES   BANKRUPT   LAWS.  887 

Objections  to  claims  shall  be  heard  and  determined  as 
soon  as  the  convenience  of  the  court  and  the  best  interests 
of  the  estates  and  the  claimants  will  permit. 

The  claims  of  creditors  who  have  received  preferences 
shall  not  be  allowed  unless  such  creditors  shaH  surrender 
their  preferences. 

The  value  of  securities  held  by  secured  creditors  shall  be 
determined  by  converting  the  same  into  money  according  to 
the  terms  of  the  agreement  pursuant  to  which  such  securi- 
ties were  delivered  to  such  creditors,  or  by  such  creditors 
and  the  trustee,  by  agreement,  arbitration,  compromise,  or 
litigation,  as  the  court  may  direct,  and  the  amount  of  such 
value  shall  be  credited  upon  such  claims,  and  a  dividend 
shall  be  paid  only  on  the  unpaid  balance. 

Whenever  a  creditor,  whose  claim  against  a  bankrupt 
estate  is  secured  by  the  individual  undertaking  of  any  per- 
son, fails  to  prove  such  claim,  such  person  may  do  so  in  the 
creditor's  name,  and  if  he  discharge  such  undertaking  in 
whole  or  in  part  he  shall  be  subrogated  to  that  extent  to  the 
rights  of  the  creditor. 

Debts  owing  to  the  United  States,  a  State,  a  county,  a 
district,  or  a  municipality  as  a  penalty  or  forfeiture  shall 
not  be  allowed,  except  for  the  amount  of  the  pecuniary  loss 
sustained  by  the  act,  transaction,  or  proceeding  out  of  which 
the  penalty  or  forfeiture  arose,  with  reasonable  and  actual 
costs  occasioned  thereby  and  such  interest  as  may  have 
accrued  thereon  according  to  law. 

Claims  which  have  been  allowed  may  be  reconsidered  for 
cause  and  reallowed  or  rejected  in  whole  or  in  part,  accord- 
ing to  the  equities  of  the  case,  before  but  not  after  the  estate 
has  been  closed. 

Whenever  a  claim  shall  have  been  reconsidered  and  re- 
jected, in  whole  or  in  part,  upon  which  a  dividend  has  been 
paid,  the  trustee  may  recover  from  the  creditor  the  amount 
of  the  dividend  received  upon  the  claim  if  rejected  in  whole, 
or  the  proportional  part  thereof  if  rejected  only  in  part. 


BUSINESS   LAWS   FOR   BUSINESS    MEN. 

The  claim  of  any  estate  which  is  being  administered  in 
bankruptcy  against  any  Hke  estate  may  be  proved  by  the 
trustee  and  allowed  by  the  court  in  the  same  manner  and 
upon  like  terms  as  the  claims  of  other  creditors. 

Claims  shall  not  be  proved  against  a  bankrupt  estate  sub- 
sequent to  one  year  after  the  adjudication;  or  if  they  are 
liquidated  by  litigation  and  the  final  judgment  therein  is 
rendered  within  thirty  days  before  or  after  the  expiration 
of  such  time,  then  within  sixty  days  after  the  rendition  of 
such  judgment:  Provided,  That  the  right  of  infants  and 
insane  persons  without  guardians,  without  notice  of  the  pro- 
ceedings, may  continue  six  months  longer. 

United  States  Compiled  Statutes,  pages  3443,  3444. 

Section  1126.— NOTICES  TO  CREDITORS.— Credit- 
ors shall  have  at  least  ten  days'  notice  by  mail,  to  their  re- 
spective addresses  as  they  appear  in  the  list  of  creditors  of 
the  bankrupt,  or  as  afterward  filed  with  the  papers  in  the  case 
by  the  creditors,  unless  they  waive  notice  in  writing,  of 
(1)  all  examinations  of  the  bankrupt;  (2)  all  hearings  upon 
applications  for  the  confirmation  of  compositions  or  the  dis- 
charge of  bankrupts;  (3)  all  meetings  of  creditors;  (4)  all 
proposed  sales  of  property;  (5)  the  declaration  and  time  of 
payment  of  dividends;  (6)  the  filing  of  the  final  accounts  of 
the  trustee,  and  the  time  when  and  the  place  where  they 
will  be  examined  and  passed  upon;  (7)  the  proposed  com- 
promise of  any  controversy,  and  (8)  the  proposed  dismissal 
of  the  proceedings. 

Notice  to  creditors  of  the  first  meeting  shall  be  published 
at  least  once  and  may  be  published  such  number  of  addi- 
tional times  as  the  court  may  direct;  the  last  publication 
shall  be  at  least  one  week  prior  to  the  date  fixed  for  the 
meeting.  Other  notices  may  be  published  as  the  court  shall 
direct. 

All  notices  shall  be  given  by  the  referee,  unless  otherwise 
ordered  by  the  judge. 

United  States  Compiled  Statutes,  page  3444. 


UNITED   STATES    BANKRUPT    LAWS.  889 

Section  1127.— WHO  MAY  FILE  PETITIONS.— Any 

qualified  person  may  file  a  petition  to  be  adjudged  a  volun- 
tary bankrupt. 

Three  or  more  creditors  who  have  provable  claims  against 
any  person  which  amount  in  the  aggregate,  in  excess  of  the 
value  of  securities  held  by  them,  if  any,  to  five  hundred 
dollars  or  over;  or  if  all  the  creditors  of  such  person  are  less 
than  twelve  in  number,  then  one  of  such  creditors  whose 
claim  equals  such  amount,  may  file  a  petition  to  have  him 
adjudged   a  bankrupt. 

United  States  Compiled  Statutes,  page  3445. 

Section  1128.— PREFERRED  CREDITORS.— A  person 
shall  be  deemed  to  have  given  a  preference  if,  being  insol- 
vent, he  has,  within  four  months  before  the  filing  of  the 
petition,  or  after  the  filing  of  the  petition  and  before  the 
adjudication,  procured  or  suffered  a  judgment  to  be  entered 
against  himself  in  favor  of  any  person,  or  make  a  transfer 
of  any  of  his  property,  and  the  eifect  of  the  enforcement  of 
such  judgment  or  transfer  will  be  to  enable  any  one  of  his 
creditors  to  obtain  a  greater  percentage  of  his  debt  than 
any  other  of  such  creditors  of  the  same  class.  Where  the 
preference  consists  in  a  transfer,  such  period  of  four  months 
shall  not  expire  until  four  months  after  it  is  recorded  or 
registered. 

If  a  bankrupt  shall  have  given  a  preference,  and  the  person 
receiving  it,  or  to  be  benefited  thereby,  or  his  agent  acting 
therein,  shall  have  had  reasonable  cause  to  believe  that  it 
was  intended  thereby  to  give  a  preference,  it  shall  be  void- 
able by  the  trustee,  and  he  may  recover  the  property  or  its 
value  from  such  person. 

If  a  creditor  has  been  preferred,  and  afterward  in  good 
faith  gives  the  debtor  further  credit  without  security  of  any 
kind  for  property  which  becomes  a  part  of  the  debtor's 
estates,  the  amount  of  such  new  credit  remaining  unpaid  at 
the  time  of  the  adjudication  in  bankruptcy  may  be  set  off 
against  the  amount  which  would  otherwise  be  recoverable 
from  him. 


890  BUSINESS   LAWS   FOR  BUSINESS    MEN. 

If  a  debtor  shall,  directly  or  indirectly,  in  contemplation 
of  the  filing  of  a  petition  by  or  against  him,  pay  money  or 
transfer  property  to  an  attorney  and  counselor  at  law, 
solicitor  in  equity,  or  proctor  in  admiralty  for  services  to  be 
rendered,  the  transaction  shall  be  re-examined  by  the  court 
on  petition  of  the  trustee  or  any  creditor  and  shall  only  be 
held  valid  to  the  extent  of  a  reasonable  amount  to  be  deter- 
mined by  the  court,  and  the  excess  may  be  recovered  by 
the  trustee  for  the  benefit  of  the  estate. 

United  States  Compiled  Statutes,  pages  3445,  3446. 

Amendments  of  1909,  pages  1314,  1315. 

Section  1129.— DEBTS  WHICH  MAY  BE  PROVED. 

— Debts  of  the  bankrupt  may  be  proved  and  allowed  against 
his  estate  which  are  (1)  a  fixed  liability,  as  evidenced  by  a 
judgment  or  an  instrument  in  writing,  absolutely  owing  at 
the  time  of  the  filing  of  the  petition  against  him,  whether 
then  payable  or  not,  with  any  interest  thereon  which  would 
have  been  recoverable  at  that  date  or  with  a  rebate  of 
interest  upon  such  as  were  not  then  payable  and  did  not 
bear  interest;  (2)  due  as  costs  taxable  against  an  involuntary 
bankrupt  who  was  at  the  time  of  the  filing  of  the  petition 
against  him  plaintiff  in  a  cause  of  action  which  would  pass 
to  the  trustee  and  which  the  trustee  declines  to  prosecute 
after  notice;  (3)  founded  upon  a  claim  for  taxable  costs 
incurred  in  good  faith  by  a  creditor  before  the  filing  of  a 
petition  in  an  action  to  recover  a  provable  debt;  (4)  founded 
upon  an  open  account,  or  upon  a  contract  express  or  im- 
plied; and  (5)  founded  upon  provable  debts  reduced  to 
judgments  after  the  filing  of  the  petition  and  before  the 
consideration  of  the  bankrupt's  application  for  a  discharge, 
less  costs  incurred  and  interest  accrued  after  the  filing  of  the 
petition  and  up  to  the  time  of  the  entry  of  such  judgments. 

Unliquidated  claims  against  the  bankrupt  may,  pursuant 
to  application  to  the  court,  be  liquidated  in  such  manner  as 
it  shall  direct,  and  may  thereafter  be  proved  and  allowed 
against  the  estate. 

United  States  Compiled  Statutes,  page  3447. 


UNITED   STATES   BANKRUPT   LAWS.  891 

Section   1130.— DEBTS  WHICH  HAVE  PRIORITY. 

— The  court  shall  order  the  trustee  to  pay  all  taxes  legally 
due  and  owing-  by  the  bankrupt  to  the  United  States,  State, 
county,  district,  or  municipality  in  advance  of  the  payment 
of  dividends  to  creditors,  and  upon  filing  the  receipts  of  the 
proper  public  officers  for  such  payment  he  shall  be  credited 
with  the  amount  thereof,  and  in  case  any  question  arises  as 
to  the  amount  or  legality  of  any  such  tax  the  same  shall 
be  heard  and  determined  by  the  court. 

The  debts  to  have  priority,  except  as  herein  provided, 
and  to  be  paid  in  full  out  of  bankrupt  estates,  and  the  order 
of  payment  shall  be  (1)  the  actual  and  necessary  cost  of 
preserving  the  estate  subsequent  to  filing  the  petition;  (2) 
the  filing  fees  paid  by  creditors  in  involuntary  cases;  (3)  the 
cost  of  administration,  including  the  fees  and  mileage  payable 
to  witnesses  as  now  or  hereafter  provided  by  the  laws  of 
the  United  States,  and  one  reasonable  attorney's  fee,  for 
the  professional  services  actually  rendered,  irrespective  of 
the  number  of  attorneys  employed,  to  the  petitioning  cred- 
itors in  involuntary  cases,  to  the  bankrupt  in  involuntary 
cases  while  performing  the  duties  herein  prescribed,  and 
to  the  bankrupt  in  voluntary  cases,  as  the  court  may  allow; 

(4)  wages  due  to  workmen,  clerks,  traveling  or  city  sales- 
men, or  servants,  which  have  been  earned  within  three 
months  before  the  date  of  commencement  of  proceedings, 
not  to  exceed  three  hundred  dollars  to  each  claimant;  and 

(5)  debts  owing  to  any  person  who  by  the  laws  of  the 
States  or  of  the  United  States  is  entitled  to  priority. 

In  the  event  of  the  confirmation  of  a  composition  being 
set  aside,  or  a  discharge  revoked,  the  property  acquired  by 
the  bankrupt  in  addition  to  his  estate  at  the  time  the  com- 
position was  confirmed  or  the  adjudication  was  made  shall  be 
applied  to  the  payment  in  full  of  the  claims  of  creditors  for 
property  sold  to  him  on  credit,  in  good  faith,  while  such 
composition  or  discharge  was  in  force,  and  the  residue,  if 
any,  shall  be  applied  to  the  payment  of  the  debts  which 
were  owing  at  the  time  of  the  adjudication. 

United  States  Compiled  Statutes,  pages  3447,  3448. 

Amendments  of  1909,  page  1317. 


892  BUSINESS   LAWS   FOR   BUSINESS    MEN. 

Section  1131.  — DECLARATION  AND  PAYMENT 
OF  DIVIDENDS.— Dividends  of  an  equal  per  centum  shall 
be  declared  and  paid  on  all  allowed  claims,  except  such  as 
have  priority  or  are  secured. 

The  first  dividend  shall  be  declared  within  thirty  days 
after  the  adjudication,  if  the  money  of  the  estate  in  excess 
of  the  amount  necessary  to  pay  the  debts  which  have  priority 
and  such  claims  as  have  not  been,  but  probably  will  be, 
allowed  equals  five  per  centum  or  more  of  such  allowed 
claims.  Dividends  subsequent  to  the  first  shall  be  declared 
upon  like  terms  as  the  first  and  as  often  as  the  amount  shall 
equal  ten  per  centum  or  more  and  upon  closing  the  estate. 
Dividends  may  be  declared  oftener  and  in  smaller  propor- 
tions if  the  judge  shall  so  order.  Provided,  that  the  first 
dividend  shall  not  include  more  than  fifty  per  centum  of  the 
money  of  the  estate  in  excess  of  the  amount  necessary  to 
pay  the  debts  which  have  priority  and  such  claims  as  prob- 
ably will  be  allowed;  and  provided,  further,  that  the  final 
dividend  shall  not  be  declared  within  three  months  after  the 
first  dividend  shall  be  declared. 

The  rights  of  creditors  who  have  received  dividends,  or  in 
whose  favor  final  dividends  have  been  declared,  shall  not 
be  affected  by  the  proof  and  allowance  of  claims  subsequent 
to  the  date  of  such  payment  or  declarations  of  dividends; 
but  the  creditors  proving  and  securing  the  allowance  of  such 
claims  shall  be  paid  dividends  equal  in  amount  to  those 
already  received  by  the  other  creditors,  if  the  estate  equals 
so  much,  before  such  other  creditors  are  paid  any  further 
dividends. 

Whenever  a  person  shall  have  been  adjudged  a  bankrupt 
by  a  court  without  the  United  States  and  also  by  a  court 
of  bankruptcy,  creditors  residing  within  the  United  States 
shall  first  be  paid  a  dividend  equal  to  that  received  in  the 
court  without  the  United  States  by  other  creditors,  before 
creditors  who  have  received  a  dividend  in  such  court  shall 
be  paid  any  amounts. 

United  States  Compiled  Statutes,  page  3448. 
Amendments  of  1909,  pages   1315,   1316. 


UNITED   STATES   BANKRUPT   LAWS.  893 

Section    1132.  — UNCLAIMED     DIVIDENDS.— Divi- 

dends  which  remain  unclaimed  for  six  months  after  the  final 
dividend  has  been  declared  shall  be  paid  by  the  trustee  into 
court. 

Dividends  remaining  unclaimed  for  one  year  shall,  under 
the  direction  of  the  court,  be  distributed  to  the  creditors 
whose  claims  have  been  allowed  but  not  paid  in  full,  and 
after  such  claims  have  been  paid  in  full  the  balance  shall 
be  paid  to  the  bankrupt;  provided,  that  in  case  unclaimed 
dividends  belong  to  minors,  such  minors  may  have  one  year 
after  arriving  at  majority  to  claim  such  dividends. 

United  States  Compiled  Statutes,  pages  3448,  3449. 

Section  1133. — LIENS. — A  lien  created  by  or  obtained  in 
or  pursuant  to  any  suit  or  proceeding  at  law  or  in  equity, 
including  an  attachment  upon  mesne  process  or  a  judgment 
by  confession,  which  was  begun  against  a  person  within 
four  months  before  the  filing  of  a  petition  in  bankruptcy  by 
or  against  such  person,  shall  be  dissolved  by  the  adjudication 
of  such  person  to  be  a  bankrupt,  if  (1)  it  appears  that  said 
lien  was  obtained  and  permitted  while  the  defendant  was 
insolvent  and  that  its  existence  and  enforcement  will  work 
a  preference,  or  (2)  the  party  or  parties  to  be  benefited 
thereby  had  reasonable  cause  to  believe  the  defendant  was 
insolvent  and  in  contemplation  of  bankruptcy,  or  (3)  that 
such  lien  was  sought  and  permitted  in  fraud  of  the  provisions 
of  this  law ;  or  if  the  dissolution  of  such  lien  would  militate 
against  the  best  interests  of  the  estate  of  such  person  the 
same  shall  not  be  dissolved,  but  the  trustee  of  the  estate 
of  such  person,  for  the  benefit  of  the  estate,  shall  be  subro- 
gated to  the  rights  of  the  holder  of  such  lien  and  empowered 
to  perfect  and  enforce  the  same  in  his  name  as  trustee 
with  like  force  and  effect  as  such  holder  might  have  done 
had  not  bankruptcy  proceedings  intervened. 

All  conveyances,  transfers,  assignments,  or  incumbrances 
of  his  property  or  any  part  thereof,  made  or  given  by  a 
person   adjudged   a   bankrupt,   within   four   months   prior   to 


894  BUSINESS   LAWS   FOR  BUSINESS    MEN. 

the  filing  of  the  petition,  with  the  intent  and  purpose  on  his 
part  to  hinder,  delay,  or  defraud  his  creditors,  or  any  of 
them,  are  null  and  void  as  against  the  creditors  of  such 
debtor,  except  as  to  purchasers  in  good  faith  and  for  a  pres- 
ent fair  consideration ;  and  all  property  of  the  debtor  con- 
veyed, transferred,  assigned,  or  encumbered  as  aforesaid 
shall,  if  he  be  adjudged  a  bankrupt,  and  the  same  is  not 
exempt  from  execution  and  liability  for  debts  by  the  law  of 
his  domicile,  be  and  remain  a  part  of  the  assets  and  estate 
of  the  bankrupt  and  shall  pass  to  his  trustee,  whose  duty  it 
shall  be  to  recover  and  reclaim  the  same  by  legal  proceed- 
ings or  otherwise  for  the  benefit  of  the  creditors.  And  all 
conveyances,  transfers,  or  incumbrances  of  his  property 
made  by  a  debtor  at  any  time  within  four  months  prior  to 
the  filing  of  the  petition  against  him,  and  while  insolvent, 
which  are  held  null  and  void  as  against  the  creditors  of  such 
debtor  by  the  laws  of  the  State,  Territory,  or  district  in 
which  such  property  is  situate,  shall  be  deemed  null  and 
void  under  this  law,  against  a  creditor  of  such  debtor  if 
he  be  adjudged  a  bankrupt,  and  such  property  shall  pass  to 
the  assignee  and  be  by  him  reclaimed  and  recovered  for  the 
benefit  of  the  creditors  of  the  bankrupt. 

All  levies,  judgments,  attachments,  or  other  liens,  obtained 
through  legal  proceedings  against  a  person  who  is  insolvent, 
at  any  time  within  four  months  prior  to  the  filing  of  a  peti- 
tion in  bankruptcy  against  him,  shall  be  deemed  null  and 
void  in  case  he  is  adjudged  a  bankrupt;  and  the  property 
affected  by  the  levy,  judgment,  attachment,  or  other  lien 
shall  be  deemed  wholly  discharged  and  released  from  the 
same,  and  shall  pass  to  the  trustee  as  a  part  of  the  estate  of 
the  bankrupt;  unless  the  court  shall,  on  due  notice,  order 
that  the  right  under  such  levy,  judgment,  attachment,  or 
other  lien  shall  be  preserved  for  the  benefit  of  the  estate; 
and  thereupon  the  same  may  pass  to  and  shall  be  preserved 
by  the  trustee  for  the  benefit  of  the  estate  as  aforesaid.  Pro- 
vided, that  nothing  herein  contained  shall  have  the  effect  to 
destroy  or  impair  the  title  obtained  by  such  levy,  judgment. 


UNITED   STATES   BANKRUPT   LAWS.  895 

attachment,  or  other  Hen,  of  a  bona  fide  purchaser  for  value 
who  shall  have  acquired  the  same  without  notice  or  reason- 
able cause  for  inquiry. 

United  States  Compiled  Statutes,  pages  3449,  3450. 

Section  1134.— SET-OFFS  AND  COUNTERCLAIMS. 

— In  all  cases  of  mutual  debts  or  mutual  credits  between 
the  estate  of  a  bankrupt  and  a  creditor,  the  account  shall  be 
stated,  and  one  debt  shall  be  set  off  against  the  other,  and 
the  balance  only  shall  be  allowed  or  paid. 

A  set-off  or  counterclaim  shall  not  be  allowed  in  favor  of 
any  debtor  of  the  bankrupt  which  (1)  is  not  provable 
against  the  estate;  or  (2)  was  purchased  by  or  transferred 
to  him  after  the  filing  of  the  petition,  or  within  four  months 
before  such  filing,  with  a  view  to  such  use  and  with  knowl- 
edge or  notice  that  such  bankrupt  was  insolvent  or  had  com- 
mitted  an   act   of   bankruptcy. 

United  States  Compiled  Statutes,  page  3450. 

Section  1135.— APPRAISAL  AND  SALE  OF  PROP- 
ERTY.— All  real  and  personal  property  belonging  to  bank- 
rupt estates  shall  be  appraised  by  three  disinterested  ap- 
praisers. They  shall  be  appointed  by,  and  report  to,  the 
court.  Real  and  personal  property  shall,  when  practicable, 
be  sold  subject  to  the  approval  of  the  court;  and  it  shall 
not  be  sold  otherwise  than  subject  to  the  approval  of  the 
court  for  less  than  seventy-five  per  centum  of  its  appraised 
value. 

United  States  Compiled  Statutes,  page  3451. 


PART  XII. 

AUTOMOBILE   LAW   OF   CALIFORNIA. 

Section   1136.— IMPORTANCE   OF  THE   SUBJECT. 

— California  is  the  second  state  in  the  Union  in  the  number 
of  automobiles  owned  and  used  by  its  citizens.  New  York 
is  first,  California  is  second ;  and  considering  our  beautiful 
climate,  and  the  increased  attention  being  paid  to  the  build- 
ing and  condition  of  public  highways,  it  is  reasonable  to 
expect  that  in  a  few  years  California,  with  relation  to  the 
ownership  and  use  of  motor  vehicles,  will  be  the  first 
state  in  the  Union.  Consequently,  the  subject  now  given, 
"Automobile  Law  of  California,"  is  of  very  great  importance 
and  universal  interest.  In  the  following  sections  under  the 
above  subject  will  be  found  the  law  of  California,  so  far  as 
it  has  been  enacted  and  decided  in  recent  years. 

Section   1137.— GENERAL   LAW   AND   STATUTES. 

— California  has  some  statutes,  laws  passed  regulating  the 
running  of  automobiles,  the  licensing  of  chauffeurs,  etc., 
which  will  be  found  in  this  subject.  These  statutory  laws 
are  not  very  many,  and  much  of  the  law  with  reference  to 
motor  vehicles  in  this  state,  as  elsewhere,  rests  upon  general 
principles  which  include  the  rights  and  liabilities  of  those 
who  own  or  operate  automobiles.  In  stating  the  general 
laws  just  mentioned,  and  their  application  to  the  subject  of 
automobiles  in  California,  the  author  desires  to  acknowledge 
the  great  assistance  received  from  a  new  work  for  lawyers 
published  at  Washington  in  1911,  entitled  "Law  Applied  to 
Motor  Vehicles,"  by  Charles  J.  Babbitt. 
(896) 


AUTOMOBILE   LAW    OF   CALIFORNIA.  897 

Section  1138.— AUTOMOBILE  DEFINED.— The  word 
"automobile"  is  compounded  of  other  words  taken  from  the 
Greek  and  Latin  languages,  and  modernized  in  the  French 
language.  "Auto"  is  taken  from  the  Greek,  and  means  self. 
"Mobile"  originates  from  the  Latin  mohilis,  movable,  and 
comes  to  us  from  the  French.  The  two  joined  make  the 
new  word,  "automobile,"  resulting  in  the  expression  of  some- 
thing movable,  to  which  we  attach  by  implication  the  idea 
of  a  vehicle. 

In  the  statutory  law  of  California,  the  phrase  "motor 
vehicle"  includes  all  vehicles  propelled  by  any  power  other 
than  muscular  power. 

General  Law  of  California,  page  636. 

Section  1139.—  REGISTRATION  OF  AUTOMO- 
BILES.— Every  owner  of  automobiles  shall,  for  each  auto- 
mobile owned  by  him,  file  in  the  office  of  the  Secretary  of 
State  a  statement  of  his  name  and  address,  with  a  brief 
description  of  the  vehicle  to  be  registered,  including  the 
name  of  the  maker,  factory  number,  style  of  vehicle  and 
motor  power.  Blanks  are  prepared  and  furnished  by  the 
Secretary  of  State  for  that  purpose. 

The  Secretary  of  State  must  file  the  statement  in  his  office, 
register  the  automobile  in  a  book  or  index  kept  for  the 
purpose,  and  assign  it  a  descriptive  number.  Upon  such 
registration  being  made,  the  Secretary  of  State  will  issue 
and  deliver  to  the  owner  a  seal,  of  aluminum  or  other  suitable 
metal,  circular  in  form  and  approximately  two  inches  in 
diameter,    which    shall    have    stamped    thereon    the    words 

"Registered  Motor  Vehicle  No ,  State  of  California," 

with  the  registration  number  inserted  therein;  and  this  seal 
shall  thereafter  at  all  times  be  conspicuously  displayed  on 
the  automobile  to  which  the  number  has  been  assigned. 
Upon  the  sale  of  a  motor  vehicle,  the  vendor,  except  a  manu- 
facturer or  dealer,  shall  within  ten  days  return  to  the  Secre- 
tary of  State  the  registration  seal  affixed  to  such  vehicle. 
General  Law  of  California,  pages  6Z6,  637. 


898  BUSINESS   LAWS   FOR   BUSINESS    MEN. 

Section  1140.— REGISTRATION  FEES.— The  fee  for 
filing  the  owner's  statement  in  the  office  of  the  Secretary  of 
State  and  registering  the  automobile  is  $2.00.  If  the  auto- 
mobile had  been  previously  registered,  the  certificate  issued 
thereon  must  be  returned  to  the  Secretary  of  State,  and  in 
lieu  thereof  the  Secretary  will  issue  to  the  owner  a  registra- 
tion seal  containing  the  number  of  such  previous  registration. 
The  registration  fee  in  this  case  is  $1.00. 

General  Law  of  California,  page  637. 

Section    1141.—  DISPLAYING     THE     NUMBER.— 

Every  automobile  shall  at  all  times  have  the  number  assigned 
to  it  displayed  on  the  back,  in  such  a  manner  as  to  be  plainly 
visible;  the  numbers  to  be  in  Arabic  numerals  black  on  a 
white  background,  each  not  less  than  three  inches  in  height, 
and  each  stroke  to  be  in  width  not  less  than  half  an  inch, 
and  also  as  a  part  of  such  number  the  abbreviated  name 
of  the  state  in  black  on  white  ground,  the  letters  to  be  not 
less  than  one  inch  in  height. 

General   Law  of  California,   page  637. 

Section  1142.— MANUFACTURER'S  OR  DEALER'S 
REGISTRATION. — A  manufacturer  of  or  dealer  in  auto- 
mobiles must  register  one  vehicle  of  each  style  or  type  manu- 
factured or  dealt  in  by  him,  and  he  will  be  entitled  to  as 
many  duplicate  registration  seals  for  each  type  or  style  so 
manufactured  or  dealt  in  as  he  may  desire  on  payment  of 
an  additional  fee  of  fifty  cents  for  each  duplicate  seal.  If 
a  registration  seal  and  the  corresponding  number  is  thereafter 
affixed  to  and  displayed  on  each  automobile  of  such  type  or 
.•^tyle,  while  such  automobile  is  being  operated  on  the 
public  highways,  this  will  be  deemed  a  compliance  with  the 
law  until  the  automobile  shall  be  sold  or  let  for  hire;  but 
this  provision  does  not  apply  to  a  motor  vehicle  employed 
by  a  manufacturer  or  dealer  for  private  use  or  for  hire. 
General  Law  of  California,  page  637. 

Section  1143.  — UNLAWFUL  USE  OF  PUBLIC 
HIGHWAYS  PROHIBITED.— No  automobile  shall  be 
used  or  operated  upon  the  public  highways  which  displays  a 


AUTOMOBILE   LAW    OF   CALIFORNIA.  899 

registration  seal  or  number  belonging  to  any  other  vehicle, 
or  displays  a  fictitious  registration  seal  or  number.  No  motor 
vehicle  shall  be  used  or  operated  on  the  public  highways 
unless  the  owner  has  complied  in  all  respects  with  the  laws 
of  this  state  providing  for  registration ;  except  that  any 
person  purchasing  an  automobile  from  the  manufacturer, 
dealer,  or  other  person,  is  allowed  to  operate  it  upon  the 
public  highways  for  a  period  of  five  days  after  the  purchase 
and  delivery  thereof,  provided  that  during  such  period  such 
automobile  bear  the  registration  number  and  seal  of  the 
previous  owner. 

General  Law  of  California,  pages  637,  638. 

Section  1144.  — NON  -  RESIDENT    OWNERS.  — The 

provisions  of  the  registration  law  do  not  apply  to  automobiles 
owned  by  non-residents  of  California,  and  only  temporarily 
within  this  state,  provided  such  non-resident  owners  have 
complied  with  any  law  requiring  registration  of  owners  of 
motor  vehicles  in  force  in  the  state,  territory  or  federal 
district  of  their  residence,  and  the  registration  number  show- 
ing the  initial  of  such  state,  territory  or  federal  district  is 
displayed  on  their  automobile  substantially  as  provided  by 
the  law  of  California. 

General  Law  of  California,  page  638. 

Section  1145.— CHAUFFEURS.— The  word  "chauffeur" 
is  of  French  origin,  meaning  generally  "a  warmer,  heater, 
stoker,  fireman."  In  Webster's  Internationa!  Dictionary, 
supplement  of  1904,  the  word  is  defined,  "Chaufifeur,  literally 
a  stoker,  one  who  manages  the  running  of  an  automobile.'* 
In  the  Standard  Dictionary,  a  chauffeur  is  defined  as  being 
"One  who  drives  or  operates  an  automobile."  In  the  statute 
law  of  California,  it  is  stated  that  "chauflfeur"  shall  mean  anv 
person  operating  a  motor  vehicle  as  mechanic,  employee  or 
for  hire. 

General  Law  of  California,  page  636. 

Section  1146.— REGISTRATION  OF  CHAUFFEURS. 

— Every   person   desiring   to   operate   a   motor   vehicle   as   a 
chauffeur  must  file  in  the  office  of  the  Secretary  of  State  a 


900  BUSINESS   LAWS   FOR  BUSINESS    MEN. 

Statement,  which  shall  include  his  name  and  address,  and 
the  trade  name  and  motive  power  of  the  motor  vehicle  or 
vehicles  he  is  able  to  operate,  and  he  must  pay  a  registration 
fee  of  $2.00.  The  Secretary  of  State  must  thereupon  file 
such  statement  in  his  office  and  register  such  chauffeur  in  a 
book  or  index  kept  for  that  purpose,  and  assign  him  a 
number.  The  Secretary  of  State  must  also  issue  and  deliver 
to  the  chauffeur  a  badge  of  aluminum  or  other  suitable  metal, 
oval  in  form,  and  the  greater  diameter  of  which  shall  not 
be  more  than  two  inches,  and  this  badge  must  have  stamped 

thereon  the  words,  "Registered  Chauffeur  No ,  State 

of  California,"  with  the  registration  number  inserted  therein. 
This  badge  must  always  be  worn  by  the  chauffeur  upon  his 
clothing,  in  a  conspicuous  place,  at  all  times  when  he  is  oper- 
ating a  motor  vehicle  upon  the  public  highways. 

No  registered  chauffeur  shall  voluntarily  permit  any  other 
person  to  wear  his  badge,  nor  shall  any  person  while  operat- 
ing an  automobile  wear  any  badge  belonging  to  another 
person,  or  a  fictitious  badge.  Every  person  is  prohibited 
from  operating  an  automobile  as  a  chauffeur  upon  a  public 
highway,  unless  he  shall  have  complied  in  all  respects  with 
the  requirements  of  this  law. 

Any  person  violating  the  provisions  of  this  law  shall  be 
deemed  guilty  of  a  misdemeanor,  and  upon  conviction  shall 
be  punishable  by  fine  not  exceeding  $100  or  by  imprisonment 
not  exceeding  thirty  days,  or  both,  for  the  first  offense;  and 
punishable  by  a  fine  of  not  less  than  $50  nor  more  than 
$100,  or  imprisonment  not  exceeding  thirty  days,  or  both, 
for  a  second  offense;  and  punishable  by  a  fine  of  not  less 
than  $100,  nor  more  than  $250,  or  imprisonment  not  ex- 
ceeding thirty  days,  or  both,  for  a  third  or  subsequent 
offense. 

General  Law  of  California,  pages  640,  641. 

Section  1147.— THE  LAW  OF  THE  ROAD.— High- 
ways are  public  roads,  which  every  citizen  has  a  right  to 
use.  The  rights  of  all  travelers  on  the  highway  are  reciprocal. 
For  instance,  the  law  of  the  road  requires  that  every  man 


AUTOMOBILE   LAW    OF   CALIFORNIA.  901 

restrain  the  speed  of  his  vehicle  within  such  bounds  as  will 
not  endanger  others,  considering  the  place  and  circumstances. 
The  use  of  a  highway  is  not  a  privilege,  but  a  right,  limited 
by  the  rights  of  others,  and  to  be  exercised  in  a  reasonable 
manner. 

The  law  does  not  denounce  motor  carriages,  as  such,  on 
the  public  highways.  For  so  long  as  they  are  constructed 
and  propelled  in  a  manner  consistent  with  the  use  of  the 
highway,  and  are  calculated  to  subserve  the  public  as  a 
beneficiat  means  of  transportation,  with  reasonable  safety 
to  travelers  by  ordinary  means,  they  have  an  equal  right  with 
other  vehicles  in  common  use  to  occupy  the  streets  and 
roads. 

(a)  Statutory  Regulations. — The  State  of  California,  and 
municipalities  within  the  state,  have  the  right  to  make  regula- 
tions which  shall  govern  the  use  of  public  highways  by  auto- 
mobiles. While  the  owner  of  an  automobile  has  the  same 
right  to  use  the  highways  as  owners  of  other  vehicles  have, 
where  the  statute  requires  certain  things  to  be  done  by  him, 
he  must  obey.  And  in  operating  his  machine  on  the  high- 
ways he  must  not  only  exercise  reasonable  care  and  caution, 
for  the  safety  of  others,  but  he  must  do  what  the  statute 
requires  when  the  conditions  therein  referred  to  arise. 

(b)  Passing  to  the  Right. — Under  the  common  law, 
the  law  of  the  road  is  based  upon  custom.  The  term  "law  of 
the  road,"  or  "rule  of  the  road,"  means  the  custom  of  a  country 
with  regard  to  the  passing  of  those  who  meet  on  the  highway. 
•It  is  the  custom  in  Great  Britain  for  those  who  meet  on  the 
highway  to  pass  to  the  left.  Generally  in  continental  Europe, 
and  everywhere  in  the  United  States,  teams  or  riders  ap- 
proaching each  other  on  the  highway  are  expected  to  keep 
to  the  right  of  the  center  of  the  traveled  part  of  the  road. 
In  most  of  the  United  States  laws  have  been  passed  regu- 
lating this  matter.    In  California  the  statute  reads  as  follows: 

"Whenever  a  person  operating  a  motor  vehicle  shall  meet 
on  a  public  highway  any  other  person  riding  or  driving  a 
horse  or  horses  or  other  livestock,  or  any  other  vehicles,  the 


902  BUSINESS   LAWS   FOR   BUSINESS   MEN. 

person  so  operating  such  motor  vehicle  shall  seasonably  turn 
the  same  to  the  right  of  the  center  of  such  highway,  so  as  to 
pass  without  interference.  Any  such  person  so  operating 
a  motor  vehicle,  shall,  on  overtaking  any  such  horse,  livestock 
or  other  vehicle,  pass  on  the  left  side  thereof,  and  the  rider 
or  driver  of  such  horse,  livestock  or  other  vehicle,  shall,  as 
soon  as  practicable,  turn  to  the  right  so  as  to  allow  free 
passage  on  the  left.  Any  such  person  so  operating  a  motor 
vehicle  shall,  at  the  intersection  of  public  highways,  keep  to 
the  right  of  the  intersection  of  the  centers  of  such  highways 
when  turning  to  the  right,  and  pass  to  the  right  of  such  inter- 
section when  turning  to  the  left." 

General  Law  of  California,  page  639. 

(c)  Brakes  and  Other  Appliances. — Safety  appliances 
for  automobiles  are  required  by  statute.  Every  automobile, 
while  in  use  on  a  public  highway  in  this  state,  must  be 
provided  with  good  and  efficient  brakes,  and  also  with  a 
suitable  bell,  horn  or  other  signal ;  and  must  be  so  con- 
structed as  to  exhibit,  during  the  period  from  one  hour  after 
sunset  to  one  hour  before  sunrise,  two  lamps  showing  white 
lights  visible  within  a  reasonable  distance  in  the  direction 
towards  which  it  is  proceeding,  showing  the  registered  number 
of  the  automobile  in  separate  Arabic  numerals,  not  less  than 
one  inch  in  height  and  each  stroke  not  less  than  one-quarter 
of  an  inch  in  width,  and  also  a  red  light  visible  in  the  re- 
verse direction. 

General  Law  of  California,  page  639. 

(d)  Speed  Limitations. — To  persons  riding  along  or 
crossing  our  public  roads,  and  especially  our  city  streets, 
the  rapidly  moving  automobile  is  a  constant  source  of  danger. 
While  owners  of  automobiles  have  the  right  to  drive  them 
upon  public  streets,  yet  the  proper  protection  of  the  equal 
rights  of  all  to  use  the  highways  necessarily  requires  the 
adoption  of  different  regulations  for  the  different  methods 
of  such  use;  and  what  may  be  a  safe  rate  of  speed  at  which 
to  ride  a  bicycle  or  drive  a  horse  may  be  an  unreasonably 


AUTOMOBILE  LAW   OF   CALIFORNIA.  903 

rapid  rate  at  which  to  drive  an  automobile  in  the  same  place. 
For  the  reason  stated,  and  others  which  might  be  given,  the 
driver  of  an  automobile  at  a  high  rate  of  speed  through  city 
streets  at  times  when  and  places  where  other  vehicles  are 
constantly  passing,  and  men,  women  and  children  are  liable 
to  be  crossing  or  around  corners  on  the  streets,  or  in  pass- 
ing by  street  cars  from  which  passengers  have  just  alighted 
or  may  be  about  to  alight,  or  in  other  similar  places  and 
situations  where  people  are  liable  to  fail  to  observe  an 
approaching  automobile,  is  bound  to  take  notice  of  the 
peculiar  danger  of  collisions  in  such  places.  He  cannot 
secure  himself  from  liability  by  merely  sounding  his  horn. 
He  must  run  his  car  only  at  such  speed  as  will  enable  him 
to  stop  it  to  avoid  collisions.  If  he  fails  to  do  so,  he  is 
responsible  for  the  damage  he  thereby  causes.  The  statute 
law  of  California  provides,  that  no  person  shall  operate  a 
motor  vehicle  on  a  public  highway  at  a  rate  of  speed  greater 
than  is  reasonable  and  proper,  having  regard  to  the  traffic 
and  use  of  the  highway,  or  so  as  to  endanger  the  life  or 
limb  of  any  person  or  the  safety  of  any  property;  or  in 
any  event  on  any  public  highway,  where  the  territory  con- 
tiguous thereto  is  closely  built  up,  at  a  greater  rate  than 
one  mile  in  six  minutes,  or  elsewhere  in  any  incorporated 
city  or  town  at  a  greater  rate  than  one  mile  in  four  minutes, 
or  elsewhere  outside  of  any  incorporated  city  or  county, 
city  or  town,  at  a  greater  rate  than  one  mile  in  three 
minutes. 

General  Law  of  California,  page  638. 

(e)  Approaching  or  Running  Over  Bridge. — Upon 
approaching  a  bridge,  dam,  sharp  curve,  or  steep  descent, 
and  also  in  traversing  such  bridge,  dam,  curve,  or  descent, 
a  person  operating  a  motor  vehicle  shall  have  it  under  con- 
trol, and  operate  it  at  a  rate  of  speed  not  exceeding  one 
mile  in  fifteen  minutes,  and  upon  approaching  a  crossing  of 
intersecting  highways,  at  a  speed  that  is  reasonable  and 
proper,  having  regard  to  the  traffic  then  on  such  highway 
and  the  safety  of  the  public. 


904  BUSINESS   LAWS   FOR  BUSINESS    MEN. 

(f)  Warning  of  Approach. — Upon  approaching  a  person 
walking  in  the  highway,  or  a  horse  or  horses,  or  other  Uve- 
stock  being  ridden,  led  or  driven  thereon,  a  person  operating 
a  motor  vehicle  shall  give  reasonable  warning  of  such  ap- 
proach, and  use  every  reasonable  precaution  to  insure  the  safety 
of  such  person  or  animal,  and  in  the  cases  of  horses  or  other 
livestock  to  prevent  frightening  the  same. 

(g)  Passing  Frightened  Animals. — A  person  operating 
a  motor  vehicle  shall,  at  request  or  on  signal  by  putting  up 
the  hand  from  a  person  riding,  leading  or  driving  a  restive 
horse  or  horses,  or  other  livestock,  bring  such  motor  vehicle 
immediately  to  a  stop,  and,  if  traveling  in  the  opposite  direc- 
tion, remain  stationary  so  long  as  may  be  reasonable  to  allow 
such  animal  to  pass,  and,  if  traveling  in  the  same  direction, 
use  reasonable  caution  in  thereafter  passing  such  horse  or 
animal;  provided,  that  in  case  such  horse  or  animal  appears 
badly  frightened,  or  the  person  operating  such  motor  vehicle 
is  requested  to  do  so,  such  person  shall  cause  the  motor  of 
such  vehicle  to  cease  running  so  long  as  shall  be  reasonably 
necessary  to  prevent  accident  and  insure  safety  to  others. 

General  Law  of  California,  page  638. 

Section  1148.— DUTY  OF  OPERATOR  IN  CASE  OF 
ACCIDENT. — In  case  of  accident  or  injury  to  a  person  or 
property  in  public  highways,  due  to  the  operation  thereon 
of  a  motor  vehicle,  the  person  operating  such  vehicle  shall 
stop,  and,  upon  request  of  the  person,  give  such  person  his 
name  and  address,  and,  if  not  the  owner,  the  name  and 
address  of  such  owner. 

General  Law  of  California,  page  639. 

Section  1149.— SETTING  ASIDE  PUBLIC  HIGH- 
WAYS FOR  SPEED  TESTS  OR  RACES.  — Local 
authorities  may  set  aside  for  a  given  time  a  specified  public 
highway  for  speed  tests  or  races,  to  be  conducted  under 
proper  restrictions  for  the  safety  of  the  public. 
General  Law  of  California,  page  639. 


AUTOMOBILE   LAW    OF   CALIFORNIA.  905 

Section    1150.— DAMAGES     FOR    NEGLIGENCE.— 

Where  a  person  or  property  are  injured  by  the  negligent  run- 
ning of  an  automobile,  the  owner  and  the  chauffeur,  or  both, 
are  liable  for  damages,  but  the  owner  is  responsible  for  the 
act  of  his  chauffeur  only  when  such  act  is  done  in  the  course 
of  his  employment.  Therefore,  if  the  chauffeur  should  take 
the  machine  out,  without  the  consent  or  knowledge  of  the 
owner,  and  at  a  time  when  he  was  prohibited  from  taking  it 
out,  the  owner  would  not  be  responsible,  for  the  chauffeur 
would  not  be  acting  at  such  time  in  the  course  of  his  em- 
ployment. The  owner  is  not  responsible  for  the  act  of  a 
borrower  of  his  machine.  But  the  owner  is  responsible  for 
the  act  of  a  friend  who  may  be  driving  for  him,  where  the 
accident  is  caused  by  the  carelessness,  negligence,  or  the 
incompetence  of  such  friend.  If  a  person  other  than  the 
owner  has  actual  control  of  the  machine,  and  employs  the 
chauffeur,  at  the  time  of  the  accident,  he,  and  not  the  owner, 
is  responsible  for  damages. 

Section  1151.— WHAT  IS  NEGLIGENCE.— What  acts 
on  the  part  of  the  person  operating  a  machine  will  constitute 
negligence  depends  upon  the  peculiar  circumstances  of  each 
case.  If  the  operator  fails  or  refuses  to  do  what  the  law 
requires,  in  the  operation  of  his  machine,  this  of  itself  will 
constitute  negligence;  or  if  he  fails  to  observe  a  degree  of 
care  on  the  streets  or  highways  which  an  ordinary  prudent 
man  would  be  expected  to  observe,  this  would  be  negligence 
on  his  part  for  which  he  will  be  liable.  In  all  cases,  however, 
it  is  for  the  jury  to  say  whether  the  operator  was  in  fact 
negligent,  or  whether  the  person  receiving  an  injury  was  him- 
self careless  and  contributed  to  his  own  hurt. 

Section  1152.— RELATION  BETWEEN  EMPLOYER 
AND  CHAUFFEUR.— The  acts  of  the  chauffeur,  in  oper- 
ating an  automobile,  within  the  authority  of  his  employment, 
are  the  acts  of  a  servant.  The  relation  of  master  and  servant 
exists  between  the  owner  and  his  employee,  and  in  operating 


906  BUSINESS    LAWS   FOR   BUSINESS    MEN. 

the  machine  the  chauffeur  is  the  agent  of  the  employer,  and 
the  employer  is  responsible  for  the  acts  of  his  agent.  In 
civil  actions,  the  person  injured  may  sue  the  chauffeur  or  the 
owner,  or  both,  for  damages. 

Section  1153.— CONFLICT  OF  ORDERS  AND  DUTY 

— It  is  no  defense  for  the  chauffeur  to  plead  that  his  viola- 
tion of  law  or  duty  was  in  obedience  to  the  commands 
of  his  employer.  The  chauffeur  occasionally  finds  himself 
between  the  horns  of  a  dilemma.  Such  a  situation  arises 
when  he  receives  an  order  from  his  employer,  to  do  that 
which  he  knows  from  his  knowledge  of  the  law  to  be  a 
violation  thereof.  The  persistency  of  the  employer  may  be 
such  as  to  threaten  the  loss  of  position  in  case  of  disobedi- 
ence. The  dilemma  presents  itself  to  the  chauffeur  in  this 
way:  "If  1  disobey  the  order  and  obey  the  law,  I  lose  my 
position.  If  I  obey  the  order  disobeying  the  law,  I  risk  a 
chance  of  being  caught  in  the  latter  for  the  sake  of  a 
certainty  of  saving  my  position."  Obedience  to  the  law 
should  control  the  chauffeur  in  any  view  of  the  matter, 
because  if  he  loses  his  position  by  disobedience  to  order,  he 
still  has  his  license,  and  may  be  employed  again ;  but  if  he 
loses  his  license,  not  only  does  he  lose  his  position,  but  he 
also  loses  the  chance  of  being  employed  by  someone  else.  In 
any  event,  if  he  disobeys  the  laws  he  runs  an  obvious  risk, 
and  it  does  not  lie  with  him  to  complain  if  the  law  finds 
him  out. 

Babbitt's  Law  Applied  to  Motor  Vehicles,  page  204. 

Section  1154.— RESPONSIBILITY  OF  TAXICAB 
DRIVERS. — The  chauffeur  of  a  taxicab,  or  of  a  sight- 
seeing motor  omnibus,  will  be  held  to  the  exercise  of  more 
abundant  caution  and  to  the  exhibition  of  a  finer  skill  than 
would  be  required  of  the  operator  of  a  private  car.  This  is 
upon  the  theory  that  by  reason  of  his  constant  practice,  he 
is  expected  to  obtain  the  highest  attainable  dexterity. 


AUTOMOBILE   LAW    OF   CALIFORNIA.  907 

Section  1155.— DEMANDING  OR  ACCEPTING  A 
COMMISSION  OR  BONUS.— Good  faith  demands  that  an 
agent  should  not  without  the  knowledge  and  consent  of  the 
principal  make  any  profit  out  of  the  agency,  beyond  his  stipu- 
lated pay.  If,  therefore,  the  chauffeur,  who  under  general 
or  special  instructions  should  purchase  supplies  or  order 
repairs,  demands  or  accepts  a  commission  or  bonus,  or  other 
fee  or  reward,  from  the  person  to  whom  the  order  is  given 
or  from  whom  the  purchase  is  made,  he  is  guilty  of  a 
violation  of  his  duty  to  his  employer. 

Section  1156.— ORDERING  SUPPLIES  AND  RE- 
PAIRS.— A  chauffeur  by  virtue  of  his  position  has  no 
authority  to  contract  for  general  repairs.  In  cases  of  sudden 
or  unexpected  breakdown,  or  "road  trouble,"  he  may  bind 
his  employer  in  ordering  such  repairs  of  a  temporary  char- 
acter, or  necessary  supplies,  as  will  enable  him  to  continue 
his  journey;  but  he  has  at  no  time  implied  authority  to  make 
contracts  for  repairs  of  a  general  or  permanent  nature. 

Section  1157.— PLACING  CAR  IN  STORAGE.— It  is 

the  chauffeur's  duty,  in  case  of  a  breakdown  on  the  road, 
to  put  his  employer's  car  for  safe  keeping  in  some  proper 
place,  and  the  employer  will  be  responsible  for  the  proper 
expenses  of  such  storage. 

Section  1158.— GENERAL  RULES  AS  TO  THE  EX- 
ERCISE OF  CARE.— Travelers  must  always  exercise  at 
least  ordinary  care  and  skill,  being  guilty  of  no  want  of 
proper  diligence,  nor  of  rashness  or  mismanagement.  In 
automobile  cases,  the  burden  usually  rests  heavily  on  the  motor- 
ist, by  reason  of  the  character  of  the  vehicle.  The  meaning  of 
the  word  care,  and  what  constitutes  due  care,  are  relative. 
They  may  mean  one  thing  on  a  country  road,  and  another 
thing  on  the  crowded  street  of  a  city.  The  operator  of  an 
automobile  must  use  reasonable  care  and  skill,  and  a  traveler 
on  foot  or  in  another  vehicle  must  also  take  care  of  himself. 
A  public  highway  is  open  in  all  its  length  and  breadth  to 
the  reasonable,  common  and  equal  use  of  the  people,  on  foot 


908  BUSINESS    LAWS   FOR   BUSINESS    MEN. 

or  in  vehicles.  The  owner  of  an  automobile  has  the  same 
right  as  the  owner  of  other  vehicles  to  use  the  highway, 
and  like  them  he  must  exercise  reasonable  care  and  caution 
for  the  safety  of  others.  A  traveler  on  foot  has  the  same 
right  to  the  use  of  the  public  highway  as  an  automobile 
or  any  other  vehicle.  In  using  such  highway  all  persons  are 
bound  to  the  exercise  of  reasonable  care  to  prevent  accidents. 
Such  care  must  be  in  proportion  to  the  danger  in  each  case. 
There  is  a  like  duty  of  exercising  reasonable  care  on  the 
part  of  all.  The  person  having  the  management  of  the 
automobile,  and  the  traveler  on  foot,  are  both  required  to  use 
such  reasonable  care,  circumspection,  prudence,  and  discretion 
as  circumstances  require;  an  increase  of  care  being  required 
where  there  is  an  increase  of  danger;  and  both  are  bound 
to  the  reasonable  use  of  all  their  senses  for  the  prevention 
of  accident,  and  to  the  exercise  of  all  such  reasonable  caution 
as  ordinary  careful  and  prudent  persons  would  exercise  under 
the  same  circumstances.  The  more  dangerous  the  character 
of  the  vehicle  or  machine,  and  the  greater  its  liability  to  do 
injury  to  others,  the  greater  degree  of  care  and  caution  is 
required  in  its  use  and  operation.  The  person  traveling  by 
foot  on  a  public  road  is  required  to  use  reasonable  care  to 
avoid  collision  with  an  automobile,  and  if  he  saw  the  auto- 
mobile before  it  struck  him,  or  by  the  reasonable  use  of  his 
senses  could  have  seen  it,  in  time  to  avoid  the  injury,  it 
was  his  duty  to  get  out  of  the  way.  It  is  the  duty  of  the 
motorist  to  keep  a  vigilant  watch  ahead  for  other  vehicles, 
and  on  the  first  appearance  of  danger  to  take  proper  steps 
to  avoid  it. 

Section  1159.— CARE  WHILE  TRAVELING  AT 
NIGHT. — 'In  running  a  car  at  night,  the  exercise  of  ordi- 
nary care  requires  greater  vigilance  than  in  the  daytime, 
particularly  in  a  strange  locality;  and  it  is  negligent  to  run 
an  automobile  without  lights  sufficient  to  enable  the  traveler 
to  see  objects  ahead  of  him.  The  same  principle  applies 
where  rain,  mist,  or  fog  prevail  to  obscure  the  outlook.     In 


AUTOMOBILE   LAW    OF    CALIFORNIA.  909 

a  case  at  Los  Angeles,  the  evidence  showed  that  at  about 
six  o'clock  P.  M.,  while  a  woman  was  crossing  Main  Street, 
she  was  struck  and  knocked  down  by  an  automobile  operated 
by  defendant,  which  she  did  not  see  until  it  was  upon  her, 
as  a  result  of  which  she  sustained  serious  injuries;  and  that 
it  was  dark  at  the  time,  and  before  attempting  to  cross  the 
street,  she  looked  up  and  down  the  street  and  saw  no  vehicle 
approaching.     There  were  no  lights  on  the  machine.     There 
was  introduced  in  evidence  an  ordinance  of  the  city  of  Los 
Angeles,  making  it  unlawful  to  operate  a  machine  upon  the 
streets  of  the  city  between  one-half  hour  after  sunset  and  one- 
half  hour  before  sunrise,  unless  such  automobile  displayed  a 
lamp  or  lantern  throwing  a  white  light  toward  the  front  and 
a  red  light  toward  the  rear  of  the  machine.     On  the  day  of 
the  collision  the  sun  set  at  4:50  P.  M.     The  court  instructed 
the  jury  that  a  failure  to  comply  with  the  municipal  ordinance 
was  negligent  in  itself;  and  that  if  they  found  the  plaintiff 
had  not  done  anything  to  bring  the  injury  upon  herself,  they 
must  give  a  verdict  of  damages  against  the  defendant.     The 
District  Court  of  Appeals,  in  deciding  the  case,  said  that  it 
must  assume,  in  the  absence  of  any  proof  to  the  contrary, 
that  plaintiff  was  in  the  possession  of  the  sense  of  seeing, 
and  hence,  had  the  car  possessed  the  Hghts  required  by  the 
ordinance,  she  might  have  seen  the  car  approach  and  avoided 
the  collision.    Such  evidently  was  the  view  entertained  by  the 
jury  and  they  were  justified   in  their  verdict   for   damages. 
(Decided  by  the  District  Court  of  Appeals,   in  the  case  of 
Fenn  vs.  Clark,  which  decision  is  printed  in  Volume  103  of 
the  Pacific  Reporter,  page  944.) 

Section  1160.— CLIMBING  OR  HANGING  ON  BE- 
HIND.— It  is  not  the  duty  of  a  driver  of  an  automobile  to 
keep  a  lookout  behind,  so  as  to  see  whether  children  or  adults 
are  riding  on  the  rear  end.  Instead,  his  duty  is  to  look 
ahead,  to  avoid  collision  with  persons  or  with  other  vehicles. 
Nor  does  he  owe  even  to  children  any  duty  to  prevent  them 
from  climbing  upon  his  vehicle  while  in  motion ;  but  if  his 


910  BUSINESS   LAWS   FOR  BUSINESS    MEN. 

machine  should  be  standing  still,  in  the  street  or  at  the  curb, 
it  be  would  be  his  duty  as  far  as  possible  to  prevent  children 
from  getting  upon  or  occupying  the  vehicle. 

Section  1161.— FAILURE  TO  SLOW  DOWN  IN 
CASE  OF  ACCIDENT. — Safety  must  always  be  reason- 
able and  proper,  having  regard  to  the  conditions  prevailing 
at  the  time.  No  blowing  of  a  horn,  or  of  a  whistle,  nor  the 
ringing  of  a  bell  or  gong  is  sufficient,  if  unaccompanied  by 
an  attempt  to  slow  the  speed,  when  the  circumstances  are 
such  as  to  demand  a  slower  speed  to  avoid  an  accident. 

Section  1162.— DRIVING  ON  WRONG  SIDE  OF 
ROAD. — The  law  does  not  expressly  require  an  automobile 
to  use  any  particular  portion  of  the  traveled  part  of  a  road, 
except  in  the  case  of  meeting  another  traveler,  or  crossing 
a  bridge,  when  the  statute  requires  that  he  should  turn  in 
a  certain  direction.  He  is  not  obliged  to  keep  on  the  right 
rather  than  on  the  left  side,  unless  he  is  about  to  meet  and 
pass  another  vehicle  or  a  traveler  on  foot.  Until  a  person 
sees  a  traveler  approach,  he  is,  therefore,  in  the  exercise 
of  a  legal  right  in  traveling  on  the  left  side  of  the  road. 
It  is  only  when  the  contingency  stated  in  the  statute  arises 
that  he  is  obliged  to  turn  to  the  right.  But  custom  in  Cali- 
fornia, as  well  as  in  most  of  the  other  states  of  the  Union, 
makes  the  right  side  of  the  road  the  one  upon  which  an 
automobile  should  be  driven  in  its  own  direction.  And  if 
the  driver  chooses  to  run  his  machine  at  a  high  rate  of 
speed  on  the  wrong  side  of  the  road,  which  would  be  the 
driver's  left  hand  side  of  the  way,  the  driver  is  bound  to 
exercise  greater  diligence  to  avoid  other  travelers  than  if  he 
were  on  the  right  side.  And  his  failure  to  keep  on  the  right 
side  of  the  road,  or,  in  other  words,  the  fact  that  he  was 
running  upon  the  wrong  side  of  the  way,  would  be  evidence 
tending  to  show  that  he  was  at  fault,  in  a  suit  for  damages 
against  him. 

When  traveling  close  to  the  curb,  the  driver  of  an  auto- 
mobile must  be  observant,  not  only  of  what   is   directly   in 


AUTOMOBILE   LAW    OF   CALIFORNIA.  911 

front  of  him,  but  of  pedestrians  who  are  on  the  sidewalk 
and  who  may  step  directly  in  front  of  the  car;  and  especially 
is  this  so  when  the  operator  is  on  the  wrong  side  of  the 
road  and  near  the  curb,  because  the  foot  passengers  are  less 
likely  to  look  in  that  direction  for  an  approaching  vehicle. 

Section    1163.—  INTOXICATION    OF    DRIVER.— 

Any  person  operating  or  driving  an  automobile,  motor  cycle 
or  other  motor  vehicle  who  becomes  or  is  intoxicated  while 
so  engaged  in  operating  or  driving  such  automobile,  motor 
cycle  or  other  motor  vehicle,  shall  be  guilty  of  a  mis- 
demeanor. 

Act  of  the  Legislature,  approved  March  1,  1911. 

Any  person  operating  or  driving  an  automobile,  motor 
cycle,  or  other  motor  vehicle,  who  becomes  or  is  intoxicated 
while  so  engaged  in  operating  or  driving  such  automobile, 
motor  cycle  or  other  motor  vehicle,  and  who  by  reason  of 
such  intoxication  does  any  act,  or  neglects  any  duty  imposed 
by  law,  which  act  or  neglect  of  duty  causes  the  death  of,  or 
bodily  injury  to,  any  person,  shall  be  punishable  by  imprison- 
ment in  the  state's  prison  not  exceeding  five  years,  or  in  the 
county  jail  not  exceeding  one  year,  or  by  fine  not  exceeding 
$500,  or  by  both  such  fine  and  imprisonment. 

Act  of  the  Legislature,  approved  March  7,  1911. 

Section  1164.  — COLLISION  WITH  OTHER  VE- 
HICLES.— Whenever  an  automobile,  motor  cycle,  or  other 
motor  vehicle  strikes  any  person,  or  collides  with  any  vehicle 
containing  a  person,  the  driver  of,  and  all  persons  in  such 
automobile,  motor  cycle  or  other  motor  vehicle  who  have  or 
assume  authority  over  such  driver,  shall  immediately  cause 
such  automobile,  motor  cycle  or  other  motor  vehicle  to  stop; 
and  shall  forthwith  render  to  the  person  struck,  or  to  the 
occupants  of  such  vehicle,  all  needed  assistance,  including  the 
carrying  of  such  person  or  occupant  to  a  physician  or  surgeon 
for  medical  or  surgical  treatment,  if  such  treatment  seems  to 
be  required,  or  if  such  carrying  is  requested  by  the  person 


912  BUSINESS   LAWS   FOR   BUSINESS    MEN. 

struck  or  occupying  such  vehicle ;  and  such  driver  and  person 
having  or  assuming  authority  over  him,  shall  forthwith  give 
to  the  occupants  of  such  vehicle  or  person  struck,  the  number 
of  such  automobile,  motor  cycle  or  other  motor  vehicle,  with 
the  name  and  address  of  the  driver  and  of  each  person  in 
such  automobile,  motor  cycle  or  other  motor  vehicle,  at  the 
time  of  such  striking  or  collision.  Any  person  violating  any 
provision  of  this  law  is  punishable  by  imprisonment  in  the 
state  prison  not  exceeding  five  years,  or  in  the  county  jail 
not  exceeding  one  year,  or  by  fine  not  exceeding  five  thous- 
and dollars,  or  by  both  such  fine  and  imprisonment. 

Act  of  the  Legislature,  approved  February  20,  1911. 

Section    1165.— JUMPING    FROM    THE    CAR.— The 

duty  of  the  operator  of  an  automobile,  at  times  of  emer- 
gency and  peril,  is  like  those  of  a  locomotive  engineer 
similarly  situated.  If  the  engineer  jumps  from  his  station 
needlessly,  if  he  abandons  his  post  when  danger  threatens 
whereby  the  lives  of  others  are  sacrificed,  which  he  might 
have  saved  by  remaining,  he  is  culpable.  The  same  may  be 
said  of  the  automobile  operator.  He  may  jump  to  save  his 
own  life,  if  it  appears  to  him  that  death  is  imminent,  and 
the  law  will  not  blame  him.  But  if  he  believes  his  duty 
requires  him  to  do  what  he  can  to  save  those  under  his 
charge,  and  he  braves  death  in  the  discharge  of  that  duty, 
the  law  has  for  him  no  censure,  but  has,  on  the  contrary, 
high  commendation  and  respect. 

Section  1166.— LEAVING  MACHINE  UNGUARDED 
AT  STREET  CURB.— The  operation  of  an  automobile 
upon  the  crowded  streets  of  a  city  necessitates  exceeding 
carefulness  on  the  part  of  the  operator.  When  the  person 
in  charge  of  an  automobile  leaves  it  on  the  street,  at  the  curb 
or  elsewhere,  he  is  not  required,  before  leaving  it,  to  chain 
the  machine  to  a  post,  or  in  some  other  way  to  fasten  it 
so  that  it  would  be  impossible  for  it  to  be  started  by  a  third 
person.     But  it  is  his  duty  to  take  all  reasonable  care  that 


AUTOMOBILE   LAW    OF   CALIFORNIA.  913 

no  injury  will  result  to  the  persons  or  property  of  others 
during  the  time  the  machine  is  there,  especially  if  the 
car  be  left  standing  alone  with  no  person  in  charge  of  it. 

Section  1167.— PARTY  DRIVING  A  LIGHT  VE- 
HICLE BOUND  TO  GIVE  WAY  TO  A  HEAVY 
LOADED  ONE. — The  driver  of  a  light  team  is  bound  to 
give  way  or  get  out  of  the  way  of  the  party  who  is  driving 
a  heavily  loaded  team.  So  in  the  actual  use  of  the  highway, 
each  may  use  it  to  his  own  best  advantage,  but  with  a  just 
regard  to  a  like  right  of  others.  Persons  in  light  carriages, 
for  the  conveyance  of  persons  only,  have  occasion  and  of 
course  a  right  when  not  expressly  limited  by  law,  to 
travel  at  a  high  rate  of  speed  so  that  they  do  not  endanger 
others.  So  in  regard  to  the  drivers  of  fast  and  slow  car- 
riages, each  must  respect  the  rights  of  the  other.  If  a 
heavily  loaded  team  be  passing  along  a  street  wide  enough 
only  for  one  carriage,  and  an  automobile  follows,  the  last 
must  for  the  time  being  be  restrained  in  its  speed,  because 
of  the  narrowness  of  the  way  and  the  ordinary  slowness  of 
the  team  ahead.  If  parties,  those  traveling  in  the  same 
direction,  should  come  to  a  portion  of  the  way  wide  enough 
for  carriages  to  pass  each  other,  it  is  obvious  that  if 
the  driver  of  the  heavy  team  would  turn  to  either  side  it 
would  give  the  automobile  room  to  pass,  whereas,  if  he 
should  keep  the  middle,  the  space  on  either  side  would 
not  permit  any  carriage  to  pass.  But  if  no  impediment 
should  intervene  and  no  circumstances  should  render  it 
dangerous  for  the  driver  of  the  team  to  bear  off,  it  would 
be  his  duty  to  do  so,  although  it  might  suit  his  conveni- 
ence better  to  keep  in  the  middle;  and  his  refusal  thus  to 
bear  off  would  be  an  abuse  of  his  own  equal  and  common 
right,  for  which,  if  injurious  to  another,  an  action  for  dam- 
ages  would  lie. 

Section     1168.— OVERTAKING     AND     PASSING.— 

The  operator  of  an  automobile  on  approaching  from  behind 
a   vehicle    going    in   the    same    direction,    and    intending    to 


914  BUSINESS   LAWS   FOR   BUSINESS    MEN. 

pass  it  on  the  proper  side,  should  seasonably  sound  his 
horn — not  only  to  warn  the  driver  of  the  vehicle  ahead  of 
such  intention,  but  also  to  keep  on  his  own  side  of  the  road. 
Under  such  circumstances  the  passing  vehicle  should  not 
unduly  crowd  the  vehicle  being  passed.  If  no  impediment 
intervenes,  the  driver  ahead  is  bound  to  give  way  to  the 
vehicle  behind   wishing  to  pass. 

Section  1169.— CROSSING  STREETS  AND  TURN- 
ING CORNERS. — A  person  driving  a  vehicle  across  a 
street  is  bound  to  see  that  it  does  not  interfere  with  others 
in  the  proper  exercise  of  their  rights  of  passage.  The 
situation  is  the  same  in  cases  where  one  vehicle  is  passing 
along  one  street,  and  another  is  turning  into  it  from  another 
or  intersecting  street.  In  all  such  cases  there  is  no  fixed 
regulation,  and  the  rule  of  the  common  law  prevails,  requir- 
ing due  care  on  the  part  of  both.  When  an  automobile  com- 
ing out  of  one  street  turns  sharply  to  the  left  hand,  in  other 
language,  "cuts  the  corner,"  the  motorist  fails  in  his  duty, 
and  is  therefore  guilty  of  negligence. 

Section  1170.— RUNNING  OVER  PEDESTRIANS.— 

Pedestrians  have  a  right  to  travel  anywhere  upon  a  highway, 
and  are  not  confined  in  the  right  to  cross-walks.  Persons 
driving  automobiles  along  the  road  are  liable  if  they  do  not 
take  care  so  as  to  avoid  driving  against  the  foot  passengers 
who  are  passing  on  the  road.  A  man  has  a  right  to  walk  in 
the  road,  if  he  pleases.  It  is  a  way  for  foot  passengers, 
as  well  as  for  carriages.  All  persons  have  a  right  to  walk 
in  the  road,  and  are  entitled  to  the  exercise  of  reasonable 
care  on  the  part  of  those  who  drive  automobiles  on  it.  But 
pedestrians,  as  well  as  all  others,  are  bound  to  exercise 
care  according  to  the  circumstances,  and  especially  bound  to 
look  where  they  are  going.  It  is  negligence  for  a  foot 
traveler  to  attempt  to  cross  the  public  thoroughfare  ahead 
of  vehicles  of  any  kind,  upon  nice  calculations  of  the  chances 
of  injury.  If  such  attempt  be  made,  and  the  calculations  fail 
to  the  person's  harm,  he  can  have  no  redress  for  injuries 


AUTOMOBILE   LAW    OF   CALIFORNIA.  915 

received  in  the  mistaken  effort.  It  is  not  the  exercise  of 
common  or  ordinary  care  on  his  part.  When  alighting  from 
a  street  car,  a  person  is  not  bound  as  a  matter  of  law  to 
look  both  ways;  but  he  must  look  where  he  is  going,  and 
he  must  not  walk  blindly  into  danger.  A  driver  of  an  auto- 
mobile has  the  right  to  suppose  that  a  person,  whether  on 
foot  or  in  a  vehicle,  when  duly  warned  in  sufficient  season, 
will  not  cross  his  path,  or  attempt  to  do  so;  but  if  he  does 
make  such  attempt,  it  is  the  duty  of  the  driver  to  do  every- 
thing in  his  power  to  avoid  an  accident.  When  two  auto- 
mobiles are  passing,  it  is  the  duty  of  each  driver  to  look  out 
for  pedestrians  suddenly  appearing  from  behind  the  other 
automobile. 

Section  1171.— INJURY  OF  PERSONS  ENGAGED 
AT  WORK  IN  THE  ROADWAY.— One  who  carelessly 
injures  a  laborer  or  other  person  whose  vocation  calls  upon 
him  to  be  in  the  highway,  is  liable  for  the  injury  inflicted. 
In  Los  Angeles,  an  employee  of  the  Los  Angeles  Street 
Railroad  Company  was  oiling  the  tracks  on  the  street,  in 
pursuance  of  his  employment.  While  he  was  so  engaged, 
the  driver  of  an  automobile  proceeding  along  East  First 
Street,  at  a  high  rate  of  speed,  carelessly  and  negligently 
ran  into  him.  The  jury  gave  a  verdict  for  the  plaintiff  for 
$7000  damages.  The  District  Court  of  Appeals  affirmed 
the  judgment,  and  said  that  under  the  circumstances  it  was 
the  duty  of  the  driver  of  the  automobile  to  proceed  at  a 
slow  pace,  if  he  were  to  escape  liability  even  to  a  pedestrian 
for  injuries  done  to  him.  It  appears  that  the  plaintiff  in 
this  case  was  walking  backward,  but  that  he  had  to  go 
backward  in  the  performance  of  his  work.  The  court  says: 
"Had  a  pedestrian  with  no  occupation  requiring  his  presence 
in  that  part  of  the  street  opened  to  the  use  of  vehicles  been 
struck  by  a  passing  vehicle,  while  he  was  backing  along  the 
road  not  looking  to  see  where  he  was  going,  it  is  clear  he 
would  have  been  guilty  of  contributory  negligence;  but  the 
rights  of  a  laborer  whose  duty   requires  him  to  be   in  the 


916  BUSINESS   LAWS   FOR  BUSINESS    MEN. 

roadway,  cannot  be  determined  by  the  same  rule.  Not 
that  he  is  bound  to  exercise  any  less  care,  but  because  the 
care  to  be  exercised  must  be  determined  from  a  different 
standpoint.  The  proper  discharge  of  his  duties  required  the 
plaintiff  to  move  backward  along  the  road  in  which  he  was 
oiling.  He  did  this  in  such  a  manner  as  to  face  in  the 
direction  from  which  any  car  or  vehicle  obeying  the  law 
of  the  road  would  approach,  and  also  looked  in  the  other 
direction  often  enough  to  satisfy  the  trial  court  that  he  was 
exercising  due  care  at  the  time  he  was  struck.  His  care  or 
want  of  care  was  a  fact  to  be  determined  from  all  the  circum- 
stances surrounding  him  at  the  time."  (Decided  by  the 
District  Court  of  Appeals,  in  the  case  of  King  vs.  Green, 
which  decision  is  printed  in  Volume  94  of  the  Pacific  Re- 
porter, page  777.') 

Section    1172.— PERSONS    UNDER    DISABILITIES. 

— At  times  a  greater  degree  of  care  is  demanded  of  an 
operator  of  an  automobile  than  at  other  times.  Thus,  if  a 
person  under  obvious  disability,  such  as  old  age,  infancy,  lame- 
ness, drunkenness,  or  the  like,  is  crossing  the  road,  the  duty 
of  avoiding  him  is  greater  than  if  he  were  a  person  of  ordi- 
nary capacity.  Care  and  caution  must  be  exercised  in  pro- 
portion to  the  apparent  risk. 

Babbitt's  Law  Applied  to  Motor  Vehicles,  page  279. 

Section  1173.— CHILDREN  IN  THE  STREET.— The 

rule  of  law  is,  that  streets  and  highways  are  made  for  the 
use  of  all  travelers,  children  as  well  as  others.  But  in  the 
case  of  children,  the  question  of  negligence  becomes  largely 
a  question  of  due  care  on  the  part  of  the  person  having 
charge  of  the  child,  allowing  it  to  be  in  the  place  where 
the  injury  was  received.  In  the  case  of  children  who  are 
of  an  age  to  go  about  unattended,  to  school  and  the  like, 
the  rule  requires  of  them  the  use  of  such  discretion  as  such 
children  have — not  so  much  as  in  the  case  of  an  adult, 
but  only  the  ordinary  care  of  school  children.     The  operator 


AUTOMOBILE   LAW    OF    CALIFORNIA.  917 

of  a  car  in  a  street  where  there  are  children  is  required  to 
manage  his  car  with  reference  to  all  the  risks  that  may  rea- 
sonably be  expected,  and  among  these  may  be  reckoned  the 
risks  arising  from  the  heedlessness  and  indiscretion  of  chil- 
dren in  the  street.  Being  or  playing  upon  a  street  is  not 
of  itself  contributory  negligence  in  a  child  of  tender  years. 
If  the  child  is  of  sufficient  age  and  discretion  to  be  in  the 
street  alone,  then  an  error  of  judgment,  based  on  such  ex- 
perience and  discretion  as  a  very  young  child  would  naturally 
possess,  is  not  negligence  on  the  child's  part,  particularly 
if  the  error  in  judgment  was  the  result  of  circumstances 
calculated  to  inspire  fright,  such  as  the  unexpected  or  sudden 
appearance  of  an  automobile. 

Section  1174.— DEFENSE  OF  NOT  EXCEEDING 
SPEED  LIMITATIONS.— No  owner  or  operator  of  an 
automobile  is  exempt  from  liability  for  a  collision  in  a  public 
street  by  simply  showing  that  at  the  time  of  the  accident 
he  did  not  run  at  a  rate  of  speed  exceeding  the  limit  allowed 
by  state  law  or  city  ordinances.  On  the  contrary,  no  matter 
how  great  the  rate  of  speed  may  be,  which  the  general  law 
and  city  ordinances  permit,  the  operator  of  an  automobile 
still  remains  bound  to  anticipate  that  he  may  meet  persons 
on  any  point  in  a  public  street,  and  he  must  keep  a  proper 
lookout  for  them,  and  keep  his  machine  under  such  control 
as  will  enable  him  to  avoid  collision  with  another  person 
also  using  proper  care  and  caution.  If  necessary,  he  must 
slow  up,  and  even  stop.  No  blowing  of  a  horn  or  of  a 
whistle,  nor  the  ringing  of  a  bell,  without  an  attempt  to  slow 
the  speed  is  sufficient  if  the  circumstances  at  a  given  point 
demand  that  the  speed  should  be  slackened  or  the  machine 
be  stopped,  and  where  such  a  course  is  practicable.  The 
true  test  is,  that  the  operator  must  use  all  the  care  and 
caution  which  a  careful  and  prudent  driver  would  have  ex- 
ercised under  the  same  circumstances.  The  idea  prevails 
among  some  motor  drivers,  that  when  once  they  have 
sounded  the  horn  they  are  justified  in  going  at  any  rate  of 


918  BUSINESS   LAWS   FOR  BUSINESS    MEN. 

speed,  and  that  people  are  bound  to  get  out  of  their  way; 
but  the  law  will  not  excuse  the  owner  or  driver  of  an  auto- 
mobile for  any  such  reason. 

Section    1175.— EVIDENCE    OF    OVER-SPEEDING. 

— In  cases  where  drivers  or  owners  are  being  prosecuted  for 
over-speeding,  the  testimony  of  a  witness  who  has  had  ex- 
perience in  timing  or  knowing  the  speed  of  motor  vehicles 
is  evidence  of  better  quality  than  that  of  one  who  has  not. 
If  the  speed  was  timed  over  a  known  or  measured  distance 
by  a  clock  or  time  piece,  or  by  a  stop  watch  or  other 
mechanical  device,  in  the  possession  of  a  person  skilled  in 
managing  it,  such  evidence  would  have  greater  weight  than 
that  of  a  witness  who  spoke  from  impression  only. 

Section  1176.— RESPONSIBILITY  OF  OWNER  FOR 
NEGLIGENCE  OF  DRIVER.— The  general  rule  in  this 
country,  as  to  the  extent  of  the  liability  of  the  master  for 
the  act  of  his  servant,  is,  that  if  the  act  is  done  without  the 
authority  of  the  master  and  not  for  the  purpose  of  obeying 
his  orders  or  doing  his  work,  then  he  is  not  responsible ;  but 
if  it  is  done  in  the  execution  of  the  authority  given  by  the 
master  and  for  the  purpose  of  performing  what  he  has 
directed,  then  he  is  responsible,  whether  the  act  be  negligent 
or  wilful.  The  test  to  determine  whether  a  master  is  liable 
to  a  stranger  for  his  servant's  misconduct,  is  to  inquire 
whether  the  latter  was  doing  what  he  was  employed  to  do 
at  the  time  he  caused  the  injury  complained  of.  If  he  was, 
the  fact  that  he  was  not  doing  it  in  the  way  expected  is 
immaterial.  But,  if  at  the  time  he  did  the  act  which  caused 
the  injury,  he  was  not  acting  within  the  scope  of  his  em- 
ployment, the  master  is  not  liable.  The  master  is  one  who 
has  the  supreme  charge,  control  and  direction  of  the  servant, 
and  whose  will  the  servant  represents  not  merely  in  the  work, 
but  in  all  its  details.  In  strictness,  the  servant  is  one  who 
for  a  consideration  engages  in  the  service  of  another  and 
undertakes  to  serve  his  direction  in  some  lawful  business. 
Therefore,  if  the  master  is  himself  driving  his  car,  and  from 


AUTOMOBILE   LAW    OF   CALIFORNIA.  919 

want  of  skill  causes  injury  to  a  passerby,  he  is,  of  course, 
responsible  for  that  want  of  skill.  'If,  instead  of  driving 
the  car  with  his  own  hands,  he  employs  a  chauffeur  to  drive 
it,  the  chauffeur  is  but  an  instrument  set  in  motion  by  the 
master.  It  was  the  master's  will  that  the  chauffeur  should 
drive,  and  whatever  the  chauffeur  does,  in  order  to  give 
effect  to  his  master's  will,  may  be  treated  as  the  act  of 
the  master.  The  acts  of  the  chauffeur,  when  operating  an 
automobile,  within  the  authority  of  his  employment,  are  the 
acts  of  a  servant.  The  relation  of  master  and  servant  exists 
between  the  chauffeur  and  his  employer,  and  the  employer  is 
responsible  for  the  acts  of  his  servant  done  within  the  limits 
of  his  employment. 

Section  1177.— RESPONSIBILITY  FOR  AN  OPER. 
ATOR  WHO  IS  NOT  HIRED.— When  the  car  is  being 
driven  by  a  friend  upon  invitation  or  by  permission,  if  the 
owner  is  present,  the  law  presumes  that  he  has  retained  con- 
trol of  the  car,  and  the  law  would  imply  an  agency  upon  the 
part  of  the  friend,  which  would  render  the  owner  liable  for 
his  acts. 

Section  1178.— LIABILITY  OF  CORPORATIONS.— 

Corporations,  like  individuals,  are  liable  as  employers,  for  the 
acts  of  their  servants  in  operating  automobiles  on  the  roads 
or  streets  in  pursuance  of  their  employment. 

Section  1179.—  EMPLOYER'S  RESPONSIBILITY 
FOR  UNAUTHORIZED  USE  OF  CAR.— The  chauffeur 
has  no  right  to  use  his  employer's  car  to  serve  his  own  needs 
and  purpose,  whether  of  business  or  pleasure.  Such  acts  are 
wholly  outside  the  relation  of  master  and  servant,  and  in  such 
cases  the  master  cannot  be  held  liable  for  the  wrongful  acts 
of  the  servant,  for  they  are  clearly  outside  of  the  employ- 
ment. If  a  chauffeur  takes  out  the  car,  without  his  em- 
ployer's knowledge  or  consent,  for  a  joy  ride  or  frolic  of  his 
own,  or  if  he  so  uses  it  outside  of  his  employment  for  his 
own  business,  the  employer  is  not  liable  for  damages  caused 


920  BUSINESS   LAWS   FOR  BUSINESS   MEN. 

by  such  use.  The  Legislature  of  California  has  in  conse- 
quence enacted  a  statute  making  the  unauthorized  use  of  an 
automobile  a  crime,  punishable  by  severe  penalties. 

Section  1180.— UNLAWFUL  USE  OF  AUTOMO- 
BILES.— Any  person  who  shall,  without  the  permission  of 
the  owner  thereof,  take  any  automobile  for  the  purpose  of 
temporarily  using  or  operating  the  same,  shall  be  deemed 
guilty  of  a  misdemeanor,  and  upon  conviction  thereof  shall 
be  punished  by  a  fine  not  exceeding  $200,  or  by  imprison- 
ment not  exceeding  three  months,  or  by  both  such  fine  and 
imprisonment. 

Every  owner  or  manager  of  an  automobile  garage,  or 
any  agent  or  employee  of  such  owner  or  manager,  or  any 
other  person,  having  the  care,  custody  or  possession  of  any 
automobile,  who  takes,  hires,  runs,  drives  or  uses  such 
automobile,  or  who  takes  or  leaves  therefrom  any  part  thereof, 
without  the  owner's  consent,  is  punishable  by  a  fine  not 
exceeding  $1000,  or  by  imprisonment  in  the  county  jail  not 
exceeding  one  year,  or  by  both  such  fine  and  imprisonment. 
Penal  Code,  Sections  499b,  499c. 

Section    1181.— USE    OF    CAR    BY    BORROWER.— 

When  the  owner  of  an  automobile  merely  permits  another  to 
use  it,  the  latter  does  not  thereby  become  the  agent  or 
servant  of  the  former.  Where  the  owner  loans  his  car  to  a 
person  over  whom  he  had  no  direction  or  control  at  the  time 
of  the  accident,  he  is  not  held  liable  for  the  mere  loaning. 
The  owner  of  a  vehicle  is  not  liable  for  an  injury  caused  by 
the  negligent  driving  of  an  operator  if  the  car  was  not  used 
at  the  time  in  the  owner's  business,  nor  under  his  control 
or  management. 

Section  1182.— OWNER'S  LIABILITY  FOR  INJURY 
TO  CHAUFFEUR. — If  the  owner  and  his  chauffeur  are 
both  in  the  car,  and  the  owner  is  negligently  driving,  and  an 
accident  occurs,  the  owner  will  be  liable  for  damages  for 
injuries  to  the  chauffeur.     But  if  the  chauffeur  is  driving,  he 


AUTOMOBILE   LAW    OF   CALIFORNIA.  921 

cannot  recover  damages  from  his  employer  caused  by  his  own 
negligent  driving.  And  the  chauffeur  undertakes  the  risk  of  the 
employment.  He  cannot  recover  damages  from  his  employer 
for  an  injury  springing  from  a  defect  in  a  machine  for  the  safe 
condition  of  which  he  himself  is  responsible.  He  is  deemed 
to  undertake  the  risk  of  a  dangerous  work.  He  is  held  to 
assume  the  ordinary  risks  of  the  business  upon  which  he 
enters,  so  far  as  those  dangers  are  known  to  him,  or  should 
be  readily  discernable  by  a  person  of  his  age  and  capacity 
in  the  exercise  of  ordinary  care.  Notwithstanding  the  general 
rule  is  that  the  master  is  bound  to  use  due  care  to  furnish  safe 
and  sound  materials,  machinery,  etc.,  yet  the  servant  assumes 
the  risks  of  obvious  defects  in  things  which  he  voluntarily  uses, 
if  his  work  consists  in  dealing  with  dangerous,  unsafe  or 
unsound  things  known  to  him  to  be  so,  or  obviously  so,  and 
which  by  the  very  nature  of  the  business  must  be  used  while 
in  that  condition. 

Section  1183.— CRIMINAL  LIABILITY  OF  EM- 
PLOYER.— A  master  is  not,  generally  speaking,  criminally 
responsible  for  the  acts  of  his  servants,  unless  he  expressly 
commands  the  act  to  be  done;  for  in  criminal  cases  they 
must  each  answer  for  their  own  acts,  and  stand  or  fall  in 
their  own  behalf;  and  where  one  employs  another  in  doing 
a  thing,  and  there  are  several  ways  of  doing  it,  one  criminal 
and  another  innocent,  and  he  does  it  in  a  criminal  manner,  the 
employer  is  not  responsible. 

But  where  one  man  expressly  orders  another  to  do  an 
illegal  act,  the  employer  is  accountable  for  that  act.  Whether 
or  not  the  person  employed  is  also  criminally  responsible 
must  depend  upon  the  circumstances. 

If,  though  the  actual  doer  of  the  deed  be  a  servant,  the 
master  stands  by  and  sees  and  assents  to  the  committal  of 
the  offense  by  the  servant,  or  chooses  to  refrain  from  exer- 
cising the  authority  which  he  might  have  exercised  to  pre- 
vent the  offense  being  committed,  the  master  will  be  crimi- 
nally liable. 

Smith's  Master  and   Servant,  fifth  edition,  page  266. 


922  BUSINESS   LAWS   FOR   BUSINESS    MEN. 

Section  1184.— GARAGES  AND  GARAGE  KEEPERS. 

— The  word  "garage"  is  of  French  origin,  and  signifies  a 
depot  for  the  storage  or  repairs  of  motor  cars.  And  in  this 
country  it  is  often  used  to  mean  a  place  not  only  for  the 
storage  and  repair  of  cars,  but  also  for  the  sale  of  auto- 
mobiles. The  garage  occupies  with  relation  to  automobiles 
the  same  place  that  livery  stables  do  with  respect  to  horses. 

Section  1185.— RELATION  OF  GARAGE  KEEPER 
TO  HIS  CUSTOMER.— The  storage  of  an  automobile  in 
a  garage  constitutes  the  keeper  a  bailee  for  hire.  The  liabil- 
ity of  the  bailee  in  this  class  of  bailments  is  for  the  care 
and  custody  of  the  property  placed  in  his  possession  and 
control ;  it  therefore  follows,  that  his  liability  does  not  begin 
until  he  has  the  possession  and  control  of  the  property,  and 
continues  until  the  possession  and  control  is  surrendered 
to  the  bailor,  or  his  assigns,  or  to  the  rightful  owner.  The 
garage  keeper  holds  the  property  for  no  other  purpose  than 
to  care  for  it  during  the  continuance  of  the  relation  in  accord- 
ance with  the  contract,  and  to  redeliver  it  to  the  bailor  upon 
the  termination  of  the  contract.  He  has  no  title  to  the 
property  except  the  possessory  interest  given  him  as  bailee, 
and  his  right  to  the  possession  ceases  whenever  he  is  guilty 
of  fraud  or  bad  faith,  or  any  misuse  of  the  property.  The 
contract  for  the  storage  can  be  terminated  at  the  will  of  the 
person  putting  the  car  into  the  garage.  The  garage  keeper 
must  at  all  times  upon  reasonable  demand  and  notice  be 
ready  to  deliver  the  property  to  the  person  who  placed  it 
with  him. 

Section  1186.  — FAILURE  TO  REDELIVER  TO 
CUSTOMER. — Not  only  is  the  garage  keeper  required  to 
deliver  the  car  he  has  had  in  his  possession  to  the  bailor 
at  the  termination  of  the  bailment,  but  for  a  misdelivery, 
whether  by  mistake  or  negligence,  he  will  be  liable  for 
damages.  For  a  mistake  or  negligence  in  the  performance 
of  his  duty  which  renders  it  impossible  for  him  to  deliver 
the   property,   he   will  be   held   accountable   the   same   as   if 


AUTOMOBILE    LAW    OF    CALIFORNIA.  923 

he  had  converted  the  property  to  his  own  use.  He  will  be 
held  to  know  who  his  bailor  is,  and  can  have  no  legal  reason 
for  making  a  mistake  in  delivery. 

Van  Zile  on  Bailments,  Second  Edition,  Section  208. 

Section  1187.— LIABILITY  FOR  THEFT  OF  ARTI- 
CLES LEFT  IN  GARAGE.— The  garage  keeper  is  bound 
to  exercise  ordinary  care  and  prudence  according  to  the  cir- 
cumstances, regarding  goods  entrusted  to  him.  This  liability 
extends  not  only  to  the  storage  of  the  automobile  itself,  but. 
also  to  the  goods  or  property  of  the  owner  left  in  connection 
with  the  machine,  even  though  responsibility  for  such  goods 
is  not  covered  by  the  express  terms  of  the  bailment.  But  it 
is  doubtful  if  the  garage  keeper  would  be  liable  for  lost  arti- 
cles, left  in  the  car,  such  as  robes,  coats,  etc.,  unless  his 
attention  were  especially  called  to  them  when  the  car  was 
brought  in.  If,  however,  a  car  is  brought  into  a  garage, 
and  the  garage  keeper  allows  it  to  be  left  in  the  garage  with 
such  articles  in  it,  with  notice  that  they  are  there,  he  will 
be  liable  for  the  value  of  such  articles  if  they  are  stolen 
while   in   his   place. 

Section  1188.— LIABILITY  OF  GARAGE  KEEPERS 
FOR  DAMAGE  TO  CAR  TAKEN  OUT  WITHOUT 
LEAVE. — The  criminal  liability  of  a  garage  keeper  who 
takes,  hires,  runs  or  uses  an  automobile  stored  with  him, 
without  the  owner's  consent,  is  stated  in  section  1180,  and 
is  defined  by  the  Penal  Code,  sections  499b,  499c.  The 
garage  keeper  will  be  liable  in  a  civil  action  for  damages, 
if  by  reason  of  his  negligence  the  car  is  taken  out  of  the 
garage  without  the  owner's  consent,  and  damaged  on  the 
road.  It  is  the  duty  of  the  garage  keeper  to  take  reasonable 
care  of  the  car. 

Section   1189.— LIABILITY   FOR  LOSS   OF   CAR.— 

The  garage  keeper  is  not  liable  for  loss  of  a  car  that  is 
caused,   (1)  by  the  act  of  God,  as  by  lightning,  earthquake. 


924  BUSINESS   LAWS   FOR   BUSINESS    MEN. 

tornadoes,  storms,  and  the  like;  or  (2)  by  the  act  of  the 
public  enemy;  or  (3)  by  unavoidable  accident,  as  by  fire, 
burglary,  etc.,  unless  by  exercising  ordinary  diligence  such 
loss  could  have  been  averted.  The  garage  keeper  is  bound 
to  maintain  a  safe  building,  with  reasonable  care  and  guard 
of  the  property,  and  he  is  bound  to  maintain  reasonable  pro- 
tection against  fire.  If  he  does  not  do  this,  and  by  reason 
of  an  unsafe  building,  or  by  reason  of  fire  which  ordinary 
prudence  would  have  prevented  or  put  out,  or  by  reason  of 
theft  of  the  car,  which  could  have  been  prevented  by  ordinary 
care  on  the  garage  keeper's  part,  he  will  be  liable  for  the 
loss  of  the  car  by  any  of  these  events.  He  is  not  an  insurer 
against  loss,  and  if  he  keeps  a  safe  house,  and  uses  the  care 
in  keeping  the  car  and  guarding  it  which  an  ordinarily  pru- 
dent man  should  use  under  the  same  circumstances,  he  will 
not  be  liable,  even  though  burglars  should  break  in  and  drive 
it  away,  or  an  earthquake  should  tumble  the  building  down 
about  it  and  break  it  up,  or  a  fire  should  sweep  away  the 
garage  and  destroy  its  contents. 

Section  1190.— LIABILITY  AS  A  RENTER  OF 
MACHINES. — The  garage  keeper  is  not  a  common  carrier, 
merely  because  he  keeps  machines  for  hire.  But  if  he  lets 
a  car,  it  then  becomes  his  duty  to  exercise  that  degree  of 
care  and  skill  which  a  prudent  man,  having  regard  to  the 
circumstances,  would  exercise.  It  is  his  duty  to  provide 
a  safe  car;  he  is  bound  to  know  the  condition  of  the  car 
he  sends  out  of  his  garage  on  hire ;  and  if  he  sends  out  a 
chauffeur  with  a  car  he  is  bound  to  provide  a  competent 
chauffeur.  In  a  business  involving  the  personal  safety  and 
lives  of  others,  due  care,  reasonable  diligence,  is  nothing  less 
than  the  most  watchful  care  and  the  most  active  diligence, 
and  anything  short  of  this  is  negligence  and  carelessness. 
If  a  garage  keeper,  therefore,  should  send  out  an  unsafe 
car,  and  it  should  break  down  on  the  road  and  injure  the 
person  to  whom  he  let  it,  it  would  be  no  defense  on  his  part 
that   he    did    not   know    that    defect   in    the   machine    which 


AUTOMOBILE   LAW    OF   CALIFORNIA.  925 

caused  the  breakdown.  He  is  bound  at  all  times  to  know 
the  condition  of  his  machines.  It  is  no  excuse  for  a  garage 
keeper  that  he  did  not  know  of  any  defect,  if  he  could  have 
known  it  by  reasonable  examination  and  inspection.  It  is 
presumed  that  he  can  at  all  times,  by  examination  and  inspection 
of  his  machines,  know  their  condition;  and  this  being  so,  it 
is  the  same  as  if  he  did  know  it,  so  far  as  regards  the  lessee's 
right  to  recover  for  damages  when  injured. 

Section  1191.— LIABILITY  OF  LESSEE  FOR  CARE 
OF  HIRED  AUTOMOBILE.— The  hirer  of  an  automobile 
is  liable  to  the  garage  keeper  from  whom  he  hired  the  ma- 
chine, for  the  want  of  reasonable  care  and  skill  in  driving, 
and  for  failure  to  exercise  such  prudence  and  caution  as 
the  circumstances  require.  If  a  person  hires  an  automobile 
from  a  garage,  and  breaks  it  up  or  otherwise  damages  it 
by  unskillful  or  reckless  driving,  leading  to  a  collision  or 
other  cause  of  damage,  he  will  be  liable  to  the  garage 
keeper  for  whatever  damages  the  latter  sustains.  If  the 
garage  keeper  must  be  careful  in  letting  a  car,  it  is  no  less 
true  that  the  hirer  must  also  be  careful  in  using  it. 

Babbitt's  The  Law  Applied  to  Motor  Vehicles,  pages 
515,   516. 

Section  1192.— LIABILITY  FOR  REPAIR  WORK.— 

Where  a  garage  keeper  maintains  a  repair  shop  for  motor 
vehicles,  contracting  to  make  repairs  generally,  rebuilding 
machines,  or  supplying  new  parts  or  attachments  and  appli- 
ances, he  is  liable  for  all  defects  in  the  work  of  repair, 
whether  due  to  his  own  want  of  skill  or  to  that  of  his  work- 
men. He  is  bound  to  do  the  work  contracted  for  reasonably 
well,  that  is,  in  a  workmanlike  manner,  using  such  skill  and 
judgment  as  the  undertaking  requires,  and  such  as  he  claims 
his  workmen  to  possess;  making  the  repairs  within  the  time 
stipulated  without  waste  or  damage  to  the  employer;  using 
the  material  furnished  in  a  proper  manner;  and  withal  exer- 
cising good  faith  in  the  performance  of  the  work. 


926  BUSINESS   LAWS   FOR  BUSINESS   MEN. 

Section  1193.— LIEN  FOR  STORAGE  AND  REPAIRS. 

— A  garage  keeper  has  a  special  lien  for  storage  or  repair 
of  an  automobile,  dependent  on  possession,  for  the  com- 
pensation, for  any  balance  which  is  due  to  him  from  the 
owner  for  such  repairs  or  storage.  If  a  car  is  brought  into 
his  garage  by  an  agent  of  the  owner,  with  authority  to  order 
repairs,  the  lien  of  the  garage  keeper  will  also  attach  to  the 
car.  The  lien  will  be  for  the  storage  charges,  and  for  reason- 
able charges  for  the  work  done  and  materials  furnished.  The 
statute  provides  in  plain  terms,  that  "keepers  of  garages  for 
automobiles  shall  have  a  lien  dependent  on  possession,  for  their 
compensation  in  caring  for  and  safe  keeping  of  such  automo- 
biles." The  same  statute  also  provides  a  lien  in  favor  of  any 
person  who  makes,  alters,  or  repairs  any  article  of  personal 
property,  at  the  request  of  the  owner,  or  legal  possessor  of 
the  property. 

Act  of  the  Legislature,  approved  April  12,  1911. 

Section  1194.— POSSESSION  ESSENTIAL  TO  VA- 
LIDITY OF  LIEN.— To  complete  the  right  of  lien,  it  is 
essential  that  the  possession  and  right  of  possession  of  the 
automobile  should  be  continued  and  uninterrupted.  A  relin- 
quishment of  the  possession  to  the  owner  is  an  abandonment 
of  the  lien,  and  operates  as  an  immediate  release  of  it.  A 
lien  may  perhaps  he  renewed  by  the  return  and  restitution 
of  the  car;  but  in  such  cases  it  would  be  subordinate  to  any 
intervening  encumbrance  to  which  the  car  in  the  meantime 
had  become  subject. 

Section  1195.— SALE  OF  CAR  TO  SATISFY  LIEN. 

— 'If  the  garage  keeper  is  not  paid  the  amount  due  him  for  stor- 
age or  repairs,  within  twenty  days  after  his  bill  becomes  due, 
then  he  may  proceed  to  sell  the  automobile,  at  public  auction. 
He  must  give  at  least  ten  days  previous  notice  of  such  sale,  by 
advertising  in  some  newspaper  published  in  the  county  in  which 
such  property  is  situated,  or  if  there  be  no  newspaper  pub- 
lished in  such  county,  then  by  posting  notices  of  the  sale  in 
three  of  the  most  public  places  in  the  town  or  place  where 


AUTOMOBILE   LAW    OF   CALIFORNIA.  927 

such  automobile  is  to  be  sold,  for  ten  days  previous  to  the 
date  of  the  sale.  The  proceeds  of  the  sale  must  be  applied 
to  the  discharge  of  his  lien  and  the  cost  of  keeping  and  selling 
the  property;  and  the  remainder,  if  any,  must  be  paid  over 
to  the  owner  of  the  car. 

Civil  Code,  Section  3052. 

Section  1196.— FORM  OF  NOTICE  OF  SALE.— The 
following  is  a  form  of  notice  of  sale  by  a  garage  keeper, 
to  be  published  in  a  newspaper  as  directed  in  the  preceding 
section,  or  to  be  posted  in  three  public  places  if  there  is  no 
newspaper  published  in  the  place  where  the  sale  is  to  be  had: 

NOTICE  OF  SALE  OF  AUTOMOBILE  AT  PUBLIC 

AUCTION. — Notice  is  hereby  given  that  on  the day 

of ,  191 . .,  at  10  o'clock  A.  M.,  at  the  garage 

of  James  &  Smith,  No.  700  Van  Ness  Avenue,  in  the  City 
and  County  of  San  Francisco,  State  of  California,  there  will 
be  offered  for  sale  and  sold  at  public  auction  to  the  highest 
bidder  for  cash,  payable  at  the  time  of  the  sale,  one  auto- 
mobile, which  said  automobile  is  particularly  described  as 
follows,  to-wit :    

(Here  insert  full  description  of  the  automobile  to  be  sold.) 


and  that  said  sale  is  to  be  had  as  aforesaid  to  satisfy  the 

lien  of  said  James  &  Smith  for  the  sum  of  $ ,  and 

costs  and  expenses  of  sale,  upon  said  automobile  for  its 
storage  and  repairs  thereon. 

Dated ,  191... 

JAMES   &   SMITH. 

Section    1197.  — MUNICIPAL    ORDINANCES.  — The 

local  authorities  of  incorporated  cities  and  counties,  cities  and 
towns,  may  limit  by  ordinance,  rule  or  regulation,  the  speed 
of  automobiles  on  the  public  highways,  such  speed  limitations 
not  to  be  in  any  case  less  than  one  mile  in  six  minutes. 
And  any  municipality  adopting  a  speed  ordinance  must  have 
placed  conspicuously  on  each  main  highway  where  the  rate 
of  speed  changes,  signs  of  sufficient  size  to  be  easily  readable 


928  BUSINESS   LAWS   FOR   BUSINESS   MEN. 

bearing  the  words  "Slow  down  to miles"    (the  rate 

being  inserted),  and  also  an  arrow  pointing  in  the  direction 
where  the  speed  is  to  be  reduced  or  changed.  The  ordinance 
must  fix  the  penalties  for  violation  thereof,  similar  to  and 
no  greater  than  those  fixed  by  the  local  authorities  for  viola- 
tion of  speed  limitations  for  any  other  vehicles  than  motor 
vehicles. 

Local  authorities  may  also  make,  enforce  and  maintain 
reasonable  ordinances,  rules  or  regulations,  concerning  the 
speed  at  which  automobiles  may  be  operated  in  any  public 
park  or  parkways ;  but  there  must  be  signs  at  each  entrance 
of  a  park  and  along  a  parkway,  conspicuously  indicating  the 
rate  of  speed  permitted   or   required. 

General  Law  of  California,  pages  630,  63 L 

Section  1193.— FRANCHISES  FOR  AUTOMOBILE 
ROADS. — The  Legislature  or  other  body  to  whom  is  en- 
trusted the  government  of  any  county,  city  and  county,  city 
or  town,  may  grant  franchises  for  the  construction  of  roads 
for  the  use  of  automobiles,  such  roads  to  be  either  on  the 
surface,  elevated,  or  depressed,  on,  over,  across,  or  under  the 
streets  and  public  highways.  The  franchise  may  be  granted 
for  a  term  not  exceeding  fifty  years.  In  incorporated  cities 
no  franchise  must  be  granted  for  an  automobile  road,  unless 
the  consent  in  writing  of  the  owners  of  a  majority  of  the 
frontage  upon  the  road  or  street  along  which  the  automobile 
road  is  sought  to  be  constructed  is  first  had  and  obtained, 
and  filed  with  the  legislative  or  governing  body  of  the 
municipality. 

Civil  Code,  Section  524. 


PART  XIII. 

TAXES    AND    TAX    TITLES. 

Section  1199.— TAX  LAWS  STRICTLY  CON- 
STRUED.— The  imposition  of  a  tax  on  property  by  the 
governing  power  is  a  thing  which  is  purely  statutory.  The  tax 
and  the  manner  of  imposing  it,  and  the  method  of  collecting  it, 
are  created  and  regulated  solely  by  the  Legislature.  There- 
fore, it  is  said  that  tax  laws  are  to  be  strictly  construed.  In 
other  words,  in  order  for  a  tax  or  tax  title  to  be  valid,  every 
step  specified  by  the  statute  to  be  taken  must  have  been  taken 
by  the  proper  authorities.  If  anything  is  lacking,  if  any  re- 
quired act  has  been  omitted,  a  tax  title  under  the  law  of 
California  will  not  be  good.  In  succeeding  Sections  will  be 
found  the  law  of  California  on  the  subject  of  taxes  and  tax 
titles. 

Section  1200.— PROPERTY  SUBJECT  TO  TAX- 
ATION.— All  property  in  this  state,  not  exempt  under  the 
laws  of  the  United  States,  excepting  fruit  and  nut-bearing 
trees  under  the  age  of  four  years  from  the  time  of  planting 
in  orchard  form,  and  grape-vines  under  the  age  of  three 
years  from  the  time  of  planting  in  vineyard  form,  growing 
crops,  property  used  exclusively  for  public  schools,  free 
public  libraries,  and  free  museums,  and  such  as  may  belong 
to  the  United  States,  this  state,  or  to  any  county  or  muni- 
cipal corporation  within  this  state,  is  subject  to  taxation,  as 
in  this  code  provided;  but  nothing  in  this  code  shall  be 
construed  to  require  or  permit  double  taxation. 
Political    Code,    Section   3607. 

Section  1201.— SHARES  OF  STOCK  IN  CORPOR- 
ATIONS.— Shares  of  stock  in  corporations  possess  no  in- 
trinsic value  over  and  above  the  actual  value  of  the  property 

(929) 


930  BUSINESS   LAWS   FOR   BUSINESS   MEN. 

of  the  corporation  which  they  stand  for  and  represent;  and 
the  assessment  and  taxation  of  such  shares,  and  also  all  the 
corporate  property,  would  be  double  taxation.  Therefore,  all 
property  belonging  to  corporations,  save  and  except  the 
property  of  national  banking  associations  not  assessable  by 
Federal  statute,  shall  be  assessed  and  taxed.  But  no  assess- 
ment shall  be  made  of  shares  of  stock  in  any  corporation, 
save  and  except  in  national  banking  associations,  whose 
property,  other  than  real  estate,  is  exempt  from  assessment 
by  Federal  statute. 

Political  Code,  Section  3608. 

Section  1202.— SHARES  OF  NATIONAL  BANKS.— 

The  stockholders  in  every  national  banking  association  doing 
business  in  this  state,  and  having  its  principal  place  of  busi- 
ness located  in  this  state,  shall  be  assessed  and  taxed  on  the 
value  of  their  shares  of  stock  therein;  and  said  shares  shall 
be  valued  and  assessed  as  is  other  property  for  taxation, 
and  shall  be  included  in  the  valuation  of  the  personal  prop- 
erty of  such  stockholders  in  the  assessment  of  the  taxes  at 
the  place,  city,  town,  and  county  where  such  national  bank- 
ing association  is  located,  and  not  elsewhere,  whether  the 
said  stockholders  reside  in  said  place,  city,  town,  or  county, 
or  not;  but  in  the  assessment  of  such  shares,  each  stock- 
holder shall  be  allowed  all  the  deductions  permitted  by  law 
to  the  holders  of  moneyed  capital  in  the  form  of  solvent 
credits.  In  making  such  assessment  to  each  stockholder, 
there  shall  be  deducted  from  the  value  of  his  shares  oi 
stock  such  sum  as  is  in  the  same  proportion  to  such  value 
as  the  total  value  of  its  real  estate,  and  property  exempt  by  law 
from  taxation  bears  to  the  whole  value  of  all  the  shares  of  capi-  . 
tal  stock  in  said  national  bank.  And  nothing  herein  shall  be 
construed  to  exempt  the  real  estate  of  such  national  bank 
from  taxation.  And  the  assessment  and  taxation  of  such 
shares  of  stock  in  said  national  banking  association  shall  not 
be  at  a  greater  rate  than  is  made  or  assessed  upon  other 
moneyed  capital  in  the  hands  of  individual  citizens  of  this 
state. 


TAXES    AND   TAX    TITLES.  931 

The  assessor  charged  by  law  with  the  assessment  of  said 
shares  shall,  within  ten  days  after  he  has  made  such  assess- 
ment, give  written  notice  to  each  national  banking  association 
of  such  assessment  of  the  shares  of  its  respective  share- 
holders ;  and  no  personal  or  other  notice  to  such  shareholders 
of  such  assessment  shall  be  necessary  for  the  purpose  of  this 
act.  And  in  case  the  tax  on  any  such  stock  is  unsecured  by 
real  estate  owned  by  the  holder  of  such  stock,  then  the  bank 
in  which  said  stock  is  held  shall  become  liable  therefor;  and 
the  assessor  shall  collect  the  same  from  said  bank,  which 
may  then  charge  the  amount  of  the  tax  so  collected  to  the 
account  of  the  stockholder  owning  such  stock,  and  shall  have 
a  lien,  prior  to  all  other  liens,  on  his  said  stock,  and  the 
dividends  and  earnings  thereof,  for  the  reimbursement  to  it 
of  such  taxes  so  paid. 

Political  Code,  Sections  3609,  3610. 

Section  1203.— EXEMPTION  OF  CHURCH  PROP- 
ERTY.— All  buildings,  and  so  much  of  the  real  property  on 
which  they  are  situated  as  may  be  required  for  the  con- 
venient use  and  occupation  of  said  buildings,  when  the  same 
are  used  solely  and  exclusively  for  religious  worship,  shall 
be  free  from  taxation ;  provided,  that  no  building  so  used 
which  may  be  rented  for  religious  purposes  and  rent  received 
by  the  owner  therefor  shall  be  exempt  from  taxation.  That 
any  person  claiming  property  to  be  exempt  from  taxation 
under  this  section  shall  make  a  return  thereof  to  the  assessor 
annually,  the  same  as  property  is  listed  for  taxation,  and 
shall  accompany  the  same  by  an  affidavit  showing  that  the 
building  is  used  solely  and  exclusively  for  religious  worship, 
and  that  the  described  portion  of  the  real  property  claimed 
as  exempt  is  required  for  the  convenient  use  and  occupation 
of  such  building,  and  that  the  same  is  not  rented  for  religious 
purposes  and  rent  received  by  the  owner  therefor. 
Political  Code,  Section  3611. 

Section  1204.— CEMETERY  LANDS  EXEMPT 
FROM  TAXATION. — The  cemetery  lands  and  property 
of  any  association,  formed  pursuant  to  law,  are  exempt  from 


932  BUSINESS   LAWS   FOR   BUSINESS   MEN. 

all  public  taxes,  rates,  and  assessments,  and  are  not  liable  to 
be  sold  on  execution,  or  be  applied  in  payment  of  debts  due 
from  any  individual  proprietors.  But  the  proprietors  of  lots, 
or  plots,  in  such  cemeteries,  their  heirs,  or  devisees,  may  hold 
the  same  exempt  therefrom,  so  long  as  the  same  shall  re- 
main dedicated  to  the  purposes  of  a  cemetery. 

Act  of  the  Legislature,  approved  April  24,  1911. 

Section  1205.— FUNDS  OF  FRATERNAL  BENE- 
FIT SOCIETY  EXEMPT.— All  the  funds  of  a  fraternal 
benefit  society,  organized  and  licensed  under  the  law  of  this 
state  as  a  charitable  and  benevolent  institution,  are  exempt 
from  all  state,  county,  district,  municipal  and  school  taxes. 
But  the  real  estate  and  office  equipment  of  such  societies  may 
be  taxed. 

Act  of  the  Legislature,  approved  May  1,  1911. 

Section  1206.— FEDERAL  SECURITIES  NOT  TAX- 
ABLE BY  THE  STATE.— Bonds  or  other  obligations  of 
the  United  States,  issued  under  its  constitutional  power  to 
borrow  money  for  its  own  purposes,  are  not  subject  to  tax- 
ation by  the  state  or  municipal  governments. 

Section  1207.— PUBLIC  PROPERTY  NOT  SUB- 
JECT TO  TAXATION.— Public  property  is  not  subject  to 
taxation.  If  it  is  the  property  of  the  state,  it  is  not  taxed 
by  the  state  itself,  because  it  would  be  unreasonable  to 
impose  a  tax,  the  payment  of  which  would  have  to  be  met  by 
the  levy  of  another  tax.  For  a  similar  reason,  the  property 
of  a  city,  town  or  county,  belonging  to  a  municipal  corpor- 
ation, when  used  for  public  purposes,  is  not  a  proper  subject 
of  taxation.  Consideration  of  public  policy  are  deemed  suf- 
ficient to  exempt  all  such  property  from  taxation. 

Section  1208.— ASSESSMENT  OF  PROPERTY.— All 

taxable  property  must  be  assessed  at  its  full  cash  value.  Land 
and  improvements  thereon  shall  be  separately  assessed.  Cul- 
tivated and  uncultivated  land,  of  the  same  quality,  and  simi- 
larly   situated,    shall    be    assessed    at    the    same    value.      A 


TAXES   AND   TAX    TITLES.  933 

mortgage,  deed  of  trust,  contract,  or  other  obligation  by  which 
a  debt  is  secured,  shall  for  the  purposes  of  assessment  and 
taxation,  be  deemed  and  treated  as  an  interest  in  the  property 
affected  thereby,  except  as  to  railroad  and  other  quasi-public 
corporations.  In  case  of  debt  so  secured,  the  value  of  the 
property  affected  by  such  mortgage,  deed  of  trust,  contract, 
or  obligation,  less  the  value  of  such  security,  shall  be 
assessed  and  taxed  to  the  owner  of  the  property,  and  the 
value  of  such  security  shall  be  assessed  and  taxed  to  the 
owner  thereof,  in  the  county,  city,  or  district  in  which  the 
property  affected  thereby  is  situated.  The  taxes  so  levied 
shall  be  a  lien  upon  the  property  and  security,  and  may  be 
paid  by  either  party  to  such  security;  if  paid  by  the  owner 
of  the  security,  the  tax  so  levied  upon  the  property  affected 
thereby  shall  become  a  part  of  the  debt  so  secured.  If  the 
owner  of  the  property  shall  pay  the  tax  so  levied  on  such 
security,  it  shall  constitute  a  payment  thereon,  and,  to  the 
extent  of  such  payment,  a  full  discharge  thereof.  If  any  such 
security  or  indebtedness  shall  be  paid  by  any  such  debtor  or 
debtors  after  assessment,  and  before  the  tax  levy,  the  amount 
of  such  levy  may  likewise  be  retained  by  such  debtor  or 
debtors,  and  shall  be  computed  according  to  the  tax  levy  for 
the  preceding  year.  The  parties  to  any  contract  of  loan  or 
to  any  mortgage,  deed  of  trust  or  other  lien  securing  any 
obligation,  shall  nevertheless  have  the  right  to  provide  by 
contract  that  the  debtor  shall  pay  all  or  any  taxes  or  assess- 
ments on  the  money  loaned  or  on  the  mortgage,  deed  of  trust, 
or  other  lien,  or  on  the  property  thereby  covered  or  the  obli- 
gation thereby  secured,  and  such  contract  shall  be  valid  and 
constitute  a  waiver  by  the  debtor  of  all  right  to  treat  the 
payment  of  such  tax  or  assessment  as  a  payment  on  the 
amount  loaned  or  secured  or  as  being  to  any  extent  a 
discharge  thereof. 

Penal  Code,  Section  3627. 

Section  1208a.— FRANCHISES  AND  OTHER  TAX- 
ABLE PROPERTY.— The  franchise,  roadway,  road-bed, 
rails,  and  rolling-stock  of  all  railroads  operated  in  more  than 


934  BUSINESS   LAWS   FOR   BUSINESS   MEN. 

one  county  in  this  state  shall  be  assessed  by  the  state  board 
of  equalization.  Other  franchises,  if  granted  by  the  authori- 
ties of  a  county,  city,  or  city  and  county,  must  be  assessed 
in  the  county,  city,  or  city  and  county  within  which  they 
were  granted ;  if  granted  by  any  other  authority,  they  must 
be  assessed  in  the  county  in  which  the  corporations,  firms, 
or  persons  owning  or  holding  them  have  their  principal  place 
of  business.  All  other  taxable  property  shall  be  assessed  in 
the  county,  city,  or  city  and  county,  town,  township,  or 
district  in  which  it  is  situated.  Land  shall  be  assessed  in 
parcels  or  subdivisions,  not  exceeding  six  hundred  and  forty 
acres  each ;  and  tracts  of  land  containing  more  than  six 
hundred  and  forty  acres,  which  have  been  sectionized  by  the 
United  States  government,  shall  be  assessed  by  sections  or 
fractions  of  sections.  Lands  sold  by  the  state  for  which  no 
patent  has  been  issued,  shall  be  assessed  the  same  as  other 
lands,  but  the  owner  shall  be  entitled  to  a  deduction  from 
such  assessed  valuation  in  the  amount  due  the  state  as  princi- 
pal upon  the  purchase  price.  The  assessor  must,  between 
the  first  Mondays  in  March  and  July  of  each  year,  ascertain 
the  names  of  all  taxable  inhabitants,  and  all  the  property  in 
his  county  subject  to  taxation,  except  such  as  is  required  to 
be  assessed  by  the  state  board  of  equalization,  and  must 
assess  such  property  to  the  persons  by  whom  it  was  owned 
or  claimed,  or  in  whose  possession  or  control  it  was,  at 
twelve  o'clock  meridian,  of  the  first  Monday  in  March  next 
preceding;  but  no  mistake  in  the  name  of  the  owner  or  sup- 
posed owner  of  real  property  shall  render  the  assessment 
thereof  invalid.  In  assessing  solvent  credits  not  secured  by 
mortgage  or  trust  deed,  a  reduction  therefrom  shall  be  made 
of  debts  due  to  bona  fide  'residents  of  this  state. 
Political  Code,  Section  3628. 

Section      1209.— STATEMENT     OF     OWNER.— The 

assessor  must  exact  from  each  person  a  written  statement, 
under  oath,  setting  forth  specifically  all  the  real  and  personal 
property  owned  by  such  person,  or  in  his  possession,  or 
under   his   control,   at   twelve   o'clock   meridian   on   the   first 


FAXES   AND   TAX    TITLES.  935 

Monday  in  March.  The  assessor  may  fill  out  the  statement 
at  the  time  he  presents  it,  or  he  may  deliver  it  to  the  person 
and  require  him,  within  an  appointed  time,  to  return  the 
same  to  him,  properly  filled  out.  Every  assessor  shall  have 
power  to  require  any  person  found  within  such  assessor's 
respective  county  to  make  and  subscribe  an  affidavit,  giving 
his  name,  place  of  residence  or  place  of  business,  and  whether 
he  is  the  owner  of  any  taxable  property ;  and  he  may  sub- 
poena and  examine  any  person  in  relation  to  any  statement 
furnished  him,  or  which  discloses  property  which  is  assess- 
able in  his  respective  county  that  may  be  stored  with,  in 
possession  of,  or  controlled  by  such  person.  And  he  may 
exercise  this  power  in  any  county  where  the  persons  whom 
he  desires  to  examine  may  be  found,  but  shall  have  no  power 
to  require  such  person  to  appear  before  him  in  any  other 
county  than  that  in  which  the  subpoena  is  served  upon  them. 
Political  Code,  Sections  3629,  3631,  3632. 

Section      1210.— ARBITRARY      ASSESSMENTS.-^If 

any  person,  after  demand  made  by  the  assessor,  neglects  or 
refuses  to  give,  under  oath,  the  statement  herein  provided 
for,  or  to  comply  with  the  other  requirements  of  this  title, 
the  assessor  must  note  the  refusal  on  the  assessment-book, 
opposite  the  name  of  such  person,  and  must  make  an  esti- 
mate of  the  value  of  such  property  of  such  person,  and_  the 
assessor  must  transmit  on  or  before  the  first  day  of  July  of 
each  year  to  the  board  of  supervisors  a  verified  report  in 
writing,  separate  from  the  assessment-roll,  containing  a  com- 
plete list  of  all  persons  who  refuse  or  neglect  to  furnish  a 
statement  of  their  property  as  herein  provided  for,  or  to 
comply  with  the  requirements  of  this  title,  the  amount  of  the 
assessment  upon  the  property  of  such  persons,  with  a  state- 
ment of  the  particular  facts,  if  any,  upon  which  the  assess- 
ment has  been  made,  and  the  valuation  of  the  property  so 
assessed  ascertained.  The  board  of  supervisors  must  investi- 
gate and  inquire  into  all  assessments  and  values  so  fixed  by 
the  assessor,  as  prescribed  by  this  section,  and  for  that  pur- 
pose must  require  each  taxpayer  affected  by  such  assessment 


936  BUSINESS   LAWS   FOR   BUSINESS   MEN. 

and  valuation  to  make  a  statement  under  oath,  within 
ten  days  from  making  an  order  requiring  such  statement, 
setting  forth  specifically,  all  the  property  owned  or  controlled, 
or  in  the  possession  of  such  taxpayer  on  the  first  Monday 
of  March.  If  any  taxpayer,  after  demand  made  by  the  board 
of  supervisors,  shall  neglect  or  refuse  to  make  and  deliver  to 
the  said  board  of  supervisors  the  statement,  duly  verified, 
herein  provided  for,  or  to  comply  with  the  other  requirements 
of  this  title,  the  said  board  of  supervisors,  sitting  as  a 
county  board  of  equalization,  must  increase  such  assessment 
and  valuation  to  such  an  amount  as  the  said  board  shall 
deem  just;  but  the  value  fixed  by  the  assessor  must  not,  in 
any  case,  be  reduced  by  the  board  of  supervisors. 
Political  Code,  Section  3633. 

Section  1211.— ASSESSMENT  OF  UNKNOWN  OR 
ABSENT  OWNERS.— If  the  owner  or  claimant  of  any 
property,  not  listed  by  another  person,  is  absent  or  unknown, 
the  assessor  must  make  an  estimate  of  the  value  of  such 
property.  If  the  name  of  the  absent  owner  is  known  to  the 
assessor,  or  if  it  appears  of  record  in  the  office  of  the  county 
recorder  where  the  property  is  situated,  the  property  must 
be  assessed  to  such  name;  if  unknown  to  the  assessor,  and 
if  it  does  not  so  appear  of  record,  the  property  must  be 
assessed  to  unknown  owners. 

Political  Code,  Sections  3635,  3636. 

Section  1212.— CONSIGNED  PROPERTY.— All  per- 
sonal property  consigned  for  sale  to  any  person  within  this 
state,  from  any  place  out  of  this  state,  or  from  other  county 
or  counties  in  this  state,  must  be  assessed  in  the  county  where 
the  property  is  situated. 

Political  Code,  Section  3638. 

Section     1213.— PROPERTY    OF    FIRM    OR    COR- 
PORATION.— The  property  of  every  firm  and  corporation 
must  be  assessed  in  the  county  where  the  property  is  situate, 
and  must  be  assessed  in  the  name  of  the  firm  or  corporation. 
Political  Code,  Section  3641. 


TAXES    AND   TAX    TITLES.  937 

Section  1214.— UNDISTRIBUTED  PROPERTY  OF 
DECEASED  PERSON.— The  undistributed  or  unpartition- 
ed  property  of  deceased  persons  may  be  assessed  to  the  heirs, 
guardians,  executors,  or  administrators ;  and  a  payment  of 
taxes  made  by  either  binds  all  the  parties  in  interest  for  their 
equal  proportions. 

Political  Code,  Section  3642. 

Section    1215.— FERRIES   AND   TOLL   BRIDGES.— 

A  ferry-boat  is  a  vessel  traversing  across  any  of  the  waters 
of  the  state,  between  two  constant  points,  regularly  employed 
for  the  transfer  of  passengers  and  freight,  authorized  by 
law  so  to  do,  and  also  any  boat  employed  as  a  part  of  the 
system  of  a  railroad  for  the  transfer  of  passengers  and 
freight,  plying  at  regular  and  stated  periods  between  two 
points.  Where  ferries  connect  more  than  one  county,  the 
wharves,  storehouses,  and  all  stationary  property  belonging  to 
or  connected  with  such  ferries,  must  be  assessed,  and  the 
taxes  paid,  in  the  county  where  located.  The  value  of  the 
franchise,  and  water-craft,  and  of  all  toll-bridges  connecting 
more  than  one  county,  must  be  assessed  in  equal  proportions 
in  the  counties  connected  by  such  ferries  or  toll-bridges. 
Political  Code,  Section  3643. 

Section      1216.— VESSELS      AND      BOATS.— Vessels 

registered,  licensed,  or  enrolled  out  of  and  plying  in  whole 
or  in  part  in  the  waters  of  this  state,  the  owners  of  which 
reside  in  this  state,  must  be  assessed  in  this  state. 

All  vessels,  except  ferry-boats,  which  may  be  registered, 
of  every  class  which  are  by  law  required  to  be  registered, 
must  be  assessed  and  the  taxes  thereon  paid,  only  in  the 
county,  or  city  and  county,  where  the  same  are  registered, 
enrolled,  or  licensed. 

All  boats  and   small  craft  not  required  to  be  registered, 
must  be  assessed  in  the  county  where  their  owner  resides. 
Political  Code,  Sections  3644,  3645,  3646. 


938  BUSINESS   LAWS    FOR   BUSINESS    MEN. 

Section  1217.— PROPERTY  AND  MONEY  IN  LITI- 
GATION.— Money  and  property  in  litigation  in  possession 
of  a  county  treasurer,  of  a  court,  county  clerk,  or  receiver, 
must  be  assessed  to  such  treasurer,  clerk,  or  receiver,  and 
the  taxes  be  paid  thereon  under  the  direction  of  the  court. 
Political  Code,  Section  3647. 

Section  1218.— PROPERTY  CONCEALED,  MIS- 
REPRESENTED, ETC.— Any  property  wilfully  concealed, 
removed,  transferred,  or  misrepresented  by  the  owner  or 
agent  thereof,  to  evade  taxation,  upon  discovery  must  be 
assessed  at  not  exceeding  ten  times  its  value,  and  the  assess- 
ment so  made  must  not  be  reduced  by  the  board  of  super- 
visors. 

Political  Code,  Section  3648. 

Section  1219.— PROPERTY  NOT  TAXED  IN  PRE- 
VIOUS YEAR. — ^Any  property  discovered  by  the  assessor 
to  have  escaped  assessment  for  the  last  preceding  year,  if 
such  property  is  in  the  ownership  or  under  the  control  of 
the  same  person  who  owned  or  controlled  it  for  such  pre- 
ceding year,  may  be  assessed  at  double  its  value. 
Political  Code,  Section  3649. 

Section  1220.— NOTICE  OF  MEETING  TO  EQUA- 
LIZE ASSESSMENTS.— As  soon  as  completed,  the  assess- 
ment-book, together  with  the  map-books,  statements,  and 
military  roll,  must  be  delivered  to  the  clerk  of  the  board  of 
supervisors,  who  must  immediately  give  notice  thereof,  and 
of  the  time  the  board  will  meet  to  equalize  assessments,  by 
publication  in  a  newspaper,  if  any  is  printed  in  the  county; 
if  none,  then  in  such  manner  as  the  board  may  direct.  In 
the  mean  time,  the  assessment-book,  map-books,  and  state- 
ments must  remain  in  his  office  for  the  inspection  of  all  per- 
sons interested.  After  the  board  of  equalization  has  com- 
pleted its  labors,,  the  map-books  and  statements  shall  be 
returned  to  the  county  assessor's  office,  and  shall  be  kept  in 
said  office  for  future  reference. 

Political  Code,  Section  3651. 


TAXES   AND   TAX    TITLES.  939 

Section  1221.— PERSONS  CLAIMING  OWNER- 
SHIP.— Lands  once  described  on  the  assessment-book  need 
not  be  described  a  second  time,  but  any  person  claiming  the 
same,  and  desiring  to  be  assessed  therefor,  may  have  his 
name  inserted  with  that  of  the  person  to  whom  such  land 
has  been  assessed. 

Political  Code,  Section  3657. 

Section  1222.— OFFICIAL  MAPS  OF  CITY  LOTS 
OR  BLOCKS. — Whenever  any  city,  town,  or  subdivision  of 
land  is  platted  or  divided  into  lots  or  blocks,  and  whenever 
any  addition  to  any  city,  town,  or  such  subdivision  shall  be 
or  has  been  laid  out  into  lots  or  blocks  for  the  purpose  of 
sale  or  transfer,  it  shall  be  lawful  for  the  city  engineer,  or 
the  county  or  city  and  county  surveyor,  under  the  direction 
and  with  the  approval  of  the  city  council  or  board  of  super- 
visors of  said  city,  county,  or  city  and  county,  to  make  an 
official  map  of  such  city,  town,  or  subdivision,  giving  to  each 
block  on  such  map  a  number,  and  to  each  lot  or  subdivision 
in  such  block  a  separate  number  or  letter,  and  giving  names 
to  such  streets,  avenues,  lanes,  courts,  commons,  or  parks,  as 
may  be  delineated  on  such  official  map. 

Whenever  the  city  council  or  board  of  supervisors  of  such 
city,  county,  or  city  and  county,  shall  adopt  such  map  as  the 
official  map  of  the  subdivision,  town,  city,  county,  or  city  and 
county,  it  shall  be  lawful  to,  and  the  assessor  shall,  describe 
such  lots,  blocks,  or  parcels  of  land  by  numbers  or  letters  as 
delineated  on  such  map  in  assessing  such  property,  and  it 
shall  be  lawful  and  sufficient  to  describe  such  lots  or  blocks 
in  any  deeds,  conveyances,  contracts,  or  obligations  affecting 
any  such  lots  or  blocks  as  designated  on  such  official  map,  a 
reference  to  such  map  sufficient  for  the  identification  thereof 
being  coupled  with  such  description. 

Such  engineer  or  surveyor,  under  the  direction  and  with 
the  approval  of  the  city  council  or  board  of  supervisors  of 
such  city,  county,  or  city  and  county,  may  compile  such 
map  from  maps  on  file,  or  may  resurvey  or  renumber  the 
blocks,  or  renumber  or  reletter  the  lots  in  such  blocks,   or 


940  BUSINESS   LAWS   FOR   BUSINESS   MEN. 

change  the  names  of  streets.  AH  surveys  and  the  field-notes 
thereof  made  by  any  such  engineer  or  surveyor,  under  the 
provisions  of  this  section,  or  in  surveying  officially  any  lots 
or  parcels  of  land  in  any  city,  town,  county,  or  city  and 
county,  for  the  purposes  of  any  such  map,  shall  be  filed  in 
the  office  of  the  surveyor  or  engineer,  as  the  case  may  be, 
and  shall  become  a  part  of  the  public  records  of  such  city, 
town,  county,  or  city  and  county. 

Each  and  every  map,  made  and  adopted  as  hereinabove 
provided,  shall  be  certified  under  the  hands  of  a  majority  of 
the  members  and  the  presiding  officer  and  secretary  and 
official  seal,  if  any,  of  the  authority  adopting  the  same.  Such 
certificate  shall  set  forth  in  full  the  resolution  adopting  such 
map,  with  the  date  of  adoption;  and  such  map,  so  certified, 
shall  be  forthwith  filed  in  the  office  of  the  county  recorder 
of  the  county,  or  city  and  county,  wherein  the  platted  lands 
are  situate,  and  the  said  recorder  shall  immediately  securely 
fasten  and  bind,  in  one  of  a  series  of  firmly  bound  books  to 
be  provided,  together  with  the  proper  indexes  thereof  and 
appropriately  marked  for  the  reception  of  the  maps  herein 
provided  for,  each  such  map  so  filed  with  him ;  and  the  same 
shall  become  an  official  map  for  all  the  purposes  of  this 
section  when  so  certified,  filed  and  bound,  but  not  before. 
This  section  is  hereby  made  applicable  to  all  cities,  towns,  and 
villages  in  this  state,  as  well  as  to  the  counties,  and  cities  and 
counties  thereof,  whether  the  same  be  incorporated  or  not; 
and  the  words  "city  council  or  board  of  supervisors"  wherever 
used  herein  shall  be  deemed  to  include  the  proper  correspond- 
ing governing  board  and  authority  in  each  such  place;  and 
the  words  "city  engineer"  and  "county  or  city  and  county 
surveyor"  shall  be  deemed  to  include  the  like  or  corresponding 
officer,  subject  to  the  direction  of  such  "corresponding  gov- 
erning board  and  authority"  in  each  such  place ;  or,  if  there 
be  no  such  officer  subject  to  such  direction,  such  "corre- 
sponding board  and  authority"  may  employ  competent  engi- 
neers and  surveyors  to  the  extent  necessary  for  the  carrying 
out  of  the  purposes  of  this  act  in  the  places  subject  to  its 
jurisdiction,    and   the   persons    so   appointed    shall    have    the 


TAXES   AND   TAX    TITLES.  941 

same  authority  and  shall  perform  the  same  duties  as  are 
given  to  and  enjoined  upon  "city  engineers"  and  "county  or 
city  and  county  surveyors,"  respectively,  in  like  cases.  The 
services  of  such  engineers  and  surveyors  so  employed  shall 
be  contracted  for,  examined,  passed  upon,  audited,  and  paid 
as  are  other  debts  contracted  by  such  governing  boards  and 
authorities. 

Political  Code,  Section  3658-A. 

Section  1223.— ASSESSMENT  OF  WATER-DITCH- 
ES, TOLL-ROADS,  AND  TELEGRAPH  AND  TELE- 
PHONE LINES. — Water-ditches  constructed  for  mining, 
manufacturing,  or  irrigating  purposes,  and  wagon  and  turn- 
pike toll-roads,  must  be  assessed  the  same  as  real  estate  by 
the  assessor  of  the  county,  at  a  rate  per  mile  for  that  portion 
of  such  property  as  lies  within  his  county.  All  telegraph  and 
telephone  lines  shall  be  described  in  the  same  manner  as  real 
estate  is  described,  but  assessed  as  personal  property  by  the 
assessor  of  the  county,  at  a  rate  per  mile  for  that  portion  of 
such  property  as  lies  within  his  county. 
Political  Code,  Section  3663. 

Section  1224.— ASSESSMENT  OF  RAILWAY 
FRANCHISES  AND  PROPERTIES.— The  state  board 
of  equalization  must  meet  at  the  State  Capitol  on  the  third 
Monday  in  July,  and  continue  in  open  session  from  day  to 
day,  Sundays  excepted,  until  the  first  Monday  in  August. 
At  such  meetings  the  board  must  assess  the  franchise,  road- 
way, road-bed,  rails,  and  rolling-stock  of  all  railroads  oper- 
ated in  more  than  one  county,  but  franchises  derived  from 
the  United  States  shall  not  be  assessed.  Assessments  must 
be  made  to  the  corporation,  persons,  or  association  of  per- 
sons owning  the  same.  If  any  portion  of  any  railroad  less 
than  the  whole  is  operated  by  some  corporation  or  association 
of  individuals  other  than  the  owner  of  such  railroad,  under 
lease  or  other  contract,  and  such  portion  so  operated  runs  in 
more  than  one  county,  the  value  of  such  part  or  portion  of 
such  railroad  shall  be  assessed  separate  and  apart  from  the 


942  BUSINESS   LAWS   FOR   BUSINESS   MEN. 

balance  of  said  railroad,  and  the  board  shall  assess  the  road- 
way, road-bed,  and  rails  of  such  portion  of  said  railroad, 
together  with  the  rolling-stock  used  thereon  by  the  corpor- 
ation or  association  of  individuals  operating  the  same.  The 
depots,  stations,  shops,  and  buildings  erected  upon  the  space 
covered  by  the  right  of  way,  and  all  other  property  owned 
by  such  person,  corporation,  or  association  of  persons,  are 
assessed  by  the  assessor  of  the  county  wherein  they  are 
situate.  Within  twenty  days  after  the  first  Monday  of 
August,  the  board  must  apportion  the  total  assessment  of  the 
franchise,  roadway,  road-bed,  rails,  and  rolling-stock  of  each 
railway  to  the  counties,  or  cities  and  counties,  in  which  such 
railway  is  located,  in  proportion  to  the  number  of  miles  of 
railway  laid  in  such  counties,  and  cities  and  counties.  The 
board  must  also,  within  said  time,  transmit,  by  mail,  to  the 
county  auditor  of  each  county,  or  city  and  county,  to  which 
such  apportionment  shall  have  been  made,  a  statement  show- 
ing the  length  of  the  main  track  of  such  railway  within  the 
county,  or  city  and  county,  with  a  description  of  the  said 
track  within  the  county,  or  city  and  county,  including  the 
right  of  way,  by  metes  and  bounds,  or  other  description 
sufficient  for  identification  (but  it  shall  not  be  necessary  to 
state  the  variable  width  of  such  right  of  way),  the  assessed 
value  per  mile  of  the  same,  as  fixed  by  a  pro  rata  distribution 
per  mile  of  the  assessed  value  of  the  whole  franchise,  road- 
way, road-bed,  rails,  and  rolling-stock  of  such  railway  within 
the  state,  and  the  amount  apportioned  to  the  county,  or  city 
and  county.  The  auditor  must  enter  the  statement  on  the 
assessment  roll  or  book  of  the  county,  or  city  and  county,  and 
where  the  county  is  divided  into  assessorial  townships  or 
districts,  then  on  the  roll  or  book  of  any  township  or  district 
he  may  select,  and  enter  the  amount  of  the  assessment 
apportioned  to  the  county,  or  city  and  county,  in  the  column 
of  the  assessment  book  or  roll,  as  aforesaid,  which  shows  the 
total  value  of  all  property  for  taxation,  either  of  the  county, 
city  and  county,  or  such  township  or  district.  On  the  third 
Monday  in  September,  the  board  of  supervisors  must  make, 
and  cause  to  be  entered  in  the  proper  record-book,  an  order 


TAXES   AND   TAX   TITLES.  943 

stating  and  declaring  the  length  of  main  track  of  the  railway 
assessed  by  the  state  board  of  equalization  within  the  county, 
the  assessed  value  per  mile  of  such  railway,  the  number  of 
miles  of  track,  and  the  assessed  value  of  such  railway  lying  in 
each  city,  town,  township,  school  and  road  district,  or  lesser 
taxation  district  in  the  county,  or  city  and  county,  through 
which   such   railway   runs,    as   fixed   by   the   state   board   of 
equalization,  which  shall  constitute  the  assessment  value  of 
said  property  for  taxable  purposes  in  such  city,  town,  town- 
ship,  school,   road,   or  other   district;   and   the   clerk   of  the 
board  of  supervisors  must  transmit  a  copy  of  each  order  or 
equalization  to  the  city  council,  or  trustees,  or  other  legislative 
body  of  incorporated  cities  or  towns,   the  trustees   of  each 
school  district,  and  the  authorized  authorities  of  other  tax- 
ation districts  through  which  such  railway  runs.     All   such 
railway  property  shall  be  taxable  upon  said  assessment  at  the 
same  rates,  by  the  same  officers,  and  for  the  same  purposes, 
as  the  property  of  individuals  within  such  city,  town,  town- 
ship, school,  road,  and  lesser  taxation  districts,  respectively. 
If  the  owner  of  a  railway  assessed  by  the   state  board  of 
equalization  is  dissatisfied  with  the  assessment  made  by  the 
board,  such  owner  may,  at  the  meeting  of  the  board,  between 
the  first  Monday  in  August  and  the  first  Monday  in   Sep- 
tember, apply  to  the  board  to  have  the  same  corrected  in  any 
particular,  and  the  board  may  correct  and  increase  or  lower 
the  assessment  made  by  it  so  as  to  equalize  the  same  with 
the  assessment  of  other  property  in  the  state.     If  the  board 
shall  increase  or  lower  any  assessment  previously  made  by 
it,  it  must  make  a  statement  to  the  county  auditor  of  the 
county    aflfected    by    the    change    in    the    assessment    of    the 
change  made,  and  the  auditor  must  note  such  change  upon 
the  assessment  book  or  roll  of  the  county,  as  directed  by  the 
board. 

Political  Code,  Section  3665. 

S/sction  1225.— COUNTY  BOARD  OF  EQUALIZ- 
ATION.— The  board  of  supervisors  of  each  county  must 
meet  on  the  first  Monday  of  July  in  each  year,  to  examine 


944  BUSINESS    LAWS   FOR   BUSINESS   MEN. 

the  assessment-book  and  equalize  the  assessment  of  property 
in  the  county.  It  must  continue  in  session  for  that  purpose, 
from  time  to  time,  until  the  business  of  equalization  is  dis- 
posed of,  but  not  later  than  the  third  Monday  in  July. 

The  board  has  power,  after  giving  notice  in  such  manner 
as  it  may,  by  rule,  prescribe,  to  increase  or  lower  the  entire 
assessment-roll,  or  any  assessment  contained  therein,  so  as  to 
equalize  the  assessment  of  the  property  contained  in  said 
roll,  and  make  the  assessment  conform  to  the  true  value  of 
such  property  in  money. 

No  reduction  must  be  made  in  the  valuation  of  property, 
unless  the  party  affected  thereby  or  his  agent  makes  and  files 
with  the  board  a  written  application  therefor,  verified  by  his 
oath  showing  the  facts  upon  which  it  is  claimed  such  reduc- 
tion should  be  made. 

Before  the  board  grants  the  application  or  makes  any 
reduction  applied  for,  it  must  first  examine,  on  oath,  the  per- 
son or  the  agent  making  the  application  touching  the  value  of 
the  property  of  such  person.  No  reduction  must  be  made 
unless  such  person  or  the  agent  making  the  application  attends 
and  answers  all  questions  pertinent  to  the  inquiry. 

Upon  the  hearing  of  the  application  the  board  may  sub- 
pcena  such  witnesses,  hear  and  take  such  evidence  in  relation 
to  the  subject  pending,  as  in  its  discretion  it  may  deem  proper. 

During  the  session  of  the  board  the  assessor  and  any  deputy 
whose  testimony  is  needed  must  be  present,  and  may  make 
any  statement,  or  introduce  and  examine  witnesses  on  ques- 
tions before  the  board. 

Any  assessment  on  a  mortgage,  or  deed  of  trust,  which 
has  been  erroneously  taxed  to  the  mortgagee,  or  party  loaning 
the  money,  when  the  same  has  been  paid  or  satisfied  prior 
to  the  first  Monday  in  March,  shall  be  valid  only  as  against 
the  real  estate  from  the  assessment  on  which  a  reduction  has 
been  previously  made.  When  partial  payments  have  been 
made  on  a  debt  secured  by  mortgage,  or  deed  of  trust,  the 
owner  is  authorized  to  make  the  proper  deduction,  listing  only 
the  balance  due  on  the  first  Monday  in  March. 

Political  Code,  Sections  3674,  3675,  3676,  3677,  3678. 


TAXES    AND   TAX    TITLES.  945 

Section  1226.— FIXING  RATE  OF  TAXES.— Between 
the  first  and  second  Mondays  in  September  of  each  year, 
the  State  Board  of  Equalization  must  determine  the  rate  of 
state  tax  to  be  levied  and  collected  upon  the  assessed  valu- 
ation of  the  property  of  the  state,  which,  after  allowing  five 
per  cent  for  delinquencies  in  collection  of  taxes,  must  be 
sufficient  to  raise  the  specific  amount  of  revenue  directed  to 
be  raised  by  the  legislature  for  state  purposes. 

The  board  of  supervisors  of  each  county  must,  on  the 
third  Monday  in  September,  fix  the  rate  of  county  taxes, 
designating  the  number  of  cents  on  each  one  hundred  dollars 
of  property  levied  for  each  fund,  and  must  levy  the  state 
and  county  taxes  upon  the  taxable  property  of  the  county; 
provided,  that  it  shall  not  be  lawful  for  any  board  of  super- 
visors of  any  county  in  the  state  to  levy,  nor  shall  any  tax 
greater  than  fifty  cents  on  each  one  hundred  dollars  of  prop- 
erty be  levied  and  collected  in  any  one  year,  to  pay  the 
bonded  indebtedness,  or  judgment  arising  therefrom,  of  this 
state,  or  of  any  county  or  municipality  in  this  state. 
Political  Code,  Sections  3696,  3714. 

Section  1227.— LIEN  OF  TAXES.— Every  tax  has  the 
effect  of  a  judgment  against  the  person,  and  every  such  lien 
has  the  force  and  effect  of  an  execution  duly  levied  against 
all  property  of  the  delinquent.  The  judgment  is  not  satisfied 
nor  the  lien  removed  until  the  taxes  are  paid  or  the  property 
sold  for  the  payment  thereof. 

Every  tax  due  upon  personal  property  is  a  lien  upon  the 
real  property  of  the  owner  thereof,  from  and  after  twelve 
o'clock  M.  of  the  first  Monday  in  March  in  each  year. 

Every  tax  due  upon  real  property  is  a  lien  against  the 
property  assessed;  and  every  tax  due  upon  improvements 
upon  real  estate  assessed  to  others  than  the  owner  of  the 
real  estate,  is  a  lien  upon  the  land  and  improvements;  which 
several  liens  attach  as  of  the  first  Monday  of  March  in  each 
year. 

Political  Code,  Sections  3716,  3717,  3718. 


946  BUSINESS   LAWS   FOR   BUSINESS   MEN. 

Section  1228.--TAX-COLLECTOR  TO  PUBLISH 
NOTICE. — Within  ten  days  after  the  receipt  of  the  assess- 
ment-book, from  the  auditor,  the  tax-collector  must  publish 
a  notice  specifying: 

1.  That  the  taxes  on  all  personal  property  secured  by  real 
property,  and  one  half  of  the  taxes  on  all  real  property,  will 
be  due  and  payable  on  the  second  Monday  in  October,  and 
will  be  delinquent  on  the  last  Monday  in  November  next 
thereafter,  at  six  o'clock  p.  m.,  and  that  unless  paid  prior 
thereto,  fifteen  per  cent  will  be  added  to  the  amount  thereof, 
and  that  if  said  one  half  be  not  paid  before  the  last  Monday 
in  April  next,  at  six  o'clock  p.  m.,  an  additional  five  per  cent 
will  be  added  thereto,  that  the  remaining  one-half  of  the 
taxes  on  all  real  property  will  be  payable  on  and  after  the 
first  Monday  in  January  next,  and  will  be  delinquent  on  the 
last  Monday  in  April  next  thereafter,  at  six  o'clock  p.  m.,  and 
that  unless  paid  prior  thereto,  five  per  cent  will  be  added  to 
the  amount  thereof. 

2.  That  all  taxes   may  be  paid  at  the  time   the  first   in- 
stallment, as  herein  provided,  is  due  and  payable. 

3.  The  times  and  places  at  which  payment  of  taxes  may 
be  made. 

Political  Code,  Section  3746. 

Section     1229.— TAXES     ON     ANY     PARTICULAR 
PARCEL  OF  LAND  MAY  BE  PAID  SEPARATELY. 

— The  taxes  on  any  particular  lot,  piece,  or  parcel  of  land 
contained  in  any  assessment  may  be  paid  separately  from  the 
whole  assessment,  if  such  lot,  piece,  or  parcel  has  a  separate 
valuation  on  the  assessment-roll,  by  paying  the  amount  of 
state  and  county  taxes  due  on  such  lot,  piece,  or  parcel  of 
land,  with  a  proper  proportion  of  the  amounts  due  as  tax  on 
personal  property,  penalties,  if  any,  and  a  proper  proportion 
of  the  tax  due  to  any  school,  road,  or  other  lesser  taxation 
district.  The  tax-collector  shall  make  an  entry  on  the  margin 
of   the   assessment-book,    showing    what    property    has    been 


TAXES    AND   TAX    TITLES.  947 

released  by  the  payment  of  the  taxes,  together  with  the  amounts 
of  such  taxes  separately  and  specifically  set  forth. 
Political  Code,  Section  3747. 

Section  1230.— TIME  AND  PLACE  OF  PAYMENT. 

— All  taxes  must  be  paid  at  the  office  of  the  tax-collector, 
unless  the  board  of  supervisors  by  order,  made  on  or  before 
the  first  Monday  in  October,  direct  that  the  taxes  must  be 
collected  in  the  several  townships  of  the  county,  or  in  either 
thereof,  or  in  any  municipal  corporation  in  said  county;  in 
which  case,  the  notice  by  the  tax-collector  must  specify  a 
time  and  place  within  any  township  or  municipal  corporation 
named  in  such  order,  when  and  where  the  tax-collector  will 
attend  to  receive  the  payment  of  taxes. 

The  notice  in  every  case  must  be  published  for  two  weeks 
in  some  weekly  or  daily  newspaper  published  in  the  county,  if 
there  is  one ;  or  if  there  is  not,  then  by  posting  it  in  three 
public  places  in  each  township. 

Political  Code,  Sections  3748,  3749. 

Section  1231.— PAYMENT  OF  TAXES  OF  DECE- 
DENTS AND  INSOLVENTS.— The  superior  court  must 
require  every  administrator  or  executor  to  pay  out  of  the 
funds  of  the  estate  all  taxes  due  from  such  estate;  and  no 
order  or  decree  for  the  distribution  of  any  property  of  any 
decedent  among  the  heirs  or  devisees,  must  be  made  until  all 
taxes  against  the  estate  are  paid.  In  the  same  manner,  the 
court  must  require  the  assignee  to  pay  out  of  the  funds  of  an 
insolvent's  estate  all  taxes  due  from  such  estate;  and  no  final 
discharge  to  such  assignee  shall  be  granted  until  all  taxes 
against  the  insolvent's  estate  are  paid. 
Political  Code,  Section  3752. 

Section  1232.— WHEN  TAXES  ARE  DELINQUENT; 
PENALTIES. — On  the  last  Monday  in  November  of  each 
year,  at  six  o'clock  p.  m.-,  all  taxes  then  unpaid,  except  the 
last  installment  of  the  real  property  taxes,  are  delinquent, 
and  thereafter  the  tax-collector  must  collect,  for  the  use  of 


948  BUSINESS   LAWS   FOR   BUSINESS   MEN. 

the  county,  or  city  and  county,  an  addition  of  fifteen  per 
cent  thereon ;  provided,  that  if  they  be  not  paid  before  the 
last  Monday  in  April  next  succeeding,  at  six  o'clock  p.  m., 
he  shall  collect  an  addition  of  five  per  cent  thereon.  On  the 
last  Monday  in  April  of  each  year,  at  six  o'clock  p.  m.,  all 
the  unpaid  portion  of  the  remaining  one-half  of  the  taxes 
on  all  real  property  are  delinquent,  and  thereafter  the  tax- 
collector  must  collect,  for  the  use  of  the  county,  or  city  and 
county,  an  addition  of  five  per  cent  thereon;  provided,  that 
the  entire  tax  on  any  real  property  may  be  paid  at  the  time 
the  first  installment,  as  above  provided,  is  due  and  payable; 
and  provided  further,  that  the  taxes  on  all  personal  property 
unsecured  by  real  property  shall  be  due  and  payable  immedi- 
ately after  the  assessment  of  said  personal  property  is  made. 
Political  Code,  Section  3756. 

Section  1233.— PUBLICATION  OF  DELINQUENT 
LIST. — On  or  before  the  fifth  day  in  June  of  each  year, 
the  tax-collector  must  publish  the  delinquent-list,  which  must 
contain  the  names  of  the  persons  and  a  description  of  the 
property  delinquent,  and  the  amount  of  taxes,  penalties,  and 
costs  due,  opposite  each  name  and  description,  with  the  taxes 
due  on  personal  property,  the  delinquent  state,  poll,  road,  and 
hospital  tax,  the  taxes  due  each  school,  road,  or  other  lesser 
taxation  district,  added  to  the  taxes  on  real  estate,  where  the 
real  estate  is  liable  therefor,  or  the  several  taxes  are  due 
from  the  same  person. 

Political  Code,  Section  3764. 

Section  1234.— NOTICE  OF  SALE.— The  tax-collector 
must  append  and  publish  with  the  delinquent-list  a  notice 
that  unless  the  taxes  delinquent,  together  with  the  costs  and 
penalties,  are  paid,  the  real  property  upon  which  such  taxes 
are  a  lien  will  be  sold. 

The  publication  must  be  made  once  a  week  for  three  suc- 
cessive weeks  in  some  newspaper,  or  supplement  thereto, 
published  in  the  county. 


TAXES   AND  TAX   TITLES.  949 

The  publication  must  designate  the  day  and  hour  when 
the  property  will,  by  operation  of  law,  be  sold  to  the  state, 
which  sale  must  not  be  less  than  twenty-one  nor  more  than 
twenty-eight  days  from  the  time  of  the  first  publication,  and 
the  place  shall  be  in  the  tax-collector's  office. 
Political  Code,  Sections  3765,  3766,  3767. 

Section  1235.— LAND  SOLD  FOR  TAXES  ENCUM- 
BERED BY  TRUST  DEED  OR  MORTGAGE.— When- 
ever land  to  be  sold  for  taxes  is  encumbered  by  trust  deed 
or  mortgage,  and  the  taxes  for  which  the  land  is  to  be  sold  is 
for  the  value  over  and  above  the  encumbrance,  as  the  said 
encumbrance  is  shown  by  and  upon  the  assessment-roll  in 
the  tax-collector's  office,  the  tax-collector  shall  at  least  ten 
days  before  the  date  of  sale  mail  a  copy  of  the  notice  of  sale 
to  the  mortgagee  named  in  any  such  mortgage  and  the 
trustees  named  in  any  such  trust  deed.  When  the  addresses 
of  the  mortgagee  named  in  any  mortgage  and  the  trustees 
named  in  any  trust  deed  are  unknown  to  the  tax-collector,  he 
shall  mail  said  notice  in  said  names  to  the  county  seat  of  the 
said  county.  The  tax-collector  shall  file  a  copy  of  said  notice 
with  an  affidavit  of  time  and  place  of  mailing  same  with  the 
county  recorder  and  county  clerk  respectively. 
Political  Code,   Section  3760-A. 

Section  1236.— ADDITIONAL  SUM  COLLECTED 
TO  DEFRAY  COSTS.— The  tax-collector  must  collect,  in 
addition  to  the  taxes  due  on  the  delinquent-list,  together  with 
the  penalties  for  delinquency,  fifty  cents  on  each  lot,  piece,  or 
tract  of  land  separately  assessed,  and  on  each  assessment  of 
personal  property,  which  shall  be  paid  to  the  county  and  be 
placed  to  the  credit  of  the  salary  fund. 
Political  Code,  Section  3770. 

Section   1237.— PROPERTY   SOLD  TO   STATE.— On 

the  day  and  hour  fixed  for  the  sale,  all  the  property  delin- 
quent, upon  which  the  taxes  of  all  kinds,  penalties,  and  costs 
have    not    been    paid,    shall,    by    operation    of   law    and    the 


950  BUSINESS   LAWS   FOR  BUSINESS   MEN. 

declaration  of  the  tax-collector,  be  sold  to  the  state,  and  said 
tax-collector  shall  make  an  entry,  "Sold  to  the  state,"  on  the 
delinquent-assessment  list,  opposite  the  tax,  provided,  that  on 
the  day  of  sale  the  owner  or  person  in  possession  of  any 
property  offered  for  sale  for  taxes  due  thereon,  may  pay  the 
taxes,  penalties,  and  costs  due;  and  provided  further,  that 
when  the  original  tax  amounts  to  the  sum  of  three  hundred 
dollars  or  more  upon  any  piece  of  property  or  assessment 
delinquent,  the  state  may  bring  suit  against  the  owner  of  said 
property  for  the  collection  of  said  tax  or  taxes,  penalties,  and 
costs. 

Political  Code,  Section  3771. 

Section  1238.— RECORD  OF  SALE  KEPT  BY  COL- 
LECTOR.— The  tax-collector  must  enter  in  appropriate 
columns  in  the  delinquent-list  opposite  the  description  of  each 
parcel  of  land  sold,  the  date  of  sale,  and  the  total  amount 
for  such  parcel  of  land  so  sold.  In  case  of  a  subsequent 
redemption  the  auditor  must  make  a  note  of  such  redemption 
and  the  date  thereof  on  the  margin  of  the  delinquent-list 
opposite  the  description  of  the  land  sold. 

Act  of  the  Legislature,  approved  May  1,  1911. 

Section  1239.— TIME  FOR  REDEMPTION  OF 
PROPERTY. — The  redemption  of  the  property  sold  may 
be  made  by  the  owner,  or  any  party  in  interest,  within  5 
years  from  the  date  of  the  sale  to  the  state,  or  at  any  time 
prior  to  the  entry  of  said  land  by  the  state. 
Political  Code,  Section  3780. 

Section    1240.— HOW    REDEMPTION    IS    MADE.— 

Redemption  must  be  made  to  the  county  treasurer  on  an 
estimate  furnished  by  the  auditor,  in  lawful  money  of  the 
United  States. 

Political  Code,  Section  3781. 

Section  1241.— TAX  DEEDS  MADE  AFTER  FIVE 
YEARS. — If  the  property  is  not  redeemed  within  five  years 
from  the  date  of  the  sale  to  the  state,  the  tax  collector,  or 


TAXES   AND   TAX   TITLES.  951 

his  successor  in  office,  must  make  the  state  a  deed  of  the 
property.  All  such  deeds  shall  be  recorded  in  the  office  of 
the  county  recorder  of  the  county  wherein  the  property  sold 
is  situated. 

Act  of  the  Legislature  approved  April  28,  1911. 

Section   1242.— EVIDENCE   OF   TAX   DEEDS.— The 

tax  deed,  duly  acknowledged  or  approved,  is  primary  evi- 
dence that  the  property  was  assessed  as  required  by  law; 
that  the  property  was  equalized  as  required  by  law;  that 
the  taxes  were  levied  in  accordance  with  the  law;  that  the 
taxes  were  not  paid;  that  at  a  proper  time  and  place  the 
property  was  sold  as  prescribed  by  law,  and  by  the  propei 
officer;  that  the  property  was  not  redeemed;  that  the  person 
who  executed  the  deed  was  the  proper  officer,  and  the  tax 
deed  is  conclusive  evidence  of  the  regularity  of  all  other 
proceedings,  from  the  assessment  by  the  assessor,  inclusive, 
to  the  execution  of  the  deed.  There  is  an  exception  to  this 
rule  in  the  case  of  actual  fraud,  and  if  a  levy  of  an  assess- 
ment, or  the  assessment  itself,  or  any  other  requisite  pro- 
ceeding leading  up  to  the  execution  of  the  deed,  was  pro- 
cured or  done  by  fraudulent  acts,  then  the  deed  would  not 
be  protected  by  the  law,  and  would  not  be  conclusive  of  the 
facts  recited  in  it. 

Act  of  the  Legislature  approved  April  25,  1911. 

Political  Code,  Section  3787, 

Section  1243.— STATE  LANDS  SOLD  FOR  DE- 
LINQUENT TAXES.— When  state  lands,  upon  which  the 
full  purchase  price  has  not  been  paid,  have  been  sold  to  the 
state  for  delinquent  taxes,  and  the  deed  therefor  to  the  state 
has  been  forwarded  to  and  filed  with  the  surveyor  general, 
the  said  lands  shall  again  become  subject  to  entry  and  sale, 
in  the  same  manner,  and  subject  to  the  same  conditions,  as 
apply  to  other  state  lands  of  like  character;  except  that  the 
former  possessors  or  owners  of  the  land  thus  deeded  to  the 
state,  their  heirs  or  assigns,  shall  be  preferred  purchasers 
thereof  for  the  period   of  six   months   after  the   deeds  are 


952  BUSINESS   LAWS  FOR  BUSINESS  MEN. 

filed  with  the  surveyor  general;   during   which   said  period 
of  six  months  no  application  by  any  person  other  than  said 
former  possessors,  or  owners,  their  heirs  or   assigns,   shall 
be  filed;  and  provided  further,  that  the  former  possessors  or 
owners  of  said  land  thus  deeded  to  the  state,  their  heirs  or 
assigns,  shall  have  the  right  to  be  restored  to  their  former 
estate  and  title  (at  any  time  either  during  the  said  period  of 
six    months    above    referred    to,    or    afterwards,    and    before 
application  for  said  land  is  made  and  filed  with  the  surveyor 
general   by   any   other   person)    upon   paying   to   the   county 
treasurer  of  the  county  wherein  the  said  land  is  situated  a 
sum   equivalent  to  the  taxes,   penalties,   costs   and   accruing 
costs  by  virtue  whereof  the  state  became  a  purchaser  of  the 
said  lands,  and  also,  all  delinquent  taxes,  penalties,  and  costs 
which  may  have  accrued  upon  such  lands  subsequent  to  the 
date  of  the  certificate  of  purchase  under  which  the   former 
possessors  or  owners,  or  their  heirs  and  assigns,  claim  title 
to  said  lands,  and  also  all  unpaid  interest  up  to  the  first  day 
of  January.     If  such  former  owner  or  possessor,   his   heirs 
or  assigns  desires  to  avail  himself  of  the  privileges  hereof, 
he   shall  file  with  the   surveyor   general   the   receipt   of  the 
county  treasurer,  showing  the  payment  of  all  such  taxes,  to- 
gether with  all  unpaid  interest  up  to  the  first  day  of  January 
following  the  date  when  he  shall  make  the  said  payment  to  the 
said   county   treasurer,   and  thereupon   the   surveyor  general 
shall  give  to  such  person  a  certificate  signed  and  sealed  by 
him,  but  which  need  not  be  acknowledged,  showing  full  pay- 
ment of  all  such  sums,  which  said  receipt  of  the  surveyor 
general    shall    be    recorded    by    said    persons    in    the    county 
recorder's  office  of  the  county   wherein  the   said   lands   are 
situated;  and  the  said  receipt,  when  so  recorded,  shall  have 
the  same  effect  as  a  deed  of  reconveyance  of  the  interest 
conveyed  by  such  deed,  and  the  said  former  owner  or  pos- 
sessor, his  heirs  or  assigns,  shall  thereby  be  restored  to  all 
his  rights  in  the  said  lands,  and  his  certificate  of  purchase 
shall  be  in  full  force  and  effect  as  effectually  as  though  no 
sale    had    been    made;    but   the    surveyor   general    shall    not 
receive  or  file  any  application  or  make  a  sale  of  any  lands 


TAXES   AND   TAX    TITLES.  953 

thus  deeded  to  the  state,  except  upon  the  previous  payment 
into  the  state  treasury,  as  other  moneys  are  required  to  be 
paid  therein,  in  addition  to  the  price  of  said  lands  as  com- 
pared with  the  price  fixed  for  other  state  lands  of  like 
character,  by  the  person  or  persons  proposing  to  file  the 
application  and  make  the  purchase,  of  a  sum  equal  to  the 
delinquent  taxes,  penalties,  costs  and  accruing  costs,  by 
virtue  whereof  the  state  became  a  purchaser  of  the  lands 
thus  sought  to  be  entered  or  purchased,  and  also  all  delin- 
quent taxes,  penalties  and  costs  which  may  have  accrued 
upon  such  lands  prior  to  and  subsequent  to  the  date  of  the 
sale  to  the  state  in  pursuance  of  which  the  state  received 
a  deed  therefor;  and  the  surveyor  general's  authority  for 
filing  said  application,  if  said  lands  are  otherwise  subject  to 
sale,  shall  be  the  production  by  said  applicant  of  the  county 
treasurer's  receipts  showing  full  payment  of  the  delinquent 
taxes,  penalties  and  costs  as  herein  specified. 

If  an  application  for  the  land  is  not  presented  to  the  sur- 
veyor general's  office  by  the  party,  or  his  agent,  who  paid 
the  delinquent  taxes,  penalties  and  costs,  by  virtue  whereof 
the  state  became  a  purchaser  of  said  land,  within  a  period 
of  fifteen  days  after  the  payment  thereof,  the  land  shall  be 
subject  to  sale  to  the  first  person  presenting  his  application 
for  said  land  to  the  surveyor  general's  office,  accompanied 
by  a  certified  copy  of  the  auditor's  estimate  and  treasurer's 
receipt,  showing  full  payment  of  all  delinquent  taxes, 
penalties  and  costs,  as  herein  specified.  An  estimate  of  the 
amount  of  delinquent  taxes,  penalties  and  costs,  as  herein 
specified,  must  be  made  by  the  county  auditor  of  the  county 
wherein  the  land  is  situated,  upon  the  written  request  of  the 
surveyor  general,  and  without  cost  to  the  state.  Said  county 
auditor's  estimate  shall  include  all  delinquent  taxes,  penalties 
and  costs,  as  shown  by  the  records  in  the  state  land  office, 
by  virtue  whereof  the  state  became  a  purchaser  of  the  land 
thus  sought  to  be  entered  or  purchased,  and  also  all  delin- 
quent taxes,  penalties  and  costs  which  may  have  accrued 
upon  such  lands  prior  to  and  subsequent  to  the  date  of  the 


954  BUSINESS    LAWS    FOR    BUSINESS    MEN. 

sale  to  the  state  in  pursuance  of  which  the  state  received  a 
deed  therefor. 

Nothing  in  this  act  contained  shall  apply  to  land  situated 
within  the  exterior  boundaries  of  an  Indian  or  Forest  reser- 
vation created  by  authority  of  the  United  States,  or  of  a 
National  Monument,  or  within  the  exterior  boundaries  of 
lands  withdrawn  from  public  entry  for  forest  purposes. 
Act  of  Legislature  approved  May  1,  1911. 

Section  1244.— SEIZURE  AND  SALE  OF  PER- 
SONAL PROPERTY  FOR  TAXES.— The  tax  collector 
of  each  county,  and  city  and  county,  has  the  power,  and  it 
is  made  by  law  his  duty,  to  collect  the  taxes  due  on  personal 
property,  except  when  real  estate  is  liable  therefor,  by  seiz- 
ure and  sale  of  any  personal  property  owned  by  the  delin- 
quent. The  sale  must  be  at  public  auction,  and  of  a  suffi- 
cient amount  of  the  property  to  pay  taxes,  percentage  and 
cost.  The  sale  must  be  made  after  one  week's  notice  of  the 
time  and  place  thereof,  given  by  publication  in  a  newspaper 
in  the  county,  or  by  posting  in  three  public  places. 
Political   Code,  Sections  3790,  3791,   3792. 

Section  1245.— TITLE  OF  PERSONAL  PROPERTY 
SOLD  FOR  TAXES.— On  payment  of  the  price  bid  for 
any  property  sold,  the  delivery  of  the  property  with  a  bill 
of  sale  vests  the  title  in  the  purchaser.  There  is  no  redemp- 
tion from  a  sale  of  personal  property. 
Political  Code,   Section  3794. 

Section  1246.— PERSONAL  PROPERTY  AT  RISK 
OF  OWNER. — The  unsold  portion  of  any  personal  property 
sold  for  taxes  may  be  left  at  the  place  of  sale,  at  the  risk 
of  the  owner. 

Political  Code,  Section  3796. 

Section    1247.—  ERRONEOUS       ASSESSMENTS.— 

When    property    that    is    exempt    from    taxation    has    been 
erroneously  assessed,  or  when  improvements  which  did  not 


TAXES   AND   TAX    TITLES.  955 

in  fact  exist  when  the  tax  became  a  lien,  have  been  erron- 
eously assessed  on  real  estate,  the  board  of  supervisors  may, 
upon  satisfactory  proof,  with  the  written  consent  of  the 
district  attorney,  and  by  an  order  entered  upon  the  minutes, 
make  an  order  to  cancel  such  assessment,  and  if  exempt  prop- 
erty has  been  sold  to  the  state  for  nonpayment  of  the  tax 
on  such  property  or  improvements  so  erroneously  assessed, 
and  a  certificate  of  sale  or  deed  has  been  issued  to  the  state 
and  the  state  has  not  disposed  of  the  property,  the  board 
must  also  direct  the  recorder  to  cancel  the  certificate  of  sale 
or  deed  so  issued,  so  far  as  the  same  relates  to  such  exempt 
property  or  non-existing  improvements.  In  the  city  and 
county  of  San  Francisco  the  written  consent  of  the  city 
attorney  shall  have  the  same  effect  as  that  of  the  district 
attorney. 

Act  of  the  Legislature,  approved  March  8,  1911. 

Section  1248.— TAXES  ERRONEOUSLY  COL- 
LECTED.— Any  taxes,  penalties  or  costs  thereon  paid  more 
than  once,  or  erroneously  or  illegally  collected,  or  any  taxes 
paid  upon  an  assessment  in  excess  of  the  actual  cash  value 
of  the  property  so  assessed  by  reason  of  a  clerical  error  of 
the  assessor  as  to  the  excess  in  such  cases,  or  any  taxes  paid 
upon  an  erroneous  assessment  of  improvements  on  real  estate 
not  in  fact  in  existence  when  said  taxes  became  a  lien,  may, 
by  order  of  the  board  of  supervisors,  be  refunded  by  the 
county  treasurer.  Whenever  any  payment  shall  have  been 
made  to  the  state  treasurer  by  the  county  treasurer  and  it 
shall  afterwards  appear  to  the  satisfaction  of  the  board  of 
supervisors  that  a  portion  of  the  money  so  paid  should  be 
refunded  as  herein  provided,  said  board  of  supervisors  may 
refund  such  portion  of  the  said  taxes,  penalties  and  costs  so 
paid  to  the  state  treasurer,  to  the  person  entitled  to  the 
same,  out  of  the  general  fund,  and  the  auditor  shall  certify 
to  the  controller,  in  such  form  as  the  controller  may  pre- 
scribe, all  amounts  so  refunded,  and  in  the  next  settlement 
of  the  county  treasurer  with  the  state,  the  controller,  if 
satisfied  of  the  legality  of  such  refunding  by  the  said  board, 


956  BUSINESS  LAWS   FOR  BUSINESS   MEN. 

shall  give  such  treasurer  credit  for  the  state's  portion  of 
the  amounts  so  refunded.  When  the  taxes,  penalties  and 
costs  hereinbefore  referred  to  are  levied  in  behalf  of  any 
school  district  or  any  municipal  or  other  public  corporation, 
and  collected  by  the  officers  of  the  county,  the  same  may  be 
refunded  upon  order  of  the  board  of  supervisors,  and  the 
county  treasurer  shall  pay  the  amount  to  be  refunded  out 
of  any  money  in  his  possession  belonging  to  the  appropriate 
fund  of  such  school  district  or  municipal  or  other  public 
corporation.  No  order  for  the  refund  of  taxes,  penalties  or 
costs  under  this  section  shall  be  made  except  upon  a  verified 
claim  therefor  filed  within  three  years  after  the  making  of 
the  payment  sought  to  be  refunded. 
Political  Code,  Section  3804. 

Section  1249.— WHEN  LAND  ASSESSED  MORE 
THAN  ONCE. — When  the  tax  collector  discovers  that  any 
property  has  been  assessed  more  than  once  for  the  same 
year,  he  must  collect  only  the  tax  justly  due  and  make 
return  of  the  facts,  by  his  certificate,  to  the  auditor  and 
board  of  supervisors ;  the  board  shall  thereupon  enter  an 
order  upon  its  minutes  directing  the  auditor  to  cancel  such 
double  assessment  by  an  entry  on  the  margin  of  the  assess- 
ment book,  as  also  upon  the  delinquent  list,  should  such 
double  assessment  be  carried  therein.  If  the  property 
assessed  under  such  double  assessment  has  been  sold  to  the 
state,  and  a  certificate  of  sale  or  deed  therefor  has  been 
issued  to  the  state,  the  order  of  the  board  shall  further  direct 
the  county  recorder  to  cancel  such  erroneous  certificate  of 
sale  and  deed  so  issued,  before  the  state  has  disposed  of  the 
property  thereby  conveyed;  provided,  no  cancellation  of  a 
double  assessment,  certificate  of  sale  or  deed  shall  be  made 
in  any  case  until  the  taxes,  penalties,  costs  and  other  charges 
by  law  against  the  property  on  one  of  such  assessments 
shall  have  been  paid.  In  case  the  tax  collector  issues  an 
erroneous  certificate  of  sale,  or  deed,  to  any  property  upon 
which  the  taxes  have  been  fully  paid  for  the  year  therein 
mentioned,    such    fact    shall    be    certified    to    the    board    of 


TAXES   AND   TAX   TITLES.  957 

supervisors  by  the  auditor  and  tax  collector,  and  thereupon 
said  board  shall  make  and  enter  in  its  minutes  an  order 
authorizing  the  county  recorder  to  cancel  such  erroneous 
certificate  or  deed. 

Whenever  a  sale  of  property  has  been  made  for  nonpay- 
ment of  a  poll  tax  unlawfully  assessed,  or  which,  if  law- 
fully assessed,  has  been  paid  and  payment  has  not  been  prop- 
erly noted,  the  board  of  supervisors  may,  upon  proof  thereof, 
by  an  order  entered  upon  its  minutes,  direct  the  county 
recorder  to  cancel  the  certificate  of  sale  or  deed  issued  to 
the  state  under  such  sale,  so  far  as  the  same  relates  to  said 
poll  tax,  at  any  time  before  the  state  has  disposed  of  such 
property;  provided,  that  where  real  property  other  than  that 
belonging  to  a  person  liable  for  poll  tax  on  the  first  Monday 
of  March  of  the  year  in  which  sucli  poll  tax  became  due, 
has  been  erroneously  sold  for  the  poll  tax  of  such  person, 
the  board  of  supervisors,  upon  satisfactory  proof  of  owner- 
ship of  the  said  property,  may  order  the  certificate  of  sale 
or  deed  canceled;  provided  further,  however,  that  no  such 
order  shall  be  made  if  the  person  liable  for  said  poll  tax 
owned  any  interest  whatever  in  said  property  on  said  first 
Monday  in  March,  when  said  tax  became  due,  or  owned  any 
interest  therein  at  the  time  of  the  application  for  such 
cancellation. 

Political  Code,  Section  3805. 

Section  1250.— PUBLIC  LANDS  UPON  WHICH 
FINAL  PAYMENT  HAS  NOT  BEEN  MADE.— When- 
ever the  possessory  interest  in  land  belonging  to  the  United 
States,  or  land  upon  which  final  payment  had  not,  at  the  time 
of  assessment,  been  made  to  the  United  States,  or  land  of  this 
state  upon  which  the  full  purchase  price  has  not  or  had  not 
been  made  to  the  state,  has  been,  or  may  hereafter  be,  assessed 
and  sold  to  the  state  for  delinquent  state,  county  or  local 
district  taxes,  or  whenever  the  taxes  levied  against  any  such 
possessory  interest  in  lands,  or  against  any  such  state  lands, 
have  not  been  paid,  the  board  of  supervisors  shall,  upon 
verified  application  of  the  owner  of  the  land,  by  an  order 


958  BUSINESS   LAWS   FOR   BUSINESS   MEN. 

entered  upon  its  minutes,  direct  the  auditor  to  cancel  such 
assessment;  and  if  the  property  under  such  assessment  has 
been  sold  to  the  state,  and  a  certificate  of  sale  or  deed  thereon 
issued  to  the  state,  such  order  of  the  board  shall  further 
direct  the  recorder  to  cancel  such  certificate  of  sale  and 
deed ;  provided,  that  no  order  to  cancel  any  such  assessments, 
certificates  of  sale  or  deeds  shall  be  made  where  the  person 
or  persons  to  whom  such  land  or  possessory  interests,  or 
state  lands,  his  or  their  successors  or  assigns,  have,  after 
such  assessment,  obtained  from  the  United  States  or  this 
state  a  patent  or  the  absolute  title  to  said  lands,  or  retain 
any  interest  therein,  or  been  in  possession  of  the  premises; 
and  provided  that  no  order  to  cancel  any  assessment  shall 
be  made  whereby  the  person  or  persons,  his  or  their  suc- 
cessors or  assigns  shall  be  relieved  from  paying  the  taxes 
upon  said  property  for  the  full  time  he  or  they  have  had 
the  possession  of  said  property,  no  matter  in  whose  name 
said  property  was  or  had  been  assessed.  Before  an  order 
to  cancel  such  assessment,  certificate  of  sale  or  deed  shall  be 
granted,  the  applicant  shall  file  with  the  board  a  certificate 
of  the  Register  of  the  United  States  Land  Office,  or  of  the 
state  land  office,  showing  that  the  person  or  persons  to 
whom  such  assessment  was  made,  his  or  their  successors 
and  assigns,  never  received  a  patent  or  otherwise  acquired 
title  to  said  lands.  Upon  aflfecting  the  cancellations,  all 
assessments,  certificates  of  sale  and  deeds  the  subject  of  such 
cancellation  shall  be  null  and  void. 
Political  Code,  Section  3805a. 

Section  1251.— CLERICAL  ERRORS  IN  CERTIFI- 
CATE OF  SALE. — When  real  property  has  been  correctly 
assessed  and  sold  to  the  state  for  delinquent  state  and 
county  taxes,  any  misstatement  of  facts  or  clerical  errors 
occurring  or  appearing  in  the  certificate  of  sale,  or  in  the 
deed  issued  thereon,  may  be  corrected  by  the  tax  collector, 
or  his  successor  in  office,  upon  an  order  of  the  board  of 
supervisors,  entered  upon  its  minutes  directing  correction, 
by  the  issuance  of  a  new  or  amended  certificate  of  sale,  or 


TAXES   AND   TAX    TITLES.  959 

tax  deed,  when  it  can  be  determined  by  the  assessment  and 
subsequent  proceedings  what  was  originally  intended. 
Political  Code,  Section  3805b. 

Section  1252.— WHAT  MISTAKES  DO  NOT  AF- 
FECT SALE  OF  PROPERTY  FOR  TAXES.— When 
land  is  sold  for  taxes  correctly  imposed  as  the  property  of 
a  particular  person,  no  misnomer  of  the  owner,  or  supposed 
owner,  or  other  mistake  relating  to  the  ownership  thereof, 
affects  the  sale,  or  renders  it  void  or  voidable. 
Political  Code,  Section  3807. 

Section  1253.— PROPERTY  SOLD  TO  STATE  AS- 
SESSED SUBSEQUENTLY.— In  case  property  assessed 
for  taxes  is  purchased  by  the  state,  it  shall  be  assessed  each 
subsequent  year  for  taxes  until  a  deed  is  made  to  the  state 
therefor,  in  the  same  manner  as  if  it  had  not  been  so 
purchased. 

Political  Code,  Section  3813. 

Section  1254.— ALL  COSTS  MUST  BE  PAID  BE- 
FORE REDEMPTION.— In  case  property  is  sold  to  the 
state,  and  is  subsequently  assessed,  no  person  shall  be  per- 
mitted to  redeem  such  sale,  except  upon  payment  of  the 
amount  of  such  subsequent  assessments,  costs,  fees,  penalties, 
and  interest. 

Political  Code,  Section  3815. 

Section  1255.— WHEN  FORMER  OWNERS  MAY  RE- 
DEEM.— In  all  cases  where  real  estate  has  been  sold,  or  may 
hereafter  be  sold  for  delinquent  taxes  to  the  state,  and  the  state 
has  not  disposed  of  the  same,  the  person  whose  estate  has 
been,  or  may  hereafter  be  sold,  his  heirs,  executors,  adminis- 
trators, or  other  successors  in  interest,  shall,  at  any  time 
after  the  same  has  been  sold  to  the  state,  and  before  the 
state  shall  have  disposed  of  the  same,  have  the  right  to 
redeem  such  real  estate  by  paying  to  the  county  treasurer 
of  the  county  wherein  the  real  estate  may  be  situated,  the 


960  BUSINESS   LAWS   FOR   BUSINESS   MEN. 

amount  of  taxes,  penalties  and  costs  due  thereon  at  the 
time  of  said  sale,  with  interest  on  the  aggregate  amount  of 
said  taxes,  at  the  rate  of  seven  per  cent  per  annum;  and 
also  all  taxes  that  were  a  lien  upon  said  real  estate  at  the 
time  said  taxes  became  delinquent;  and  also  all  unpaid 
taxes  of  every  description  assessed  against  the  property  for 
each  year  since  the  sale;  or,  if  not  so  assessed,  then  upon 
the  value  of  the  property  as  assessed  in  the  year  nearest 
the  time  of  such  redemption,  with  interest  from  the  first 
day  of  July  following  each  of  said  years,  respectively,  at 
the  same  rate,  to  the  time  of  redemption ;  and  also  all  costs 
and  expenses  of  such  redemption,  and  penalties  as  follows, 
to-wit:  ten  per  cent  if  redeemed  within  six  months  from  the 
date  of  sale;  twenty  per  cent  if  redeemed  within  one  year 
therefrom;  thirty  per  cent  if  redeemed  within  two  years 
therefrom ;  forty  per  cent  if  redeemed  within  three  years 
therefrom ;  forty-five  per  cent  if  redeemed  within  four  years 
therefrom ;  and  fifty  per  cent,  if  redeemed  within  five  or  any 
greater  number  of  years  therefrom.  The  penalty  shall  be 
computed  upon  the  amount  of  each  year's  taxes  in  like 
manner,  reckoning  from  the  time  when  the  lands  would 
have  been  sold  for  the  taxes  of  that  year,  if  there  had  been 
no  previous  sales  thereof. 

The  county  auditor  shall,  on  the  application  of  the  person 
desiring  to  redeem,  make  an  estimate  of  the  amount  to  be 
paid,  and  shall  give  him  triplicate  certificates  of  the  amount, 
specifying  the  several  amounts  thereof,  which  certificates 
shall  be  delivered  to  the  county  treasurer,  together  with  the 
money,  and  the  county  treasurer  shall  give  triplicate  receipts, 
written  or  indorsed  upon  said  certificates,  to  the  redemp- 
tioner,  who  shall  deliver  one  of  said  receipts  to  the  state 
controller,  and  one  to  the  county  auditor,  taking  their  receipts 
therefor. 

Upon  the  payment  of  the  money  specified  in  said  certificate, 
and  the  giving  of  the  receipts  aforesaid  by  the  treasurer, 
controller,  and  auditor,  any  deed  or  certificate  of  sale  that 
may  have  been  made  to  the  state  shall  become  null  and  void, 
and  all  right,  title  and  interest  acquired  by  the  state,  under 


TAXES   AND   TAX    TITLES.  961 

and  by  virtue  of  the  tax  sale,  shall  cease  and  determine. 
Upon  consummation  of  the  redemption,  the  auditor  shall 
report  same  to  the  recorder,  whereupon  the  recorder  shall, 
without  payment  of  fee,  note  on  the  margin  of  the  certificate 
of  sale,  or  deed,  if  issued,  the  fact  of  such  redemption,  date 
thereof  and  by  whom  redeemed. 

The  receipt  of  the  controller  may  be  recorded  in  the 
recorder's  office  of  the  county  in  which  said  real  estate  is 
situated,  in  the  book  of  deeds,  and  the  record  thereof  shall 
have  the  same  effect  as  that  of  a  deed  of  reconveyance  of 
the  interest  conveyed  by  such  deed  or  certificate  of  sale. 

This  act  shall  apply  to  state  lands  sold  by  the  state  when 
the  full  amount  of  the  purchase  price  has  not  been  paid  to 
the  state  therefor,  except  when  the  deed  to  the  state  has 
been  filed  with  the  surveyor-general,  and  an  application  has 
been  filed  therefor  in  that  office. 

Political  Code,  Section  3817. 

Section  1256.— PARTIAL  REDEMPTION.— A  partial 
redemption  may  be  made,  separately  from  the  whole  assess- 
ment, of  any  lot,  piece,  or  parcel  of  land  contained  in  any 
assessment,  if  such  lot,  piece,  or  parcel  has  a  separate  valu- 
ation on  the  assessment  roll,  in  the  manner  following:  In 
the  estimate  provided  for,  the  auditor  shall  estimate  the 
amount  of  state  and  county  taxes  due  on  such  lot,  piece, 
or  parcel  of  land,  together  with  a  proper  proportion  of  the 
taxes  due  on  personal  property  under  such  assessment,  and 
of  the  taxes  due  each  school,  road,  or  lesser  taxation 
district;  and  such  redemption  shall  be  made  in  the  manner 
provided  in  this  act.  The  recorder  shall  note,  on  the  margin 
of  the  record  of  the  certificate  of  sale,  a  description  of  the 
property  thus  redeemed,  and  shall  specifically  set  forth  the 
several  amounts  of  taxes  paid  upon  such  redemption. 
Political  Code,  Section  3818. 

Section    1257.— PAYMENT    UNDER   PROTEST.— At 

any  time   after   the   assessment   book   has   been   received   by 
the  tax   collector,   and   the  taxes   have  become   payable,   the 


962  BUSINESS   LAWS   FOR   BUSINESS   MEN. 

owner  of  any  property  assessed  therein,  who  may  claim  that 
the  assessment  is  void  in  whole  or  in  part,  may  pay  the 
same  to  the  tax  collector  under  protest,  which  protest  shall 
be  in  writing,  and  shall  specify  whether  the  whole  assess- 
ment is  claimed  to  be  void,  or  if  a  part  only,  what  portion, 
and  in  either  case  the  grounds  upon  which  such  claim  is 
founded;  and  when  so  paid  under  protest,  the  payment  shall 
in  no  case  be  regarded  as  voluntary  payment,  and  such 
owner  may  at  any  time  within  six  months  after  such  payment 
bring  an  action  against  the  county,  in  the  superior  court,  to 
recover  back  the  tax  so  paid  under  protest.  And  if  it  shall 
be  adjudged  that  the  assessment,  or  the  part  thereof  referred 
to  in  the  protest,  was  void  on  the  ground  specified  in  the 
protest,  judgment  shall  be  entered  against  such  county  there- 
for; provided,  that  no  assessment  shall  be  declared  void  on 
account  of  deductions  being  made  for  mortgages  where  part 
payments  have  been  made  and  not  released  upon  the  record. 
Political  Code,  Section  3819. 

Poll  Taxes. — Every  male  inhabitant  of  this  state,  over 
twenty-one  and  under  sixty  years  of  age,  except  paupers, 
insane  persons,  and  Indians  not  taxed,  must  annually  pay  a 
poll  tax  of  two  dollars;  provided,  the  same  be  paid  between 
the  first  Monday  in  March  and  the  first  Monday  in  August; 
but  if  not  paid  prior  to  the  first  Monday  in  August,  then 
it  shall  be  three  dollars ;  provided  further,  that  nothing  herein 
shall  affect  any  laws  imposing  a  greater  poll  tax  upon  inhabi- 
tants ineligible  to  citizenship. 

Political  Code,  Section  3839. 

Poll  tax  must  be  collected  by  the  assessors  between  the 
first  Monday  in  March  and  the  last  Monday  in  December 
of  the  same  year. 

The  assessor  must  demand  payment  of  poll  tax  of  every 
person  liable  therefor,  and  on  the  neglect  or  refusal  of  such 
person  to  pay  the  same,  he  must  collect  by  seizure  and  sale 
of  any  personal  property  owned  by  such  person. 

The  sale  may  be  made  after  three  hours  verbal  notice  of 
time  and  place. 


TAXES   AND   TAX   TITLES.  963 

Every  person  indebted  to  one  who  neglects  or  refuses, 
after  demand,  to  pay  a  poll  tax,  becomes  liable  therefor, 
and  must  pay  the  same  for  such  other  person  after  service 
upon  him  by  the  collector  of  a  notice  in  writing,  stating 
the  name  of  such  person. 

Every  officer  authorized  to  draw  the  warrants  for  or  to 
pay  the  salary  or  fees  of  any  officer  is  the  debtor  of  such 
officer  within  the  meaning  of  the  law. 

Every  person  paying  the  poll  tax  of  another  may  deduct 
the  same  from  any  indebtedness  to  such  other  person. 

The  assessor  must  deliver  the  poll  tax  receipt,  filled  out 
with  the  name  of  the  person  owing  the  taxes,  to  the  pur- 
chaser of  property  at  any  such  sale;  in  other  cases  he  must 
deliver  it,  filled  out  in  like  manner,  to  the  person  paying 
the  tax. 

The  receipt  so  delivered  is  the  only  evidence  of  payment. 

Whenever  the  name  of  a  person  not  liable  for  poll  tax 
is  erroneously  entered  upon  said  poll  tax  roll,  or  whenever 
the  assessor  has  failed  to  note  the  payment  of  a  poll  tax 
lawfully  assessed,  if  paid,  the  board  of  supervisors  may, 
upon  proof  thereof,  order  the  necessary  correction  to  be 
made  on  the  poll  tax  roll  and  the  assessment  roll  whereon 
the  same  may  appear. 

If  any  person,  assessed  for  a  property  tax  has  not  paid 
to  the  assessor  the  poll  tax  due  from  him,  or  for  which  he 
is  liable,  it,  with  thirty-three  and  one-third  per  cent  in  addi- 
tion thereto,  constitute  a  lien  upon  the  property  assessed  to 
such  person,  to  attach  from  the  first  Monday  in  March  in 
each  year,  and  must  be  collected  in  the  same  manner  and  at 
the  same  time  as  delinquent  taxes  are  collected. 

Political  Code,  Sections  3839,  3840,  3846,  3848,  3849, 
3850,  3851,  3859,  3860. 

Section  1258.— SALE  OF  PROPERTY  PURCHASED 
BY  STATE. — Whenever  the  state  shall  become  the  owner 
of  any  property  sold  for  taxes  and  the  deed  to  the  state 
has  been  filed  with  the  controller  as  provided  herein,  the 
controller  may  thereupon  by  a   written   authorization   direct 


964  BUSINESS   LAWS   FOR  BUSINESS   MEN. 

the  tax  collector  of  the  county,  or  city  and  county,  to  sell 
the   property   or    any   part   thereof    as    in    his   judgment    he 
shall   deem   advisable    in   the   manner    following:     He   must 
give   notice   of   such    sale   by   first   publishing   a    notice    for 
at  least  three  successive  weeks  in  some  newspaper  published 
in  the  county  or  city  and  county,  or  if  there  be  no  newspaper 
published   therein,   then   by   posting   a   notice   in   three    con- 
spicuous  places   in   the   county   or   city   and   county,   one   of 
which  shall  be  at  the  United   States   postoifice   nearest  the 
land,  in  addition  to  a  notice  conspicuously  posted  on  the  land 
itself  for  the  same  period.    Such  notices  must  state  specifically 
the  place  of  and  the  day  and  hour  of  sale,  and  shall  contain 
a    description    of    the    property    to    be    sold    and    shall    also 
contain    a    detailed    statement    of    all    the    delinquent    taxes, 
penalties,   costs,   interest,    and   expenses   up   to   the   date   of 
such  sale,  and  shall  give  the  name  of  the  person  to  whom 
the  property  was  assessed  for  each  year  on  which  there  may 
be  delinquent  taxes  against  said  property  or  any  part  thereof; 
and  said  notice  shall  also  embody  a  copy  of  the  authorization 
received   from  the  controller.     It  shall  be  the   duty  of  the 
tax  collector  to  mail  a  copy  of  said  notice,  postage  thereon 
prepaid  and  registered,  to  the  party  to  whom  the  land  was 
last  assessed  next  before  the  sale,  at  his  last  known  post- 
office  address.    At  the  time  set  for  such  sale,  the  tax  collector 
must  sell  the  property  described  in  the  controller's  authoriza- 
tion and  said  notices,  at  public  auction  to  the  highest  bidder 
for  cash  in  lawful  money  of  the  United  States;  but  no  bid 
shall  be  received  or  accepted  at  such  sale  for  less  than  the 
amount  of  all  the  taxes  levied  upon  such  property  and  all 
costs    and    penalties    for    every    year    delinquent,    as    shown 
by  the   delinquent   rolls    for   said  years   to   the   date   of   the 
execution  of  the  deed  to  the  state,  and  all  expenses  accrued 
to   the   date   of   the   sale   under   this   section,   together   with 
interest  at  seven  per  cent  per  annum  from  the  first  day  of 
July  following  delinquency  in  each  of  said  years  to  the  date 
of  the  sale  hereunder,  computed  upon  the  aggregate  amount 
of    such    delinquent    taxes,    penalties    and    costs;    provided, 
however,  that  if  the  board  of  supervisors  of  the  county,  or 


TAXES   AND   TAX    TITLES.  965 

city  and  county,  in  which  any  such  property  is  situate,  shall, 
by  resolution  entered  upon  their  minutes,  declare  that,  in 
their  judgment,  the  property  so  owned  by  the  state,  and 
particularly  described  in  said  resolution,  is  not  at  that  time 
of  value  great  enough  that  it  can  be  sold  by  the  state  for 
a  sum  equal  to  the  amount  of  all  taxes  levied  upon  said 
property,  and  all  interests,  costs  and  penalties  and  expenses 
up  to  the  date  of  such  sale,  and  that  it  would  be  to  the 
best  interest  of  the  state  to  sell  the  said  property  for  a  sum 
to  be  stated  in  said  resolution  less  than  the  sum  above 
named,  upon  receipt  of  a  copy  of  said  resolution,  certified  by 
the  clerk  of  said  board  of  supervisors,  the  state  controller 
may  thereupon,  by  written  authorization,  direct  the  tax 
collector  of  the  county,  or  city  and  county,  to  sell  the  said 
property  so  described  in  said  resolution  for  a  sum  not  less 
than  the  sum  stated  in  said  resolution,  together  with  the 
expenses  of  sale.  The  expense  of  giving  the  notice  herein 
required  shall  be  a  charge  against  the  property  so  advertised, 
and  shall  be  collected  by  the  collector,  and  no  redemption 
of  such  property  before  said  sale  may  be  had  without 
payment  of  such  cost  of  advertising;  and  to  secure  the 
payment  of  such  advertising  cost  the  collector  shall  demand 
in  advance,  from  the  party  or  parties  seeking  to  purchase,  a 
deposit  with  said  officer  of  a  sum  sufficient  to  defray  such 
cost  of  advertising,  which  deposit  shall  be  forfeited  in  the 
event  said  party  or  parties  fail  or  refuse  to  purchase  at 
such  sale;  provided,  that  if  the  party  or  parties  so  depositing 
fail  to  secure  such  property  on  their  bid,  such  deposit  shall 
be  returned,  and  such  advertising  cost  shall  be  collected  from 
the  successful  purchaser. 

Political  Code,  Section  3897. 

Section    1259.— VOID    SALE— FAILURE    TO    MAIL 
NOTICE     TO     PARTY     LAST     ASSESSED.— It     has 

already  been  stated  that  tax  laws  are  strictly  construed,  and 
that  in  order  to  make  a  valid  tax  title  it  must  appear  that 
everything  was  done  from  the  beginning  to  the  end  of  the 
tax   proceedings   which   the   law   requires   to   be   done.     An 


966  BUSINESS   LAWS   FOR  BUSINESS   MEN. 

illustration  of  this  statement  is  found  in  a  case  appealed 
to  the  Supreme  Court  of  California  from  Mendocino  County. 
It  appeared  on  the  trial  of  this  case  that  the  address  of  the 
person  to  whom  the  land  in  controversy  was  last  assessed  was 
well  known  to  the  tax  collector,  and  that  no  copy  of  the  notice 
of  the  proposed  sale  of  the  land  by  the  state  was  mailed  to  the 
owner  prior  to  the  sale,  as  required  by  Section  3897  of  the 
Political  Code.  It  was  held  by  the  Supreme  Court  in  this 
case  that  a  sale  by  the  state  of  land  sold  to  it  for  non- 
payment of  taxes  is  void,  where  the  tax  collector  through 
whom  such  sale  is  made  fails  to  mail  a  copy  of  the  notice 
of  sale  to  the  person  to  whom  the  land  was  last  assessed 
next  before  the  sale,  at  the  address  shown  on  the  assess- 
ment roll.  The  mailing  of  such  notice,  where  the  address 
of  the  party  is  known,  or  shown  on  the  assessment  roll  so 
that  it  can  be  ascertained,  is  essential  to  the  validity  of  a 
sale  by  the  state  of  land  purchased  by  it  for  delinquent  taxes. 
(Decided  by  the  Supreme  Court  of  California,  in  the  case  of 
Wright  vs.  Anglo-Californian  Bank,  which  decision  is 
printed  in  Volume  42,  California  decisions,  page  760.) 

Section  1260.— SAVINGS  BANK  DEPOSITS.— Money 

and  savings  deposits  of  a  savings  bank  invested  in  quasi- 
public  corporation  bonds  of  this  state  are  not  assessable 
as  credits  of  the  corporation.  Double  taxation  does  not 
necessarily  consist  in  assessing  the  same  property  twice  to 
the  same  person,  but  may  consist  in  requiring  a  double 
contribution  to  the  same  tax  on  account  of  the  same  property, 
although  the  assessments  are  to  different  persons.  The 
provision  of  subdivision  six  of  Section  3617  of  the  Political 
Code  that  "credits,  claims,  debts  and  demands  due,  in  or 
accruing  for  or  on  account  of  moneys  deposited  with  savings 
and  loan  corporations  or  with  building  and  loan  corporations, 
shall  for  the  purpose  of  taxation  be  deemed  and  treated  as 
an  interest  in  the  property  of  such  corporation,  and  shall  not 
be  assessed  to  the  creditor  or  owner,"  means  that  these 
moneys  shall  be  considered  as  a  part  of  the  assets  of  the 
corporation,  and  taxable  as  such,  and  necessarily  implies  that 


TAXES   AND   TAX    TITLES.  967 

the  corporation  shall  be  subjected  to  this  burden  only  while 
the  deposits  remain  a  part  of  its  assets.  (Decided 
by  the  District  Court  of  Appeals  in  the  case  of  Napa  Savings 
Bank  vs.  County  of  Napa,  which  decision  is  printed  in 
Volume   13,  California  Appellate  decisions,  page  625.) 

Section   1261.  —  FRAUDULENT    ASSESSMENT.— A 

taxpayer  may  go  into  the  Superior  Court  of  the  county 
where  he  is  assessed  and  obtain  an  injunction  prohibiting 
the  collection  of  a  tax  founded  upon  an  assessment  fraudu- 
lently and  corruptly  made,  with  the  intention  of  discriminat- 
ing against  him,  and  for  the  purpose  of  causing  him  to  pay 
more  than  his  share  of  the  public  taxes.  This  was  deter- 
mined by  the  Supreme  Court  of  California  in  a  case  in  Ala- 
meda County,  where  the  property  owner  alleged  that  the 
assessment  was  fraudulently  made,  at  excessive  values,  in 
fixing  which  he  was  discriminated  against.  In  this  case  the 
property  owner  tendered  the  legal  tax,  or  an  amount  founded 
on  the  real  value  of  the  property,  which  was  not  accepted, 
and  the  suit  followed.  (Decided  by  the  Supreme  Court  of 
California,  in  the  case  of  Pacific  Postal  Telegraph  Co.  vs. 
Dalton,  which  decision  is  printed  in  Volume  51  of  the  Pa- 
cific Reporter,  page  1072.) 

Section  1262.— SEAT  IN  STOCK  EXCHANGE.— In 
a  case  in  San  Francisco,  the  question  was  whether  or  not  a 
seat  in  the  San  Francisco  Stock  and  Exchange  Board  is  tax- 
able property,  and  the  Supreme  Court  decided  that  it  is  not. 
The  Court  said  that  a  seat  in  the  Stock  Exchange  is  merely 
a  personal  privilege  of  being  and  remaining  a  member  of  a 
voluntary  association,  with  the  consent  of  the  associates,  and 
is  not  property  that  will  pass  by  a  sale  under  the  common 
writ  of  execution;  and  it  has  no  such  qualities  as  make  it 
assessable  and  taxable  as  property.  It  is  a  mere  right  to 
belong  to  an  association,  with  the  latter's  consent,  and  to 
enjoy  certain  personal  privileges  and  advantages  which  flow 
from  membership  in  the  association.  Those  privileges  and 
advantages  cannot  be  conveyed  without  the  consent  of  the 


968  BUSINESS   LAWS   FOR   BUSINESS   MEN. 

association,  and  a  forced  sale  of  them  would  not  give  the 
purchaser  the  right  to  occupy  the  seat.  It  is  too  impalpable 
to  go  into  any  category  of  taxable  property.  (Decided  by 
the  Supreme  Court  of  California,  in  the  case  of  City  and 
County  of  San  Francisco  vs.  Anderson,  which  decision  is 
printed  in  Volume  36  of  the  Pacific  Reporter,  page  1034.) 

Section  1263.— RAILROAD  BONDS.— Bonds  held  by 
a  permanent  resident  within  the  state,  though  issued  by  a 
non-resident  corporation,  and  secured  by  mortgage  on  prop- 
erty outside  the  state,  may  be  taxed  in  this  state  as  property 
belonging  to  the  resident.  Bonds  of  a  railroad  corporation 
organized  in  Arizona,  payable  in  New  York,  and  secured 
by  a  mortgage  in  Arizona,  were  taxed  in  California,  as  the 
property  of  a  permanent  resident  of  the  state,  and  the  Su- 
preme Court  decided  that  the  tax  was  valid  under  the  pro- 
vision of  the  Constitution  which  defines  property  for  the  pur- 
pose of  taxation,  and  expressly  declares  it  to  include,  among 
other  things,  moneys,  credits  and  bonds.  (Decided  by  the 
Supreme  Court  of  California,  in  the  case  of  Mackay  vs.  City 
and  County  of  San  Francisco,  which  decision  is  printed  in 
Volume  45  of  the  Pacific  Reporter,  page  696.) 

Section  1264.— TAXATION  OF  SHIP  ON  THE 
HIGH  SEAS. — It  has  been  held  that  a  ship  engaged  in 
commerce  on  the  high  seas  was  taxable  in  the  City  and 
County  of  San  Francisco,  where  the  managing  owner  of  the 
vessel  resided  there,  although  she  had  been  temporarily  reg- 
istered in  Washington,  had  received  permanent  registration 
at  San  Francisco,  and  had  never  been  in  the  waters  of  Cali- 
fornia, and  though  some  of  her  owners  resided  without '  the 
state.  A  vessel  must  be  taxed  at  the  place  of  her  home  port, 
although  in  fact  she  may  be  thousands  of  miles  away  on  the 
high  seas;  and  she  is  taxable  only  within  the  state  in  which 
her  home  port  is  situated.  The  taxation  must  be  in  the 
state  of  her  home  port,  at  which  alone  the  vessel  may  be 
registered.  And  where  the  vessel  has  several  owners,  it  is 
only  the  residence  of  the  managing  owner  that  is  material. 


TAXES   AND  TAX   TITLES.  969 

Tangible  personal  property  is  ordinarily  taxable  only  in  the 
state  where  it  is  physically  situated.  When,  however,  we 
come  to  sea-going  vessels,  engaged  in  foreign  or  interstate 
commerce,  and  not  employed  in  such  commerce  wholly 
within  the  waters  of  any  one  state,  we  find  that  from  the 
nature  of  the  property  a  different  rule  is  necessarily  adopted. 
Such  a  vessel  goes  where  she  may  be  called  in  the  business 
in  which  she  is  engaged,  and  is  in  port  in  any  jurisdiction 
only  as  an  incident  to  that  business,  and  therefore  cannot 
properly  be  held  to  have  an  actual  physical  presence  within 
any  particular  state.  Under  our  shipping  laws,  however,  every 
such  vessel  has  what  is  called  her  "Home  Port,"  the  port 
to  which  she  belongs,  and  which  constitutes  her  local  abiding 
place  or  residence,  regardless  of  her  actual  location.  It  is 
only  in  the  collection  district  comprising  her  home  port  that 
she  may  be  permanently  registered.  (Decided  by  the  Su- 
preme Court  of  California,  in  the  case  of  Olson  vs.  City  and 
County  of  San  Francisco,  which  decision  is  printed  in  Vol- 
ume 82  of  the  Pacific  Reporter,  page  850.) 

Section  1265.— TAXATION      OF     OIL     LEASES.— 

Where  a  land  owner  grants  to  a  lessee  the  exclusive  right 
to  enter  on  the  premises,  and  bore  wells,  and  extract  oil 
from  them,  this  constitutes  on  the  part  of  the  oil  company 
a  claim  to  the  possession  of  land,  and  can  be  assessed  sep- 
arately from  the  ownership  in  fee.  The  oil  stratum  also 
constitutes  "minerals  in  and  under  the  land,"  and  the  rights 
of  the  lessee  are  rights  and  privileges  appertaining  to  such 
minerals,  and  hence  are  "real  estate"  within  the  meaning  of 
Section  3617  of  the  Political  Code.  The  rights  of  an  oil 
lessee  to  extract  oil  from  land  constitute  a  claim  to  the 
possession  of  land,  which  may  be  assessed  and  taxed;  and  if 
the  taxes  thereon  are  not  paid  and  no  personal  property  of 
the  owner  can  be  found,  the  assessor  can  forthwith  proceed 
to  sell  the  rights  under  the  lease,  and  give  immediate  posses- 
sion to  the  purchaser.  (Decided  by  the  Supreme  Court  of 
California,  in  the  case  of  Graciosa  Oil  Co.  vs.  Santa  Barbara 


970  BUSINESS   LAWS   FOR   BUSINESS   MEN. 

County,  which  decision  is  printed  in  Volume  99  of  the  Pa- 
cific Reporter,  page  483.) 

Section  1266.— CORPORATION  STOCK.  — Corporate 
stock  of  domestic  corporations  owned  by  citizens  is  taxable 
at  full  value,  less  the  value  of  the  corporation  property 
taxed  in  the  state.  (Decided  by  the  Supreme  Court  of  Cali- 
fornia, in  the  case  of  Canfield  vs.  Los  Angeles  County,  which 
decision  is  printed  in  Volume  108  of  the  Pacific  Reporter, 
page  705.) 

Section  1267.— INHERITANCE  TAXES.— For  the  In- 
heritance Tax  Law,  see  under  the  subject  about  settlement 
of  estates. 

Section  1268.— CORPORATION  TAXES.— A  law  was 

passed  in  1911,  providing  for  the  taxation  of  public  service 
and  other  corporations,  banks,  and  insurance  companies,  for 
the  benefit  of  the  state.  This  law  provides  that  taxes  levied, 
assessed  and  collected  upon  railroads,  including  street  rail- 
ways, whether  operated  in  one  or  more  counties;  sleeping 
car,  dining  car,  drawing  room  car  and  palace  car  companies, 
refrigerator,  oil,  stock,  fruit,  and  other  car  loaning  and 
other  car  companies,  operated  upon  railroads  in  this  state; 
companies  doing  express  business  on  any  railroad,  steamboat, 
vessel  or  stage  line  in  this  state ;  telegraph  companies ;  tele- 
phone companies;  companies  engaged  in  the  transmission  or 
sale  of  gas  or  electricity ;  insurance  companies ;  banks,  bank- 
ing associations,  savings  and  loan  societies,  and  trust  com- 
panies, shall  be  assessed  and  levied  by  the  state  board  of 
equalization. 

1.  Public  Service  Corporations. — All  railroad  com- 
panies, including  street  railways,  whether  operated  in  one  or 
more  counties;  all  sleeping  car,  dining  car,  drawing-room 
car  and  palace  car  companies;  all  refrigerator,  oil,  stock, 
fruit  and  other  car-loaning  and  other  car  companies  operat- 
ing  upon   the   railroads   in   this    state;    all   companies    doing 


TAXES   AND   TAX   TITLES.  971 

express  business  on  any  railroad,  steamboat,  vessel,  or  stage 
line  in  this  state ;  all  telegraph  and  telephone  companies ;  and 
all  companies  engaged  in  the  transmission  or  sale  of  gas  or 
electricity;  shall  annually  pay  to  the  state  a  tax  upon  their 
franchise,  roadways,  rails,  rolling  stock,  pipes,  rights  of  way, 
and  other  property,  or  any  part  thereof  used  exclusively  in 
the  operation  of  their  business  in  this  state,  computed  as 
follows :  Said  tax  shall  be  equal  to  the  percentages  herein- 
after fixed  upon  the  gross  receipts  from  operation  of  such 
companies  within  this  state.  When  such  companies  are 
operating  partly  within  and  partly  without  this  state,  the 
gross  receipts  on  business  beginning  and  ending  within  this 
state,  and  a  proportion,  based  upon  a  proportion  of  the 
mileage  within  this  state  to  the  entire  mileage  with  which 
this  business  is  done,  passing  through,  into,  or  out  of  this 
state.  The  percentages  above  mentioned  shall  be  as  follows: 
On  all  railroad  companies,  four  per  cent;  on  all  sleeping  car, 
dining  car,  drawing-room  car,  palace  car  companies,  refrig- 
erator, oil,  stock,  fruit,  and  other  car-loaning,  and  other  car 
companies,  three  per  cent ;  on  all  companies  doing  express 
business  on  any  railroad,  steamboat,  vessel  or  stage,  two  per 
cent;  on  all  telegraph  and  telephone  companies,  three  and 
one-half  per  cent ;  on  all  companies  engaged  in  the  trans- 
mission or  sale  of  gas  and  electricity,  four  per  cent.  Such 
taxes  shall  be  in  lieu  of  all  other  taxes  and  licenses,  state, 
county,  and  municipal,  upon  the  property  above  enumerated 
of  such  companies,  except  as  otherwise  provided  in  the  Con- 
stitution of  this  state. 

2.  Insurance  Companies. — Every  insurance  company  or 
association  doing  business  in  this  state  shall  annually  pay  to 
the  state  a  tax  of  one  and  one-half  per  cent  upon  the  amount 
of  the  gross  premiums  received  upon  its  business  done  in  this 
state,  less  return  premiums  and  reinsurance  by  companies; 
provided,  that  there  shall  be  deducted  from  said  one  and  one- 
half  per  cent  upon  the  gross  premiums  the  amount  of  any 
county  and  municipal  taxes  paid  by  such  companies  on  real 
estate  owned  by  them  in  this  state.     This  tax  shall  be  in  lieu 


972  BUSINESS   LAWS   FOR   BUSINESS   MEN. 

of  all  Other  taxes  and  licenses,  state,  county,  and  municipal, 
upon  the  property  of  such  companies,  except  county  and 
municipal  taxes  on  real  estate  and  except  as  otherwise  pro- 
vided in  the  Constitution  of  this  state;  provided,  that  when 
by  the  laws  of  any  other  state  or  country,  any  tax,  fines, 
penalties,  licenses,  fees,  deposits  of  money  or  of  securities, 
are  imposed  on  insurance  companies  of  this  state  doing 
business  in  such  other  state  or  country,  or  their  agents 
therein,  in  excess  of  such  taxes,  the  same  impositions  and 
prohibitions  of  whatever  kind  must  be  imposed  by  the 
insurance  commissioner  upon  insurance  companies  of  such 
other  state  or  country  doing  business  in  this  state. 

3.  State  and  National  Banks. — The  shares  of  capital 
stock  of  all  banks,  organized  under  the  laws  of  this  state, 
or  of  the  United  States,  or  of  any  other  state,  and  located 
in  this  state,  shall  be  assessed  and  taxed  to  the  owners  or 
holders  thereof  by  the  state  board  of  equalization,  in  the 
city  or  town  where  the  bank  is  located,  and  not  otherwise. 
There  shall  be  levied  and  assessed  upon  such  shares  of 
capital  stock  an  annual  tax,  payable  to  the  state,  of  one  per 
centum  upon  the  value  thereof.  The  value  of  each  share 
of  stock  in  each  bank,  except  such  as  are  in  liquidation,  shall 
be  taken  to  be  the  amount  paid  in  thereon,  together  with  its 
pro  rata  of  the  accumulated  surplus  and  undivided  profits. 
The  value  of  each  share  of  stock  in  each  bank  which  is  in 
liquidation  shall  be  taken  to  be  its  pro  rata  of  the  actual 
assets  of  such  bank.  This  tax  shall  be  in  lieu  of  all  other 
taxes  and  licenses,  state,  county,  and  municipal,  upon  such 
shares  of  stock  and  upon  the  property  of  such  bank,  except 
county  and  municipal  taxes  on  real  estate,  and  except  as 
otherwise  provided  in  the  constitution  of  this  state.  In  de- 
termining the  value  of  the  capital  stock  of  any  bank  there 
shall  be  deducted  from  the  value,  as  defined  above,  the  value, 
as  assessed  for  county  taxes,  of  any  real  estate,  other  than 
mortgage  interests  therein,  owned  by  such  bank  and  taxed 
for  county  purposes.  The  banks  shall  be  liable  to  the  state 
for  this  tax,  and  the  same  shall  be  paid  to  the  state  by  them 


TAXES   AND   TAX   TITLES.  973 

on  behalf  of  the  stockholders,  and  they  shall  have  a  lien  upon 
the  shares  of  stock  and  upon  any  dividends  declared  thereon 
to  secure  the  amount  so  paid. 

4.     Tax   on   Unincorporated   Banks,   and   on   Branches 
and   Agencies   of    Foreign    Banks. — The   moneyed   capital, 
reserve,    surplus,    undivided    profits,    and    all    other   property 
belonging  to  unincorporated  banks  or  bankers  of  this  state, 
or   held   by   any   bank   located   in   this    state   which   has   no 
shares   of  capital   stock,   or  employed   in   this   state   by   any 
branches,    agencies,    or   other    representatives    of   any    banks 
doing  business  outside  of  the   State  of  California,   shall  be 
likewise  assessed  and  taxed  to  such  banks  or  bankers  by  the 
said  board  of  equalization,  in  the  same  manner  as  above  pro- 
vided  for  incorporated  banks,   and  taxed  at  the   same   rate 
that  is  levied  upon  the  shares  of  capital  stock  of  incorporated 
banks.     In  the  case  of  a  branch,  an  agency,  or  other  repre- 
sentative of  any  bank  doing  business   outside  of  this   state, 
the  capital  of  said  branch,  agency,  or  representative  used  in 
this  state  shall  be  taken  to  be  the  average  amount  owed  by 
the   said  branch,   agency,   or   representative   to   the   bank   of 
which  it  is  a  branch,   agency,   or  representative   during  the 
year  ending  the  first  Monday  in  March.     The  value  of  said 
property  shall  be  determined  by  taking  the   entire  property 
invested  in  such  business,  together  with  all  reserve,  surplus, 
and  undivided  profits,  at  their  full  cash  value,  and  deducting 
therefrom    the   value   as   assessed    for   county   taxes   of   any 
real  estate,  other  than  mortgage  interests  therein,  owned  by 
such  bank  or  banker  and  taxed  for  county  purposes.     Such 
taxes  shall  be  in  lieu  of  all  other  taxes  and  licenses,  state, 
county,  and  municipal,  upon  the  property  of  the  banks  and 
bankers  mentioned  herein,  except  county  and  municipal  taxes 
on  real  estate,  and  except  as  otherwise  provided  in  the  Con- 
stitution of  this  state.     All  moneyed  capital  and  property  of 
the  banks  and  bankers  mentioned  in  this  paragraph  shall  be 
assessed  and  taxed  at  the  same  rate  as  an  incorporated  bank. 
In  determining  the  value  of  the  moneyed  capital  and  prop- 
erty of  the  banks  and  bankers  mentioned  herein,   the  state 


974  BUSINESS   LAWS   FOR  BUSINESS   MEN. 

board  of  equalization  shall  include  and  assess  to  such  banks 
property  and  everything  of  value  owned  or  held  by  them 
which  would  go  to  make  up  the  value  of  the  capital  stock 
of  such  banks  and  bankers,  if  the  same  were  incorporated 
and  had  shares  of  capital  stock. 

The  word  "banks"  as  used  in  this  act  shall  include  bank- 
ing associations,  incorporated  banks  and  bankers,  branches, 
or  other  representatives  of  other  banks  doing  business  outside 
of  the  State  of  California,  Savings  and  Loan  Societies,  and 
such  Trust  Companies  as  conduct  the  business  of  receiving 
money  on  deposit,  but  shall  not  include  building  and  loan 
associations. 

5.  Tax  on  Franchise. — All  franchises  other  than  those 
of  public  service  corporations,  insurance  companies,  and 
state  or  national  banks,  shall  be  assessed  at  their  actual 
cash  value,  after  making  the  due  deductions  for  good  will, 
and  shall  be  taxed  at  the  rate  of  one  per  centum  each  year, 
and  the  tax  collected  thereon  shall  be  exclusively  for  the 
benefit  of  the  state.  This  franchise  shall  include  the  actual 
exercise  of  the  right  to  be  a  corporation  and  to  do  business 
as  a  corporation  under  the  laws  of  this  state,  and  the  actual 
exercise  of  the  right  to  do  business  as  a  corporation  in  this 
state,  when  such  right  is  exercised  by  a  corporation  incor- 
porated under  the  laws  of  any  other  state  or  country ;  also 
the  right,  authority,  privilege,  or  permission  to  maintain 
wharves,  ferries,  toll  roads  and  toll  bridges,  and  to  con- 
struct, maintain  or  operate,  in,  under,  above,  upon,  through 
or  along  any  streets,  highways,  public  places  or  waters,  any 
pipes,  canals,  ditches,  tanks,  conduits  or  other  means  for  con- 
ducting water,  oil,  or  other  substances. 

6.  State    Corporation    License    Tax    Not    Repealed. — 

The  new  law  does  not  repeal  the  corporation  license  tax,  and 
is  not  to  be  construed  so  as  to  release  any  corporation  from 
the  payment  of  the  annual  license  tax  provided  for  by  law. 

7.  Gross     Receipts     From     Operation     Defined. — The 
term  "gross  receipts  from  operation"  as  used  in  this  act  is 


TAXES    AND   TAX   TITLES.  975 

defined  to  include  all  sums  received  from  business  done 
within  this  state  during  the  year  ending  the  31st  day  of 
December  last  preceding,  including  the  company's  propor- 
tion of  gross  receipts  from  any  and  all  sources  on  account  of 
business  done  by  it  within  this  state  in  connection  with  other 
companies. 

In  case  of  companies  operating  partly  within  and  partly 
without  this  state,  the  gross  receipts  within  this  state  shall  be 
deemed  to  be  all  receipts  on  business  beginning  and  ending 
within  this  state,  and  the  proportion  based  upon  the  propor- 
tion of  the  mileage  within  this  state  to  the  entire  mileage 
over  which  such  business  is  done,  of  receipts  on  all  business 
passing  through,  into  or  out  of  this  state. 

No  deduction  shall  be  allowed  from  the  gross  receipts  from 
operation  for  commissions,  rebates,  or  other  repayments, 
except  only  such  refunds  as  arise  from  errors  or  overcharges; 
nor  shall  any  deduction  be  allowed  for  payments  from  gross 
receipts  to  other  companies  for  any  purpose  whatsoever, 
except  such  refunds  as  arise  from  errors  or  overcharges. 

Income  derived  from  property  not  defined  in  this  act  as 
operative  property  shall  not  be  included  in  the  gross  receipts 
for  the  purpose  of  determining  the  tax  on  the  property  and 
franchises. 

8.  "Operative  Property"  Defined. — The  term  "oper- 
ative property"  as  used  in  this  act  shall  include : 

(a)  In  the  case  of  railroad  companies,  including  street 
railways:  The  franchises,  roadway,  roadbed,  rails,  rolling 
stock,  rights  of  way,  sidings,  spur  tracks,  switches,  signal 
systems,  cranes  and  structures  used  in  loading  and  unloading 
cars,  fences  along  the  right  of  way,  poles,  wires,  conduits, 
power  lines,  piers,  used  exclusively  in  the  operation  of  the 
railroad  business,  depot  grounds  and  buildings,  ferry  boats, 
tugs  and  car-floats  used  exclusively  in  the  operation  of  the 
railroad  business;  machine  shops,  repair  shops,  round  houses, 
car  barns,  power  houses,  substations  and  other  buildings, 
used  in  the  operation  of  the  railroad  business  and  so  much 
of  the  land  on  which  said  shops,  houses,  barns,  and  other 


976  BUSINESS   LAWS   FOR   BUSINESS   MEN. 

buildings  are  situate  as  may  be  required  for  the  convenient 
use  and  occupation  of  said  buildings. 

(b)  In  the  case  of  sleeping  car,  dining  car,  drawing-room 
car  and  palace  car  companies,  refrigerator,  oil,  stock,  fruit, 
and  other  car-loaning,  and  other  car  companies  operating 
upon  railroads  in  this  state:  The  franchises,  cars,  and  other 
rolling  stock. 

(c)  In  the  case  of  companies  doing  express  business  on  any 
railroad,  steamboat,  vessel,  or  stage  line  in  this  state:  The 
franchises,  cars,  trucks,  wagons,  horses,  harness,  and  safes. 

(d)  In  the  case  of  telegraph  and  telephone  companies 
doing  business  in  this  state :  The  franchises,  rights  of  way, 
poles,  wires,  pipes,  conduits,  cables,  switchboards,  telegraph 
and  telephone  instruments,  batteries,  generators,  and  other 
electrical  appliances,  and  exchange  and  other  buildings  used 
in  the  telegraph  and  telephone  business  and  so  much  of  the 
land  on  which  said  buildings  are  situate  as  may  be  required 
for  the  convenient  use  and  occupation  of  said  buildings. 

(e)  In  the  case  of  companies  engaged  in  the  transmission 
or  sale  of  gas  or  electricity :  The  franchises,  towers,  poles, 
wires,  pipes,  canals,  tunnels,  ditches,  flumes,  aqueducts,  con- 
duits, rights  of  way,  dams,  reservoirs,  water  and  water  rights 
used  exclusively  in  the  business  of  the  transmission  or  sale 
of  gas  or  electricity;  transformers,  substations,  gas-holders, 
gas  and  electric  generators,  switches,  switchboards,  meters, 
electrical  and  gas  appliances,  oil  tanks,  power  plants,  power 
houses,  and  other  buildings  and  structures  used  in  the  opera- 
tion of  the  business  of  the  transmission  or  sale  of  gas  or 
electricity,  and  so  much  of  the  land  on  which  said  buildings 
and  structures  are  situate  as  may  be  required  for  the  con- 
venient use  and  operation  of  said  buildings. 

Provided,  that  the  operative  property  of  the  companies 
enumerated  shall  also  include  any  other  property  not  above 
enumerated  that  may  be  reasonably  necessary  for  use  by  said 
companies  exclusively  in  the  operation  and  conduct  of  the 
particular  kinds  of  business  enumerated  in  this  act. 


TAXES   AND   TAX    TITLES.  977 

9.  Operative  Property  Exempt  From  Local  Taxa- 
tion.— The  operative  property  mentioned  above  in  subdi- 
visions (a),  (b),  (c),  (d),  and  (e),  shall  not  be  subject  to 
taxation  for  county,  municipal,  or  district  purposes,  except 
as  otherwise  provided  for  in  the  Constitution  and  laws  of 
this  state. 

Provided,  however,  that  when  any  piece  or  parcel  of  prop- 
erty in  this  state  owned  by  any  of  the  companies  mentioned 
is  used  partially  by  such  company  for  any  use  reasonably 
necessary  to  the  operation  of  any  of  the  lines  of  business 
enumerated,  and  such  property  is  also  partially  rented  to  or 
used  by  others  or  is  partially  used  by  the  company  for  some 
other  lines  of  business  not  among  those  so  enumerated,  or 
for  purposes  not  reasonably  necessary  to  the  operation  of  any 
of  said  enumerated  lines  of  business,  it  shall  be  considered 
operative  property,  in  that  proportion  only  which  that  part 
of  the  property  mentioned  in  this  proviso  used  by  the  com- 
pany in  the  operation  of  any  of  said  enumerated  lines  of 
business,  bears  to  the  whole  of  the  property  mentioned  in 
this  proviso. 

10.  Plants  Under  Construction. — Any  property  of  the 
classes  mentioned,  owned  by  a  company  constructing  a  new 
railroad,  street  railway,  telegraph  or  telephone  system,  or 
plant  or  system  for  the  transmission  or  sale  of  gas  or  elec- 
tricity, no  part  of  which  new  road,  line,  plant,  or  system  is 
in  operation,  and  the  same  classes  of  property  when  held  by 
an  operating  company  solely  for  the  construction  of  a  new 
railroad  or  railway  line,  a  new  telegraph  or  telephone  system, 
or  a  new  plant  or  system  for  the  transmission  or  sale  of  gas 
or  electricity,  and  not  to  be  used  for  betterments  or  additions 
to  roads,  lines,  plants,  or  systems  already  under  operation, 
shall  not  be  considered  operative  property,  and  shall  be  sub- 
ject to  assessment  and  taxation  for  county,  municipal,  and 
district  purposes.  The  property  of  any  company  shall  be 
deemed  to  be  in  operation  as  to  such  part  of  the  new  road, 
line,  plant,  or  system  as  may  be  in  use  as  soon  as  it  offers 
and  renders  service  to  the  public  for  compensation ;  provided, 


978  BUSINESS   LAWS   FOR  BUSINESS   MEN. 

however,  that  the  state  board  of  equalization  shall  finally 
determine  the  fact  of  such  operation  and  the  liability  of  any 
such  company  to  be  taxed  upon  its  gross  receipts. 

11.  When  no  Service  Is  Rendered  to  Public. — When 
any  property  in  this  state  belonging  to  a  company  of  the 
classes  named  is  rendering  no  service  to  the  public  in  this 
state,  even  though  it  may  be  rendering  service  to  the  public 
in  some  other  state  or  states,  such  property  shall  not  be  con- 
sidered as  operative  property,  and  "^hall  be  subject  to  assess- 
ment and  taxation  for  county,  municipal  and  district  pur- 
poses. 

12.  Report  of  Public  Service  Companies. — Such  per- 
son or  officer,  as  the  state  board  of  equalization  may  desig- 
nate, of  each  company,  shall,  on  or  before  the  first  Monday 
in  March  of  each  year,  file  with  the  said  board  a  report 
signed  and  sworn  to  by  one  or  more  of  said  persons  or 
officers,  showing  in  detail  for  the  year  ending  the  thirty-first 
day  of  December  last  preceding,  the  various  items  as  fol- 
lows: 

( 1 )  The  name  of  the  company,  its  nature,  whether  a  person 
or  persons,  a  partnership  (with  names  of  partners),  an  asso- 
ciation, or  corporation,  and  under  the  laws  of  what  state, 
territory  or  country  organized,  the  nature  of  its  business,  the 
location  of  its  principal  place  of  business,  the  names  and 
postoffice  addresses  of  its  president,  secretary,  auditor,  treas- 
urer, superintendent,  and  general  manager,  the  location  of  its 
principal  place  of  business  in  this  state,  the  name  and  post- 
office  address  of  its  chief  officer  or  managing  agent  in  this 
state,  and  the  names  and  addresses  of  all  subsidiary  com- 
panies whose  property  and  business  are  operated  by  it  and 
the  names  and  addresses  of  any  company  of  which  it  may  be 
subsidiary. 

(2.)  Each  of  the  companies  shall  report,  in  such  detail  as 
the  state  board  of  equalization  shall  prescribe,  all  of  its  prop- 
erty in  this  state  which  comes  under  the  definition  of  oper- 
ative   property.      When    any    such    company    operates    both 


TAXES    AND   TAX    TITLES.  979 

within  and  without  this  state  it  shall  report  the  mileage  over 
which  it  operates  both  within  and  without  this  state.  It 
shall  also  report  the  location  of  said  property  within  this 
state  by  counties,  cities  and  counties,  municipalities,  and  dis- 
tricts, in  such  manner  and  in  such  detail  as  said  board  of 
equalization  shall  prescribe.  It  shall  also,  at  the  same  time, 
furnish  a  duplicate  of  the  report  covering  so  much  of  said 
property  as  is  located  in  any  county,  city  and  county,  munic- 
ipality, or  district,  to  the  assessor  of  the  county,  city  and 
county,  city,  or  district  in  which  such  property  is  located. 

The  state  board  of  equalization  may  require  the  filing  in 
its  office  of  maps  descriptive  of  all  the  operative  property  of 
any  such  companies,  and  may  prescribe  the  form  and  size  of 
such  maps  and  the  details  to  be  shown  therein,  and  may 
require  that  similar  maps  descriptive  of  the  operative  prop- 
erty within  each  county,  city  and  county,  municipality,  or 
district,  shall  be  filed  in  the  assessor's  office  in  each  county, 
city  and  county,  city,  or  district  in  which  any  of  said  prop- 
erty is  located. 

(3.)  The  amount  of  capital  stock  issued,  and  the  amount 
of  money  received  therefor,  showing  separately  the  capital 
stock  issued  and  the  money  received  therefor  of  the  operating 
company  and  of  each  subsidiary  company  in  this  state. 

(4.)  The  dividends  paid  during  the  year  ending  the  thirty- 
first  day  of  December  last  preceding,  the  surplus  fund,  if  any, 
on  said  thirty-first  day  of  December,  or  between  such  periods 
as  the  state  board  of  equalization  may  determine,  those  of 
the  operating  company  and  of  each  subsidiary  company  in 
this  state  to  be  shown  separately. 

(5.)  The  funded  and  floating  debts  and  the  rate  of  interest 
thereon,  showing  separately  the  debts  of  the  operating  com- 
pany and  of  each  subsidiary  company  in  this  state,  on  the 
thirty-first  day  of  December  last  preceding. 

(6.)  The  market  value  of  the  stock  and  of  the  outstanding 
bonds,  or,  when  said  stock  or  bonds  have  no  market  value, 
the  actual  value  thereof,  for  such  periods  and  for  such  dates 
as  the  state  board  of  equalization  shall  prescribe. 


980  BUSINESS  LAWS  FOR  BUSINESS  MEN. 

(7.)  The  amounts  expended  for  improvements  during  the 
year  ending  the  thirty-first  day  of  December  last  preceding, 
how  expended  and  the  character  of  the  improvements. 

(8.)  The  gross  receipts  from  operation  within  this  state  for 
the  year  ending  the  thirty-first  day  of  December  last  preced- 
ing, the  gross  receipts  from  such  classes  of  business  as  the 
state  board  of  equalization  may  designate,  to  be  reported 
separately;  also,  where  the  property  and  business  are  partly 
within  and  partly  without  this  state,  the  gross  receipts  for 
said  period  on  all  business  beginning  and  ending  entirely 
within  this  state,  and  that  proportion  of  the  gross  receipts 
from  all  business  passing  through,  into,  or  out  of  this  state, 
which  the  mileage  within  this  state  bears  to  the  total  mileage 
over  which  such  interstate  business  is  done  as  further  defined 
in  section  seven  of  this  act. 

(9.)  The  operating  and   other   expenses. 

(10.)  The  balances  of  profit  and  loss,  between  such  periods 
as  the  state  board  of  equalization  may  determine. 

(11.)  Such  other  matters  as  the  state  board  of  equaliza- 
tion may  deem  necessary. 

(12.)  Each  such  company  shall  include  in  its  report  the 
property  and  business  of  all  subsidiary  companies  whose 
property  and  business  are  operated  by  it,  whether  by  virtue 
of  a  lease,  an  operating  contract  or  agreement,  or  by  virtue 
of  control  through  the  ownership  of  stock  or  otherwise, 
even  though  such  subsidiary  companies  maintain  an  inde- 
pendent legal  existence  and  separate  accounts. 

The  term  "subsidiary  company"  is  hereby  defined  as  apply- 
ing to  a  company  which  is  merged  in  the  operating  system  of 
an  operating  company  in  any  of  the  ways  above  stated,  whose 
property  and  franchises  would  be  taxable  by  this  act  if  the 
same  were  operated  independently.  No  separate  report  need 
be  rendered  by  a  subsidiary  company  whose  property,  fran- 
chises, and  operations  are  fully  and  completely  covered  by 
the  report  of  an  operating  company,  unless  the  state  board  of 
equalization  shall  deem  such  a  separate  report  necessary. 


TAXES   AND   TAX   TITLES.  981 

13.  Separate  Reports  of  Certain  Subsidiary  Com- 
panies.— Each  such  company  operating  the  property  and 
business  of  a  subsidiary  company  in  some  Hne  of  business 
to  which  a  different  percentage  of  the  gross  receipts  is 
applied  by  this  act  from  that  applied  to  the  gross  receipts  of 
the  operating  company,  shall  report  such  receipts  of  the 
subsidiary  company  separately. 

14.  Hearings   and    Decision   by   State   Board. — If   any 

assessor  finds  in  the  report  of  the  operative  property  in  his 
county,  city  and  county,  municipality,  or  district,  furnished 
to  him  by  any  of  the  companies  as  required  in  this  act, 
any  piece  or  parcel  of  property  which  he  regards  as  non- 
operative  property,  or  partially  operative  and  partially 
non-operative,  he  shall,  within  thirty  days  after  receiving 
such  report,  notify  the  state  board  of  equalization  thereof  by 
mail,  which  notice  shall  contain  a  general  description  of  the 
property  and  the  assessor's  reasons  for  regarding  the  same 
as  non-operative  property.  He  shall  also  mail  a  copy  of  the 
notice  to  the  company  whose  property  is  involved.  The  said 
board  shall  investigate  the  nature  of  the  property  and  its 
use,  and,  if  an  agreement  between  the  said  board,  the  assessor 
and  the  company  as  to  the  proper  classification  of  such  prop- 
erty cannot  be  reached,  then  the  said  board  shall,  under  such 
rules  of  notice  as  it  may  deem  reasonable,  set  a  date  for  a 
hearing,  at  which  the  assessor  and  the  company  may  be 
present  or  represented.  At  such  hearing  the  board  shall, 
from  the  evidence  presented  and  from  the  best  information 
it  can  obtain,  decide  the  matter  in  dispute,  and  determine 
whether  such  property  is  operative  or  non-operative,  or  in 
what  proportion  operative  and  in  what  proportion  non- 
operative. 

If  the  state  board  of  equalization  shall  find  in  the  report  of 
operative  property  furnished  to  said  board  by  any  company 
under  the  provisions  of  this  act,  any  piece  or  parcel  of  prop- 
erty which  said  board  regards  as  non-operative  property,  or 
partially  operative  and  partially  non-operative,  the  board 
shall,  within  thirty  days  after  receiving  such  report,  notify 


982  BUSINESS   LAWS   FOR   BUSINESS   MEN. 

said  company  thereof  in  writing,  which  notice  shall  contain 
a  general  description  of  the  property  and  the  reasons  for 
regarding  the  same  as  non-operative.  It  shall  also  mail  a 
copy  of  the  notice  to  any  assessor  in  whose  county,  city  and 
county,  municipality,  or  district  the  property  is  located.  If 
an  agreement  between  the  said  board,  the  assessor,  and  the 
company  as  to  the  proper  classification  of  such  property 
cannot  be  reached,  then  the  said  board  shall,  under  such 
rules  of  notice  as  it  may  deem  reasonable,  set  a  date  for  a 
hearing,  at  which  the  assessor  and  the  company  may  be  pres- 
ent or  represented.  At  such  hearing  the  board  shall,  from 
the  evidence  presented  and  from  the  best  information  it  can 
obtain,  decide  the  matter  in  dispute,  and  determine  whether 
such  property  is  operative  or  non-operative,  or  in  what  pro- 
portion operative  and  in  what  proportion  non-operative. 

15.  Insurance  Commissioner  to  Report. — The  insur- 
ance commissioner  of  this  state  must  on  or  before  the  last 
day  of  March  in  each  year  make  and  file  with  the  state  board 
of  equalization  a  report  showing: 

(1.)  All  companies,  domestic  and  foreign,  and  all  firms, 
associations,  or  persons,  engaged  in  the  business  of  insurance 
in  this  state. 

(2.)  The  total  amount  of  the  gross  premiums  received 
from  its  business  in  this  state  by  each  of  said  companies, 
firms,  associations,  and  persons  during  the  year  ending  the 
thirty-first  day  of  December  last  preceding. 

(3.)  The  amount  of  return  premiums  paid  on  business 
done  in  this  state  and  the  amount  of  reinsurance  on  business 
done  in  this  state  paid  to  other  insurance  companies  or  asso- 
ciations authorized  to  do  business  in  this  state,  by  said  com- 
panies, firms,  associations,  and  persons,  during  said  year. 

(4.)  The  amount  of  any  county  and  municipal  taxes  paid 
during  said  year  by  such  companies  on  real  estate  owned  by 
them  in  this  state,  and  where  said  real  estate  is  located. 

In  making  this  report  he  shall  list  separately  all  those  com- 
panies, firms,  associations,  or  persons,  which  are  subject  to 
a  tax  at  a  rate  higher  than  one  and  one-half  per  cent  on 


TAXES   AND   TAX    TITLES.  983 

their  gross  premiums,  or  to  any  additional  tax  or  burden,  and 
shall  indicate  in  each  case  the  amount  and  character  of  said 
tax  or  burden. 

16.  Additional  Statements  by  Insurance  Companies.— 

Every  company,  firm,  association,  or  person  engaged  in  the 
business  of  insurance  in  this  state  shall  file  with  the  insurance 
commissioner  on  or  before  the  first  Monday  in  March  in 
each  year  such  statements  in  addition  to,  or  in  modification 
of,  the  statements  required  to  be  rendered  under  the  provis- 
ions of  the  Political  Code  as  said  insurance  commissioner 
shall  deem  necessary  to  enable  him  to  prepare  the  report  re- 
quired of  him  in  this  act,  and  said  statements  shall  be  veri- 
fied in  the  same  manner  as  is  provided  for  the  verification  of 
other  statements  by  insurance  companies,  except  that  those 
filed  by  foreign  companies  shall  be  verified  by  the  oath  of  the 
manager  thereof  residing  within  this   state. 

17.  Bank  Reports. — The  president,  secretary,  treasurer, 
cashier,  or  such  other  officer  as  the  state  board  of  equaliza- 
tion may  determine,  of  every  bank  shall  on  the  first  Monday 
in  March,  or  within  ten  days  thereafter,  make  and  file  with 
the  state  board  of  equalization  a  sworn  statement  showing 
the  condition  of  said  bank  at  the  close  of  business  on  the 
first  Monday  in  March,  and  showing  the  amount  of  its  author- 
ized capital  stock,  the  number  of  shares  issued  and  the  par 
value  thereof,  the  amount  received  for  stock  issued,  the 
amount  of  its  surplus  and  undivided  profits,  if  any,  a  complete 
list  of  the  names  and  residences  of  its  stockholders  and  the 
number  of  shares  held  by  each  as  of  record  on  the  books  of 
the  bank  at  the  close  of  business  on  the  first  Monday  in 
March;  or,  in  the  case  of  unincorporated  banks  and  bankers, 
of  banks  having  no  capital  stock,  and  of  branches,  agencies, 
or  other  representatives  of  banks  doing  business  outside  of 
this  state,  the  moneyed  capital,  reserve,  surplus,  undivided 
profits,  and  other  taxable  property  used  by  them  in  the  bank- 
ing business  in  this  state;  also  a  description  of  the  real  estate, 
other  than  mortgage  interests  therein,  and  the  value  of  each 
piece  thereof  as  assessed  for  the  purpose  of  county  taxation 


984  BUSINESS   LAWS   FOR  BUSINESS   MEN. 

for  the  then  current  fiscal  year.  Branches,  agencies,  or  other 
representatives  of  banks  doing  business  outside  of  this  state, 
shall  report  the  average  amount  owed  by  said  branches, 
agencies,  or  other  representatives,  to  the  banks  of  which  they 
are  branches,  agencies,  or  representatives,  during  the  year 
ending  the  first  Monday  in  March;  also  a  description  of  the 
real  estate  other  than  mortgage  interests  therein,  and  the 
value  of  each  piece  thereof  as  assessed  for  the  purpose  of 
county  taxation  for  the  then  current  fiscal  year.  The  state 
board  of  equalization  shall  prescribe  the  form  of  reports,  the 
manner  of  their  verification,  and  may  require  the  submission 
of  tax  receipts,  or  copies  thereof  certified  to  be  correct  by 
any  notary  public,  in  order  to  verify  the  statements  as  to  the 
assessed  value  of  the  real  estate,  and  may  require  such 
further  information  or  statements  as  said  board  may  deem 
necessary. 

18.  Owmers  of  Franchise  Report. — ^The  owner  or 
holder  of  every  franchise  subject  to  taxation  shall  within  ten 
days  after  the  first  Monday  in  March  in  each  year,  make 
a  written  report  to  the  state  board  of  equalization,  signed 
and  sworn  to  by  the  holder  or  owner  himself,  if  an  individual, 
or  by  one  of  the  copartners  if  such  owner  or  holder  is  a 
copartnership,  or  by  the  president  or  vice-president  and  the 
treasurer  or  secretary,  if  the  owner  is  a  corporation,  contain- 
ing such  a  concise  statement  or  description  of  every  fran- 
chise possessed  or  enjoyed  on  said  day  by  such  owner  or 
holder,  as  the  state  board  of  equalization  may  prescribe,  a 
copy  of  the  law,  grant,  ordinance,  or  contract  under  which 
the  same  is  held,  or  if  possessed  or  enjoyed  under  a  general 
law,  a  reference  to  such  law,  a  statement  of  any  condition, 
obligation,  or  burden  imposed  upon  such  franchise,  or  under 
which  the  same  is  enjoyed,  and  containing  also: 

(1.)  The  name  of  the  company,  its  nature,  whether  a 
person  or  persons,  a  partnership  (with  names  of  partners), 
an  association,  or  corporation,  and  under  the  laws  of  what 
state,  territory,  or  country  organized,  the  nature  of  its  busi- 
ness,   the    location    of    its    principal    place    of    business,    the 


TAXES   AND   TAX    TITLES.  985 

names  and  postoffice  addresses  of  its  president,  secretary, 
auditor,  treasurer,  superintendent,  and  general  manager,  the 
location  of  its  principal  place  of  business  in  this  state,  the 
name  and  postoffice  address  of  its  chief  officer  or  managing 
agent  in  this  state,  and  the  names  and  addresses  of  all  sub- 
sidiary companies  whose  property  and  business  are  operated 
by  it. 

(2.)  The  amount  of  its  authorized  capital  stock,  the 
amount  thereof  issued  and  outstanding  on  the  first  Monday 
in  March,  and  the  amount  paid  in  thereon  or  the  value  of 
the  property  received  therefor. 

(3.)  The  funded  and  floating  debts  and  the  interest  paid 
thereon  showing  separately  the  debts  of  the  operating  com- 
pany and  of  any  subsidiary  companies  in  this  state  on  the 
thirty-first  day  of  December  last  preceding. 

(4.)  The  market  value  of  the  stock  and  of  the  outstanding 
bonds,  or,  when  said  stock  or  bonds  have  no  market  value, 
the  actual  value  thereof,  for  such  periods  and  for  such  dates 
as  the  state  board  of  equalization  shall  prescribe.  • 

(5.)  The  assessed  value  of  its  property  as  assessed  for  the 
current  fiscal  year  in  each  county,  city  and  county,  and  city 
in  the  state  for  the  purposes  of  taxation,  and  if  any  property 
of  such  corporation  be  assessed  and  taxed  outside  of  the 
State  of  California  the  place  where  assessed,  the  amount  of 
such  assessment  and  taxes  there  paid  during  such  current 
fiscal  year. 

In  case  the  company,  person,  firm,  association,  or  corpora- 
tion making  such  report  cannot  or  does  not  fairly  and  fully 
state  the  facts  and  matters  contained  in  the  foregoing  sub- 
divisions 1  to  5  inclusive,  then  such  company,  person,  firm, 
association,  or  corporation  must  render  an  additional  report 
containing  the  following  matters,  to  wit: 

(6.)  The  dividends  paid  during  the  year  ending  the  thirty- 
first  day  of  December  last  preceding,  the  surplus  fund,  if  any, 
on  said  thirty-first  day  of  December,  or  between  such  periods 
as  the  state  board  of  equalization  may  determine.  Those  of 
the  operating  company  and  of  each  subsidiary  company  in 
this  state  to  be  shown  separately. 


986  BUSINESS   LAWS   FOR   BUSINESS   MEN. 

(7.)  The  gross  receipts  from  all  sources  for  the  year  end- 
ing the  thirty-first  day  of  December  last  preceding,  from  the 
entire  property  and  business,  the  gross  receipts  from  such 
classes  of  business  as  the  state  board  may  designate,  to  be 
reported  separately;  also,  where  the  property  and  business 
are  partly  within  and  partly  without  this  state,  the  gpross 
receipts  for  said  period  on  all  business  beginning  and  ending 
entirely  within  this  state,  and  that  proportion  of  the  gross 
receipts  from  all  business  passing  through,  into,  or  out  of 
this  state,  which  the  mileage  within  this  state  bears  to  the 
total  mileage  over  which  such  interstate  business  is  done  as 
further  defined  in  section  seven  of  this  act. 

(8.)  The  operating  and  other  expenses. 

(9.)  The  balances  of  profit  and  loss,  between  such  periods 
as  the  state  board  of  equalization  may  determine. 

(10.)  Such  other  matters  as  the  state  board  of  equaliza- 
tion may  deem  necessary. 

The  state  board  of  equalization  shall  ascertain  and  deter- 
mine from- the  foregoing  reports  or  from  the  best  informa- 
tion it  can  obtain  the  actual  cash  value  on  the  first  Monday 
in  March  of  each  such  franchise,  and  shall  assess  and  levy 
the  taxes  thereon. 

19.  Arbitrary  Assessment  in  Case  of  Failure  or  Re- 
fusal to  Report. — If  any  company  mentioned  shall  fail  or 
refuse  to  furnish  to  the  state  board  of  equalization  within 
the  time  prescribed  in  this  act  the  verified  report  provided 
for  in  this  act,  the  state  board  of  equalization  must  make  an 
estimate  of  the  amount  of  the  gross  receipts,  gross  pre- 
miums, value  of  the  shares  of  capital  stock,  or  value  of  the 
franchises,  of  such  company,  and  must  assess  the  same  at 
the  amount  thus  estimated,  which  assessment  shall  be  the 
assessment  upon  which  the  taxes  upon  the  property  or  fran- 
chise of  the  company  for  such  year  shall  be  levied  and  col- 
lected. And  if  in  the  succeeding  year  any  such  company 
shall  again  fail  or  refuse  to  furnish  the  verified  report 
required  by  this  act,  the  state  board  shall  make  an  estimate 
of  the  amount  of  the  gross  receipts,  gross  premiums,  value 


TAXES   AND  TAX    TITLES.  987 

of  the  shares  of  capital  stock,  or  value  of  the  franchise  of 
such  company,  which  estimate  shall  not  be  less  than  twice 
the  amount  of  the  estimate  made  by  said  board  in  the  previ- 
ous year,  and  the  said  estimate  so  made  shall  be  the  assess- 
ment upon  which  the  taxes  upon  the  property  or  franchise 
of  the  company  for  such  year  shall  be  levied  and  collected. 
In  case  of  each  succeeding  consecutive  failure  or  refusal  the 
said  board  shall  follow  the  same  procedure  until  a  true 
statement  shall  be  furnished. 

20.  Penalty  for   Failure   or   Refusal   to   Report. — Any 

company  failing  or  refusing  to  make  and  furnish  any  report 
prescribed  in  this  act,  or  rendering  a  false  or  fraudulent 
report,  shall  be  guilty  of  a  misdemeanor  and  subject  to  a 
fine  of  not  less  than  three  hundred  dollars  and  not  exceeding 
five  thousand  dollars  for  each  such  offense. 

21.  Penalty  for  False  Report. — Any  person  required  to 
make,  render,  sign,  or  verify  any  report,  who  makes  any 
false  or  fraudulent  report,  with  intent  to  defeat  or  evade 
the  assessment  required  by  this  act  to  be  made,  shall  be 
guilty  of  a  misdemeanor,  and  shall  for  each  such  offense  be 
fined  not  less  than  three  hundred  dollars  and  not  more  than 
five  thousand  dollars,  or  be  imprisoned  not  exceeding  one 
year  in  the  county  jail  of  the  county  where  said  report  was 
verified,  or  be  subject  to  both  said  fine  and  imprisonment, 
at  the  discretion  of  the  court. 

22.  Extension  of  Time  for  Filing  Report. — The  state 
board  of  equalization  may,  for  good  cause  shown,  by  order 
entered  upon  its  minutes,  extend  for  not  exceeding  thirty 
days,  the  time  fixed  in  this  act  for  filing  any  report  herein 
provided  for. 

23.  Bank  Waiver  of  Assessment  to  Individual  Stock- 
holder.— If  any  bank  shall  by  resolution  of  its  board  of  direc- 
tors, request  the  state  board  of  equalization  to  assess  to  and 
in  the  name  of  such  bank  so  requesting,  the  entire  taxable 
value  of  all  the  shares  of  the  capital  stock  of  such  bank,  as 
determined   by   said   state   board,   instead   of   assessing   such 


988  BUSINESS   LAWS   FOR   BUSINESS   MEN. 

shares  to  and  in  the  name  of  the  individual  stockholders 
or  shareholders  owning  the  same,  and  if  such  bank  shall 
promise  that  it  will,  upon  being  notified  by  said  state 
board,  of  such  assessment  thereof  to  said  bank,  and  of 
the  amount  of  taxes  to  be  paid  upon  such  assessment,  pay 
such  taxes  at  the  times  when  taxes  assessed  and  levied  under 
this  act  are  due  and  payable;  which  request  to  assess  said 
bank  and  promise  to  pay  said  tax  shall  be  in  substantially  the 
following  form : 

The  state  board  of  equalization  is  hereby  instructed  to 
assess  in  the  name  of  this  bank  and  not  to  the  individual  stock- 
holders or  shareholders  therein,  the  taxable  value  of  all  the 
shares  of  capital  stock  in  this  bank,  and  such  bank  hereby 
promises  to  pay  to  the  state  treasurer  the  amount  of  the  tax 
levied  upon  such  assessment  when  such  taxes  are  due  and 
payable  under  the  laws  of  this  state. 

By 

(Here  insert  title  of  official  signing.) 

Then  the  state  board  may  assess  the  capital  stock  to  and 
in  the  name  of  such  bank,  and  said  promise  to  pay  the  taxes 
shall  be  binding  upon  such  bank,  and  collection  of  such  taxes 
from  such  bank  may  be  enforced. 

24.  Correction  of  Assessment. — The  state  board  shall 
have  power  at  any  time  on  or  before  the  first  Monday  in  July 
to  correct  the  record  of  assessments  for  state  taxes,  and  may 
increase  or  decrease  any  assessment  therein  if  in  its  judg- 
ment the  evidence  presented  or  obtained  warrants  such  action. 

25.  Taxes,    When    Due    and    When    Delinquent. — The 

taxes  assessed  and  levied  as  provided  by  the  provisions  of 
this  act,  shall  be  due  and  payable  on  the  first  Monday  in 
July  in  each  year,  and  one-half  thereof  shall  be  delinquent  on 
the  sixth  Monday  after  said  first  Monday  in  July  at  six 
o'clock  P.  M.,  and  unless  paid  prior  thereto,  fifteen  per  cent 
shall  be  added  to  the  amount  thereof,  and  unless  paid  prior 
to  the  first  Monday  in  February  next  thereafter  at  six  o'clock 
p.  m.,  an  additional  five  per  cent  shall  be  added  to  the 
amount  thereof;  and  the  unpaid  portion,   or  the  remaining 


TAXES   AND  TAX   TITLES.  989 

one-half  of  said  taxes  shall  become  delinquent  on  the  first 
Monday  in  February  next  succeeding  the  day  upon  which 
they  became  due  and  payable  at  six  o'clock  P.  M. ;  and  if  not 
paid  prior  thereto  five  per  cent  shall  be  added  to  the  amount 
thereof;  provided,  that  all  taxes  provided  for  or  levied  under 
this  act  which  are  not  fully  secured  by  real  property  are  due 
and  payable  at  the  time  the  assessment  is  made.  When  in 
the  opinion  of  the  state  board  of  equalization  any  of  the 
taxes  provided  for  are  not  a  lien  upon  real  property  suffi- 
cient to  secure  the  payment  of  the  taxes,  said  board  may 
direct  the  controller,  or  his  duly  authorized  representative, 
to  collect  the  same  at  any  time  before  the  first  Monday  in 
August  thereafter,  and  the  controller  may  collect  the  taxes 
by  seizure  and  sale  of  any  property  owned  by  the  company 
against  whom  the  tax  is  assessed. 

26.  Sale  of  Property  for  Taxes. — ^The  sale  of  any  prop- 
erty seized  shall  be  made  at  public  auction  and  of  a  sufficient 
amount  of  the  property  to  pay  the  taxes,  penalties  and  costs, 
and  be  made  after  one  week's  notice  of  the  time  and  place 
of  such  sale  given  by  publication  in  a  newspaper  of  general 
circulation  published  in  the  county  where  the  property  seized 
is  situate,  or  if  there  be  no  newspaper  of  general  circulation 
published  in  such  county,  then  by  posting  of  such  notice  in 
three  public  places  in  such  county.  On  payment  of  the  price  bid 
for  any  property  sold,  the  delivery  thereof  with  bill  of  sale 
executed  by  the  controller  vests  the  title  in  the  purchaser. 
The  unsold  portion  of  any  property  so  seized,  may  be  left 
at  the  place  of  sale  at  the  risk  of  the  owner.  All  of  the 
proceeds  of  any  such  sale  in  excess  of  the  taxes,  penalties, 
and  costs,  must  be  returned  to  the  owner  of  the  property 
sold,  and  until  claimed  must  be  deposited  in  the  state  treasury 
subject  to  the  order  of  the  owner  thereof,  his  heirs,  or 
assigns. 

27.  Taxes  a  Lien. — The  taxes  levied  under  the  provis- 
ions of  this  act  shall  constitute  a  lien  upon  all  the  property 
and  franchises  of  every  kind  and  nature  belonging  to  the 
companies  subject  to  taxation  for  state  purposes,  which  lien 


990  BUSINESS   LAWS   FOR   BUSINESS   MEN. 

shall  attach  on  the  first  Monday  in  March  of  each  year. 
Every  tax  herein  provided  for  has  the  effect  of  a  judgment 
against  the  company,  and  every  lien  created  by  this  act  has 
the  effect  of  an  execution  duly  levied  against  all  property  of 
the  delinquent;  the  judgment  is  not  satisfied  nor  the  lien 
removed  until  such  taxes,  penalties,  and  costs  are  paid,  or  the 
property  sold  for  the  payment  thereof. 

28.  Taxes  Erroneously  Collected.  —  Whenever  any 
taxes,  penalties,  or  costs  collected  and  paid  under  the  pro- 
visions of  this  act  shall  have  been  paid  more  than  once,  or 
shall  have  been  erroneously  or  illegally  collected,  or  when 
any  taxes  shall  have  been  collected  and  paid  pursuant  to 
this  act  upon  a  computation  erroneously  made  by  reason  of 
clerical  mistake  of  the  officers  or  employees  of  the  state  board 
of  equalization,  or  shall  have  been  computed  in  a  manner  con- 
trary to  law,  the  state  board  of  equalization  shall  certify  to 
the  state  board  of  examiners  the  amount  of  such  taxes,  pen- 
alties, or  costs,  collected  in  excess  of  what  was  legally  due, 
from  whom  they  were  collected  or  by  whom  paid,  and  if 
approved  by  said  board  of  examiners,  the  same  shall  be 
credited  to  the  company  or  person  to  whom  it  rightfully 
belongs,  at  the  time  of  the  next  payment  of  taxes.  No  claim 
for  such  credit  shall  be  so  audited,  approved,  allowed,  or  paid 
unless  presented  within  one  year  after  the  payment  sought 
to  be  refunded. 

29.  Protest  of  Taxes. — Any  company,  person,  or  asso- 
ciation dissatisfied  with  any  assessment  made  by  the  state 
board  of  equalization  may  bring  an  action  against  the  state 
treasurer  for  the  recovery  of  any  taxes,  penalties,  or  costs 
paid  on  such  assessment,  but  no  such  action  may  be  brought 
later  than  the  third  Monday  in  February  next  following  the 
day  on  which  the  taxes  were  due,  nor  unless  such  company, 
person  or  association  shall  have  filed  with  the  state  con- 
troller at  the  time  of  payment  of  such  taxes  a  written  protest 
stating  whether  the  whole  assessment  is  claimed  to  be  void, 
or  if  a  part  only,  what  part,  and  the  grounds  upon  which 
such  claim  is  founded;  and  when  so  paid  under  protest  the 


TAXES    AND   TAX    TITLES.  991 

payment  shall  in  no  case  be  regarded  as  voluntary.  When- 
ever under  the  provisions  of  this  section  an  action  is  com- 
menced against  the  state  treasurer,  a  copy  of  the  complaint 
and  of  the  summons  must  be  served  upon  the  treasurer,  or 
his  deputy.  At  the  time  the  treasurer  demurs  or  answers, 
he  may  demand  that  the  action  be  tried  in  the  Superior  Court 
of  the  County  of  Sacramento,  which  demand  must  be 
granted.     The  attorney  general  must  defend  the  action. 

30.  Controller  to  Send  Notice  of  Delinquent  Taxes. — 

Within  ten  days  after  the  first  Monday  in  February,  the  con- 
troller shall  send  by  mail  to  the  last  known  address  of  any 
company  whose  taxes  are  delinquent  a  notice  of  the  amount 
of  said  taxes,  penalties,  and  costs,  and  that  if  the  said  taxes, 
penalties,  and  costs  are  not  paid  on  or  before  the  first  Mon- 
day in  March  next  thereafter  at  six  o'clock  P.  M.,  the  de- 
linquent company  if  it  be  a  domestic  corporation  will  forfeit 
its  charter  to  the  state,  and  that  if  the  delinquent  company  be  a 
foreign  corporation  it  will  forfeit  its  right  to  do  business  in 
this  state. 

31.  Charter  Forfeited  for  Delinquent  Taxes. —  If  the 

taxes,  penalties,  and  costs  are  not  paid  within  the  time 
specified  in  said  notice,  the  controller  shall,  on  said  first 
Monday  in  March  at  six  o'clock  P.  M.,  mark  on  the  record 
of  assessments  for  state  taxes  opposite  the  assessment  of  the 
delinquent  company  the  words  "charter  forfeited  to  the 
state,"  if  the  delinquent  company  be  a  domestic  corporation, 
and  thereupon  said  charter  shall  be  so  forfeited;  and  if  the 
delinquent  company  be  a  foreign  corporation  the  words  "right 
to  do  business  forfeited,"  and  thereupon  said  right  to  do 
business  shall  be  so  forfeited.  He  shall  at  once  report  to  the 
secretary  of  state  the  name  and  number  of  charter  of  each 
corporation  whose  charter  or  right  to  do  business  has  been 
forfeited  for  non-payment  of  taxes,  and  the  secretary  of  state 
shall  at  once  report  the  same  to  the  governor.  The  governor 
shall  forthwith  issue  his  proclamation,  declaring  that  the 
charters  of  such  domestic  corporations  have  been  forfeited 
and  the  right  of  such  foreign  corporations  to  do  business  in 


992  BUSINESS   LAWS   FOR   BUSINESS   MEN. 

this  State  has  been  forfeited.  Said  proclamation  shall  be  filed 
immediately  in  the  office  of  the  secretary  of  state,  and  the 
secretary  of  state  shall  immediately  cause  a  copy  of  said 
proclamation  to  be  published  in  one  issue  of  one  daily  news- 
paper of  general  circulation  published  at  the  state  capital,  of 
one  daily  newspaper  of  general  circulation  published  in  the 
City  and  County  of  San  Francisco,  and  of  one  daily  news- 
paper of  general  circulation  published  in  the  city  of  Los 
Angeles.  The  secretary  of  state  shall  thereupon  transmit  a 
certified  copy  of  the  proclamation  to  each  county  clerk  in 
this  state,  who  shall  file  the  same  in  his  office. 

32.  Relief  from  Forfeiture. — Any  such  corporation 
making  subsequent  payment  of  all  taxes,  penalties,  and  costs 
due  the  state,  and  in  addition  thereto  an  amount  equal  to  the 
taxes  levied  under  this  act  for  the  year  in  which  such  for- 
feiture occurred,  for  each  year  subsequent  to  such  forfeiture 
and  to  the  time  of  such  redemption,  shall  be  relived  of  such 
forfeiture,  and  the  controller  shall  notify  the  secretary  of 
state  thereof,  and  the  secretary  of  state  shall  annually  on  the 
first  Monday  in  April  transmit  to  the  county  clerk  of  each 
county  in  this  state  a  list  of  the  corporations  so  paying,  and 
which  have  been  relieved  of  such  forfeiture,  which  list  shall 
be  by  said  county  clerk  filed  in  his  office;  provided,  the  re- 
habilitation of  a  corporation  under  the  provisions  of  this 
act  shall  be  without  prejudice  to  any  action,  defense  or  right 
which  accrued  by  reason  of  the  original  forfeiture;  and  pro- 
vided, that  in  case  the  name  of  any  corporation  which  has 
suffered  the  forfeiture  prescribed  in  this  act,  or  a  name  so 
closely  resembling  the  name  of  such  corporation  as  will  tend  to 
deceive,  has  been  adopted  by  any  other  corporation  since  the 
date  of  said  forfeiture,  then  said  corporation  having  suf- 
fered such  forfeiture  shall  be  relieved  therefrom  pursuant  to 
the  terms  of  this  section  only  upon  the  adoption  by  said 
corporation  seeking  revivor  of  a  new  name,  and  in  such  case 
nothing  in  this  act  contained  shall  be  construed  as  permitting 
such  corporation  to  be  revived  or  carry  on  any  business  under 
its  former  name;  and  such  corporation  shall  have  the  right 


TAXES   AND  TAX   TITLES.  993 

to  use  its  former  name  or  take  such  new  name  only  upon 
filing  an  application  therefor  with  the  secretary  of  state  and 
upon  the  issuing  of  a  certificate  to  such  corporation  by  the 
secretary  of  state,  setting  forth  the  right  of  such  corporation  to 
take  such  new  name  or  use  its  former  name,  as  the  case  may  be ; 
provided,  however,  that  the  secretary  of  state  shall  not  issue 
any  certificate  permitting  any  corporation  to  take  or  use  the 
name  of  any  corporation  heretofore  organized  in  this  state, 
and  which  has  not  suffered  a  forfeiture  prescribed  by  this 
act,  or  to  make  or  use  a  name  so  closely  resembling  the  name 
of  such  corporation  heretofore  organized  in  this  state  as 
will  tend  to  deceive. 

33.  State  Board  to  Equalize  Assessments. — Whenever 
the  state  board  of  equalization  is  satisfied  after  investiga- 
tion that  any  county  assessor,  or  board  of  equalization, 
has  assessed  any  real  estate  belonging  to  any  bank  above 
its  full  cash  value  and  has  thereby  unjustly  reduced  the 
amount  of  taxes  due  the  state  from  said  bank,  said  state 
board  shall,  under  such  rules  of  notice  to  the  clerk  of  the 
board  of  supervisors  of  the  county  affected  thereby  as  the 
said  state  board  shall  deem  reasonable,  equalize  the  assessed 
value  of  such  real  estate,  and  shall  upon  completion  of  said 
equalization  issue  an  order  to  said  assessor  or  board  of 
equalization  and  to  the  county  auditor  of  the  county  in  which 
said  real  estate  is  located,  fixing  the  assessed  value  of  said 
real  estate.  The  value  so  equalized  and  fixed,  and  no  other, 
shall  be  deemed  the  value,  as  assessed  for  county  taxes,  of 
such  real  estate,  and  the  sole  basis  of  taxation  upon  such  real 
estate  for  county  taxes. 

The  state  board  of  equalization  shall  immediately  after  the 
county  and  city  assessments  have  been  completed,  ascertain 
the  value  of  any  real  estate  belonging  to  any  insurance  com- 
pany as  assessed  and  equalized  for  purposes  of  county  and 
of  city  taxation.  Whenever  the  state  board  of  equalization 
is  satisfied  after  investigation  that  any  county,  city  and 
county,  city,  or  district  assessor,  or  board  of  equalization,  has 
assessed  any  real  estate  belonging  to  any  insurance  company 


994  BUSINESS   LAWS   FOR  BUSINESS   MEN. 

above  its  full  cash  value  and  has  thereby  unjustly  reduced 
the  amount  of  taxes  due  the  state  from  said  insurance  com- 
pany, said  state  board  shall,  under  such  rules  of  notice  to 
the  clerk  of  the  board  of  supervisors  of  the  county  or  the 
proper  officer  of  the  city  affected  as  the  board  shall  deem 
reasonable,  equalize  the  assessed  value  of  such  real  estate 
and  shall,  upon  the  completion  of  said  equalization,  issue  an 
order  to  said  assessor  or  board  of  equalization  and  to  the 
county,  city  and  county,  city,  or  district  auditor  or  clerk  of 
the  county,  city  and  county,  city,  or  district  in  which  said 
real  estate  is  located,  fixing  the  assessed  value  of  said  real 
estate.  The  value  so  equalized  and  fixed,  and  no  other,  shall 
be  deemed  the  value,  as  assessed  for  county,  city  and  county, 
city,  or  district  taxes,  of  such  real  estate,  and  the  sole  basis 
of  taxation  upon  such  real  estate  for  county,  municipal  and 
district  taxes. 

Act  of  the  Legislature,  approved  April  1,  1911. 


PART   XIV. 

TRUST  DEEDS. 

Section  1269.— EXTENT  OF  THIS  SUBJECT.— It  is 

not  intended  to  include  in  this  subject  any  of  the  law  about 
trusts  created  by  last  wills,  or  trusts  in  personal  property, 
or  trusts  created  by  operation  of  law.  It  is  only  intended 
to  give  here  the  most  important  points  about  trust  deeds 
of  real  estate,  and  particularly  about  trusts  created  by  deed 
for  the  benefit  of  creditors  of  the  grantor. 

Section  1270.— TRUST  DEED  DEFINED.— A  trust 
deed  is  a  conveyance  to  a  person  in  trust,  to  do  the  things 
specified  in  it.  The  legal  title  passes  to  the  grantee.  A 
trust  creates  an  obligation  upon  a  person,  arising  out  of  a 
confidence  reposed  in  one  who  has  the  legal  title  to  property 
conveyed  to  him,  that  he  will  faithfully  apply  and  deal  with 
such  property  according  to  the  confidence  reposed,  as  ex- 
pressed in  the  conditions  named  in  the  deed. 

Section  1271.— TRUST  DEED  MUST  BE  IN  WRIT- 
ING.— A  trust  deed  must  be  in  writing,  and  must,  be  sub- 
scribed by  the  grantor  and  by  the  trustee,  or  by  the  agent  of 
the  trustee  authorized  by  writing. 
Civil  Code,  Section  852. 

Section  1272.— PURPOSES  FOR  WHICH  TRUST 
DEED  MAY  BE  MADE.t— Trusts  may  be  created  by  deed 

for  any  of  the  following  purposes: 

1.  To  sell  real  property,  and  apply  or  dispose  of  the  pro- 
ceeds in  accordance  with  the  instrument  creating  the  trust. 

2.  To  mortgage  or  lease  real  property  for  the  benefit  of 
annuitants  or  other  legatees,  or  for  the  purpose  of  satisfying 
any  charge  thereon. 

(995) 


996  BUSINESS   LAWS   FOR   BUSINESS   MEN. 

3.  To  receive  the  rents  and  profits  of  real  property,  and 
pay  them  to  or  apply  them  to  the  use  of  any  person,  whether 
ascertained  at  the  time  of  the  creation  of  the  trust  or  not, 
for  himself  or  for  his  family,  during  the  life  of  such  person, 
or  for  any  shorter  term. 

4.  To  receive  the  rents  and  profits  of  real  property,  and  to 
accumulate  the  same  for  the  purposes  and  within  the  limits 
named  in  the  deed. 

Civil  Code,  Section  857. 

Section  1273.— PROFITS  OF  LAND  LIABLE  TO 
CREDITORS.— Where  a  trust  is  created  to  receive  the 
rents  and  profits  of  real  property,  and  no  direction  for 
accumulation  is  given,  the  surplus  of  such  rents  and  profits, 
beyond  the  sum  that  may  be  necessary  for  the  education  and 
support  of  the  person  for  whose  benefit  the  trust  is  created, 
is  liable  to  the  claims  of  the  creditors  of  the  beneficiary,  and 
may  be  garnisheed  in  the  hands  of  the  trustee. 
Civil  Code,  Section  859. 

Section  1274.— NUMBER  OF  TRUSTEES.— The  law 
does  not  limit  the  number  of  trustees  named  in  a  deed  of 
trust.     The  grantor  may  appoint  any  number  he  desires. 

Section  1275.— ACTION  BY  TRUSTEES.— Where  the 

trust  is  vested  by  the  deed  in  several  trustees,  they  must  all 
unite  in  the  execution  of  the  trust;  but,  in  case  any  one  or 
more  of  them  is  dead,  the  trust  may  be  executed  by  the 
survivors,  unless  the  deed  creating  the  trust  directs  otherwise. 
Civil  Code,  Section  860. 

Section  1276.— BENEFICIARIES  TAKE  NO  TITLE 
BY  DEED. — The  deed  of  trust  vests  the  whole  estate  in 
the  trustees,  subject  only  to  the  execution  of  the  trust.  The 
beneficiaries  take  no  estate  or  interest  in  the  property,  but 
may  enforce  the  performance  of  the  trust. 
Civil  Code,  Section  863. 


TRUST  DEEDS.  997 

Section  1277.—  DEVISE  AND  TRANSFER  OF 
TRUST  PROPERTY.— The  grantor  in  a  trust  deed  may 
direct  to  whom  the  real  property  to  which  the  trust  relates 
shall  belong,  in  the  event  of  the  failure  or  termination  of 
the  trust.  He  may  also  transfer  the  property  by  deed,  or 
devise  it  by  his  will,  subject  to  the  execution  of  the  trust. 
The  devisee  or  grantee  of  trust  property  acquires  a  legal 
estate  in  the  property,  as  against  all  persons  except  the 
trustees  and  those  lawfully  claiming  under  them. 
Civil  Code,  Sections  864,  865. 

Section  1278.  — WHEN  BENEFICIARY  CANNOT 
DISPOSE  OF  HIS  INTEREST  IN  TRUST  ESTATE. 

— Where  a  trust  is  created  by  deed,  to  pay  the  beneficiary 
the  rents  and  profits  of  real  property,  or  an  annuity  out  of 
such  rents  and  profits,  the  deed  may  lawfully  contain  the 
condition  that  the  beneficiary  must  not  dispose  of  his  interest 
in  the  trust  during  his  life,  or  for  a  term  of  years. 
Civil  Code,  Section  867. 

Section  1279.— POWER  OF  TRUSTEE.— The  trustees 
have  only  power  to  carry  out  the  directions  and  purposes  of 
the  trust.  They  cannot  go  outside  of  the  provisions  of  the 
deed.  Every  transfer  or  other  act  of  the  trustees,  contrary 
to  the  terms  of  the  trust,  is  absolutely  void. 

A  trustee  is  a  general  agent  for  the  trust  property.  Where 
there  are  several  co-trustees,  all  must  unite  in  any  act  to 
bind  the  trust  property,  unless  the  deed  of  trust  otherwise 
provides. 

Civil   Code,   Sections  870,   2258,  2267,  2268. 

Section  1280.  —  LIABILITY  FOR  BREACH  OF 
TRUST. — A  trustee  who  uses  or  disposes  of  the  trust  prop- 
erty for  his  own  advantage,  and  not  in  furtherance  of  the 
purposes  of  the  trust  deed,  must  account  for  all  profits  so 
made  by  him,  or  pay  the  value  of  his  use  of  the  trust 
fund;  or,  if  he  has  disposed  of  the  trust  property,  he  musi 
replace  it,  or  account  for  its  proceeds,  with  interest.     If  a 


998  BUSINESS   LAWS   FOR   BUSINESS   MEN. 

trustee  makes  an  honest  mistake  in  the  performance  of  his 
duty,  but  goes  outside  of  his  legitimate  powers,  he  is  liable 
to  make  good  to  the  beneficiary  whatever  is  lost  by  his  error. 
Civil  Code,  Sections  2237,  2238. 

Section    1281.— COMPENSATION    OF    TRUSTEE.— 

A  trustee  is  entitled  to  the  repayment,  out  of  the  trust  prop- 
erty, of  all  expenses  actually  and  properly  incurred  by  him 
in  the  performance  of  his  trust.  He  is  entitled  to  the  repay- 
ment of  even  unlawful  expenditures,  if  they  were  productive 
of  actual  benefit  to  the  estate. 

Sums  expended  by  a  trustee,  in  payment  of  taxes,  are 
valid  charges  on  the  property,  though  the  deed  contains  no 
express  authority  for  such  payments.  (Decided  by  the 
Supreme  Court  of  California,  in  the  case  of  Savings  &  Loan 
Society  vs.  Burnett,  which  decision  is  printed  in  Volume  39 
of  the  Pacific  Reporter,  page  922.) 

~/- 

When  a  deed  of  trust  is  silent  upon  the  subject  of  com- 
pensation, the  trustee  is  entitled  to  the  same  compensation 
as  an  executor.  If  it  specifies  the  amount  of  his  compensa- 
tion, he  is  entitled  to  the  amount  thus  specified  and  no  more. 
If  it  directs  that  he  shall  be  allowed  a  compensation,  but 
does  not  specify  the  rate  or  amount,  he  is  entitled  to  such 
compensation  as  may  be  reasonable  under  the  circumstances. 
If  there  are  two  or  more  trustees  the  compensation  shall  be 
apportioned  among  the  trustees  according  to  the  services 
rendered  by  them  respectively. 

Civil  Code,  Sections  2273,  2274.        .. 

Section  1282.— TERMINATION  OF  THE  TRUST.— 

A  trust  is  extinguished  by  the  entire  fulfillment  of  its  object, 
or  by  such  object  becoming  impossible  or  unlawful. 

A  trust  cannot  be  revoked  by  the  trustor  after  its  accept- 
ance,  actual  or  presumed,  by  the  trustee  and  beneficiaries, 
except  by  the  consent  of  all  the  beneficiaries,  unless  the  deed 
of  trust  reserves  a  power  of  revocation  to  the  trustor. 
Civil  Code,  Sections  2279,  2280. 


TRUST   DEEDS.  999 

Section    1283.—  DISCHARGE     OF     TRUSTEE.— A 

trustee  can  be  discharged  from  his  trust  only  as  follows: 

1.  By  the  extinction  of  the  trust; 

2.  By  the  completion  of  his  duties  under  the  trust; 

3.  By  such  means  as  may  be  prescribed  by  the  deed  of  trust ; 

4.  By  the  consent  of  the  beneficiary,  if  he  have  capacity 
to  contract; 

5.  By  the  judgment  of  a  competent  tribunal,  in  a  direct 
proceeding  for  that  purpose,  that  he  is  of  unsound  mind;  or, 

6.  By  the  superior  court. 

The  superior  court  may  remove  any  trustee  who  has 
violated  or  is  unfit  to  execute  the  trust,  or  may  accept  the 
resignation  of  a  trustee. 

Civil  Code,   Sections  2282,  2283. 

Section  1284.— APPOINTMENT  OF  TRUSTEE  IN 
CASE  OF  VACANCY.— The  superior  court  may  appoint 
a  trustee  whenever  there  is  a  vacancy  and  the  deed  of  trust 
does  not  provide  a  practicable  method  of  appointment.  If 
the  beneficiary  of  the  trust  is  of  the  age  of  fourteen  years, 
he  may  nominate  such  trustee,  and  if  such  nominee  is 
found  competent  to  discharge  the  duties,  he  is  entitled  to 
be  appointed  such  trustee  in  preference  to  any  other  person. 
Act  of  the  Legislature,  approved  February  25,  1911. 

The  deed  of  trust  may  provide  for  some  other  method  of 
appointing  trustees ;  as  a  trust  deed  to  secure  a  note  to 
a  bank,  providing  that  the  bank  may  from  time  to  time 
appoint  other  trustees  on  the  death  of  those  named  in  the 
deed.  (Decided  by  the  Supreme  Court  of  California,  in  the 
case  of  Sacramento  Bank  vs.  Murphy,  which  decision  is 
printed  in  Volume  115  of  the  Pacific  Reporter,  page  232.) 

Section   1285.  — SURVIVORSHIP    BETWEEN     CO- 
TRUSTEES.— On  the  death,  renunciation,  or  discharge  of 
one  of  several  co-trustees  the  trust  survives  to  the  others. 
Civil  Code,   Section  2288. 


1000  BUSINESS   LAWS   FOR   BUSINESS   MEN. 

Section  1286.— CREDITOR  AS  TRUSTEE.— A  creditor 
of  the  grantor  may  be  named  in  the  trust  deed  as  trustee, 
and  may  be  given  the  power  to  sell  property  and  apply  the 
proceeds  to  payment  of  the  debt.  When  the  debt  and  ex- 
penses of  sale  are  paid,  the  remainder  must  go  to  the 
grantor.  (Decided  by  the  Supreme  Court  of  California,  in 
the  case  of  Cary  vs.  Brown,  which  decision  is  printed  in 
Volume  62  of  the  California  Reports,  page  373.) 

Section  1287.  — BANK  MAY  BUY  PROPERTY 
FROM  STOCKHOLDER  TRUSTEES.— Stockholders  of 
a  bank  are  not  the  bank,  even  if  they  are  trustees  of  a  trust 
deed  to  the  bank;  and  a  sale  to  the  bank  by  the  trustees 
is  not  a  sale  to  themselves.  If  there  is  a  deficiency,  after  the 
sale  upon  a  promissory  note  for  which  the  trust  deed  was 
security,  an  action  lies  upon  it  to  recover  the  balance  due 
after  crediting  the  amount  received  from  the  sale  less  the 
costs  of  sale.  (Decided  by  the  Supreme  Court  of  Cali- 
fornia, in  the  case  of  Copsey  vs.  Sacramento  Bank,  which 
decision  is  printed  in  Volume  133  of  the  California  Reports, 
page  659.) 

Section  1288.— RECONVEYANCE  TO  GRANTOR.— 

When  the  trust  is  satisfied  before  sale  of  the  property,  it  is 
the  duty  of  the  trustee  to  convey  the  property  back  to  the 
grantor.  Thus,  if  a  trust  deed  is  made  of  property,  with 
power  of  sale  to  dispose  of  the  property  and  apply  the  pro- 
ceeds to  the  debt  of  the  grantor;  if  the  grantor  pays  the 
debt  before  the  trustee  sells,  the  latter  cannot  keep  the 
property,  for  the  debt  is  wiped  out,  and  the  object  of  the 
trust  is  ended.  (Decided  by  the  Supreme  Court  of  Cali- 
fornia, in  the  case  of  Boswick  vs.  McEvary,  which  decision 
is  printed  in  Volume  62  of  the  California  Reports,  page  496.) 

Section   1289.— REVOCATION   BY   DEED.— Where  a 

trust  deed  provides  that  the  grantor  may  revoke  the  trust 
by  another  deed  made  at  a  later  date,  the  grantor,  if  he 
wishes    to    take    advantage    of    the    provision,    must    strictly 


TRUST   DEEDS.  1001 

comply  with  the  trust  deed.  He  cannot  revoke  the  trust  by 
his  will.  (Decided  by  the  Supreme  Court  of  California,  in 
the  case  of  Carpenter  vs.  Cook,  which  decision  is  printed 
in  Volume  60  of  the  Pacific  Reporter,  page  475.) 

Section  1290.— POSSESSION  OF  ESTATE  UPON 
TERMINATION  OF  TRUST.— Upon  the  termination  of 
a  trust,  that  has  been  created  to  manage  and  hold  the 
property  for  the  benefit  of  another  during  a  limited  period, 
the  beneficiary  is  entitled  to  the  immediate  possession  and 
enjoyment  of  the  trust  estate,  as  against  all  the  trustees; 
and  to  have  their  account,  as  well  as  the  amount  of  the 
estate  in  their  hands,  settled  and  determined ;  and  such 
possession  and  enjoyment  must  not  be  postponed  for  the 
purpose  of  determining  the  rights  of  the  trustees  as  between 
themselves.  (Decided  by  the  Supreme  Court  of  California, 
in  the  case  of  Bermingham  vs.  Wilcox,  which  decision  is 
printed  in  Volume  52  of  the  Pacific  Reporter,  page  822.) 

Section  1291— SUIT  FOR  BALANCE  AFTER  SALE. 

— After  a  sale  under  a  trust  deed  securing  a  note,  if  the 
sale  does  not  bring  enough  to  pay  the  note,  a  suit  may  be 
brought  by  the  creditor  for  any  unsatisfied  balance.  (Decided 
by  the  Supreme  Court  of  California  in  the  case  of  Kraft  vs. 
Bryan,  which  decision  is  printed  in  Volume  7Z  of  the  Pacific 
Reporter,  page  745.) 

Section    1292.— LEASE    OF    TRUST    PROPERTY.— 

Where  the  deed  creates  the  trust  for  a  limited  period,  the 
trustees  have  no  right  to  lease  the  property  for  a  longer 
period.  The  lease  will  end  when  the  trust  ends,  even  if 
made  for  a  longer  term,  because  the  trustees  had  no  power 
to  make  a  lease  for  a  longer  time  than  the  life  of  the  trust 
estate.  (Decided  by  the  Supreme  Court  of  California,  in 
the  case  of  South  End  Warehouse  Co.  vs.  Lavery,  which 
decision  is  printed  in  Volume  107  of  the  Pacific  Reporter, 
page   1008.) 


1002  BUSINESS   LAWS   FOR  BUSINESS   MEN. 

Section    1293.— SALE     OF     TRUST     PROPERTY.— 

Where  the  deed  gives  the  trustees  power  to  sell,  they  may 
sell,  without  any  court  proceedings  whatever.  Notice  of 
the  sale  must  be  given,  in  the  manner  provided  by  the  terms 
of  the  deed.  The  sale  must  be  made  in  the  manner  specified 
in  the  deed. 

There  is  no  foreclosure,  and  no  redemption. 

Section  1294.— FORM  OF  TRUST  DEED.— The  fol- 
lowing is  a  form  of  trust  deed : 

This  deed  of  trust,  made  this day  of , 

in  the  year  one  thousand  nine  hundred  and ,  between 

,   of  Alameda  County,   California,   the 

party  of  the  first  part,  and ,  of 

San  Francisco,  California,  the  party  of  the  second  part,  and 

,  of  San  Francisco,  California,  the 

party  of  the  third  part,  witnesseth:  That  whereas  the  said 
party  of  the  first  part  has  borrowed  of  the  said  party  of  the 
third  part  the  sum  of  twenty-five  thousand  (25,000)  dollars, 
in  gold  coin  of  the  United  States,  and  has  agreed  to  repay 

the  same  on  the day  of ,  in  the  year 

one  thousand  nine  hundred  and ,  to  the  said  party 

of  the  third  part,  in  like  gold  coin  with  interest  according 
to  the  terms  of  a  certain  promissory  note,  of  even  date 
herewith,  executed  and  delivered  therefor  by  the  said  party 
of  the  first  part. 

Now  this  indenture  witnesseth,  that  the  said  party  of  the 
first  part,  in  consideration  of  the  aforesaid  indebtedness  to 
the  said  party  of  the  third  part;  and  for  the  purpose  of 
securing  the  payment  of  said  promissory  note,  and  of  any 
sum  or  sums  of  money,  with  interest  thereon,  that  may  now 
or  hereafter  be  paid  or  advanced  by,  or  may  otherwise  be 
due  to,  the  parties  of  the  second  or  third  part  under  the 
provisions  of  this  instrument,  does  by  these  presents  grant 
unto  the  party  of  the  second  part,  and  to  his  successors  and 
assigns,  the  piece  or  parcel  of  land  situated  in  the  County 
of  Alameda,  and  State  of  California,  described  as  follows: 


(Description.) 


TRUST  DEEDS.  1003 

And  also,  all  the  interest,  or  other  claim  or  demand,  which 
the  said  party  of  the  first  part  now  has  or  may  hereafter 
acquire  of,  in  and  to  said  premises  with  the  appurtenances. 

To  have  and  to  hold,  the  same  to  the  party  of  the  second 
part  and  to  his  successors  and  assigns  upon  the  trusts  and 
confidence  hereinafter  expressed,  to-wit: 

Firstly,  during  the  continuance  of  these  trusts,  the  party 
of  the  second  part  and  the  party  of  the  third  part,  their 
successors  and  assigns,  are  hereby  authorized  to  pay,  without 
previous  notice  all  or  any  liens,  and  all  or  any  incumbrances 
now  subsisting,  or  that  may  hereafter  exist  upon  said  prem- 
ises (excepting  taxes  and  assessments  imposed  upon  this 
deed  of  trust  or  the  money  secured  hereby)  which  may  in 
their  judgment,  aflFect  said  premises  or  these  trusts;  and 
they  may  in  their  discretion  at  the  expense  of  said  party  of 
the  first  part,  contest  the  payments  of  any  such  liens  or 
encumbrances,  or  may  defend  any  suit  or  proceeding  that  they 
may  consider  proper  to  protect  the  title  to  said  premises, 
and  may  insure  buildings  on  said  premises,  and  these  trusts 
shall  be  and  continue  as  security  to  the  party  of  the  third 
part,  and  his  assigns,  for  the  repayment,  in  gold  coin  of  the 
United  States,  of  the  money  so  borrowed  by  the  said  party 
of  the  first  part  and  the  interest  thereon,  and  of  all  amounts 
so  paid  out  and  costs  and  expenses  incurred,  as  aforesaid, 
with  interest  on  such  payment  at  the  rate  of  one  per  cent 
per  month  until  final  payment. 

Secondly,  in  case  the  said  party  of  the  first  part  shall  well 
and  truly  pay,  or  cause  to  be  paid,  at  maturity,  in  gold  coin 
as  aforesaid,  all  sums  of  money  so  borrowed,  as  aforesaid, 
and  the  interest  thereon,  and  shall  upon  demand  repay  all 
other  moneys  secured  or  intended  to  be  secured  hereby  and 
also  the  reasonable  expenses  of  this  trust,  then  the  party  of 
the  second  part,  his  successors  and  assigns,  shall  reconvey 
all  the  estate  in  the  premises  aforesaid  to  the  party  of  the 
first  part  at  his  request  and  cost. 

Thirdly,  if  default  shall  be  made  in  the  payment  of  any 
of  said  sums  of  principal  or  interest,  when  due,  in  the  manner 
stipulated  in  said  promissory  note,  or  in  the  reimbursements 
of  any  amounts  herein  provided  to  be  paid,  or  of  any  interest 
thereon,  then  the  said  party  of  the  second  part,  his  successors 
or  assigns,  on  application  of  the  party  of  the  third  part,  or  his 
assigns,  shall  sell  the  above-granted  premises,  or  such  part 
thereof  as  in  his  discretion,  he  shall  find  it  necessary  to  sell 


1004  BUSINESS  LAWS  FOR  BUSINESS  MEN. 

in  order  to  accomplish  the  objects  of  these  trusts,  in  the 
manner  following,  namely:  He  shall  first  publish  the  time 
and  place  of  such  sale,  with  a  description  of  the  property  to 
be  sold,  at  least  once  a  week  for  four  weeks,  in  some  news- 
paper published  in  said  County  of  Alameda,  and  may  from 
time  to  time  postpone  such  sale  by  publication ;  and  on  the 
day  of  sale  so  advertised,  or  any  day  to  which  such  sale 
may  be  postponed  he  may  sell  the  property,  so  advertised, 
or  any  portion  thereof  at  public  auction,  in  any  county  where 
any  part  of  said  property  may  be  situated,  to  the  highest 
cash  bidder;  and  the  holder  or  holders  of  said  promissory 
note,  his  agents  or  assigns  and  the  party  of  the  second  part 
may  bid  and  purchase  at  such  sale. 

And  the  party  of  the  second  part,  or  assigns,  shall  estab- 
lish as  one  of  the  conditions  of  such  sale,  that  all  bids  and 
payments  for  said  property  shall  be  made  in  like  gold  coin 
as  aforesaid,  and  upon  such  sale  he  shall  make,  execute,  and 
after  due  payment  made,  shall  deliver  to  the  purchaser  or 
purchasers,  his  or  their  heirs  and  assigns,  a  deed  or  deeds 
of  grant,  bargain  and  sale  of  the  above-granted  premises, 
and  out  of  the  proceeds  thereof  shall  pay, 

First,  the  expenses  thereof,  together  with  the  reasonable 
expenses  of  this  trust,  including  counsel  fees  of  five  hundred 
dollars,  in  gold  coin,  which  shall  become  due  upon  any 
default  made  by  the  said  party  of  the  first  part  in  any  of 
the  payments  aforesaid. 

Second,  all  sums  which  may  have  been  paid  by  the  said 
party  of  the  second  or  third  part,  their  successors  or  assigns, 
or  the  holders  of  the  note  aforesaid,  and  not  reimbursed, 
and  which  may  then  be  due,  whether  paid  on  account  of 
encumbrances  or  insurance,  as  aforesaid,  or  in  the  perform- 
ance of  any  of  the  trusts  herein  created,  and  with  whatever 
interest  may  have  accrued  thereon ;  next  the  amount  due  and 
unpaid  on  said  promissory  note,  with  whatever  interest  may 
have  accrued  thereon;  and  lastly  the  balance  or  surplus  of 
such  proceeds,  if  any,  to  said  party  of  the  first  part,  his 
heirs  or  assigns. 

And  in  the  event  of  the  sale  of  said  premises  or  any  part 
thereof,  and  the  execution  of  a  deed  or  deeds  therefor,  under 
these  trusts,  then  the  recitals  therein  of  default  and  publica- 
tion shall  be  conclusive  proof  of  such  default  and  of  the 
due    publication    of    such    notice;     and    any    such    deed    or 


TRUST   DEEDS.  1005 

deeds  with  such  recitals  therein  shall  be  effectual  and  con- 
clusive against  the  said  party  of  the  first  part,  his  heirs  or 
assigns,  and  all  other  persons ;  and  the  receipt  for  the  pur- 
chase money  contained  in  any  deeds  executed  to  the  pur- 
chaser, as  aforesaid,  shall  be  a  sufficient  discharge  to  such 
purchaser  from  all  obligations  to  see  to  the  proper  application 
of  the  purchase  money,  according  to  the  trusts  aforesaid. 

In  witness  whereof,  we  have  hereunto  set  our  hands  and 
seals  the  day  and  year  first  above  written. 

(Seal.) 

(Seal.) 

(Seal.) 

(Acknowledgment  in  usual  form.) 


PART   XV. 

ASSIGNMENT  OF  CONTRACTS, 

GUARANTY  OF  ACCOUNTS,  AND 

POWERS  OF  ATTORNEY. 

Assignment  of  Contracts. 

Section    1295.— WHAT     CAN     BE    ASSIGNED.— All 

contracts  may  be  assigned,  in  California,  with  certain  excep- 
tions. The  law  seeks  to  do  away  with  restrictions  upon 
the  power  of  the  parties  to  assign  their  ordinary  contracts. 
But  the  law  does  not  intend  to  render  assignable  all  con- 
tracts whatever,  regardless  of  their  nature  or  effect,  and 
hence  the  rule  of  assignability  must  be  taken  with  some 
qualifications. 

In  the  first  place,  it  was  not  intended  to  render  null  any 
agreement  that  the  parties  may  have  made  on  the  subject. 
For  if  the  contract  itself  provides  in  terms  that  it  is  not 
transferable,  it  cannot  be  transferred  by  an  assignment, 
although  it  otherwise  might  be  so.  Leases,  and  the  tickets 
usually  issued  by  railroad  companies,  are  famailiar  instances 
of  this.  And  if  the  contract  does  not  in  so  many  words 
forbid  the  assignment,  yet,  if  there  are  equivalent  expressions, 
or  language  which  excludes  the  idea  of  performance  by 
another,  the  contract  is  not  assignable.  The  question  in 
every  case  must  turn  at  last  upon  the  intention  of  the 
parties. 

If  a  contract  provides  that  it  shall  not  be  assigned  to  a 
particular  person,  naming  him,  it  cannot  be  assigned  to 
that  person. 

In  the  next  place,  although  the   language  used  may  not 
show  an  intention  that  the  contract  should  not  be  assigned, 
(1006) 


ASSIGNMENT   OF   CONTRACTS.  1007 

yet  the  nature  of  the  case  may  be  such  that  performance 
by  another  would  be  an  essentially  different  thing  from 
that  contracted  for.  Thus,  a  picture  by  one  artist  is  an 
essentially  different  thing  from  a  picture  on  the  same  subject 
by  another  artist;  and  so  of  a  book  composed  by  an  author; 
or  any  other  act  or  thing  where  the  skill,  credit,  or  other 
personal  quality  or  circumstance  of  the  party,  is  a  distinctive 
characteristic  of  the  thing  contracted  for,  or  a  material  in- 
ducement to  the  contract. 

Therefore,  if  a  contract  comes  within  either  of  the  quali- 
fications above  stated,  then  it  is  not  assignable.  But,  if  it  does 
not — that  is  to  say,  if  the  language  used  does  not  exclude 
the  idea  of  performance  by  another;  and  the  nature  of  the 
thing  contracted  for,  or  the  circumstances  of  the  case,  do  not 
show  that  the  skill,  credit,  or  other  personal  quality  or 
circumstance  of  the  party,  was  a  distinctive  characteristic 
of  the  thing  stipulated  for  or  material  inducement  to  the 
contract — then  the  contract  is  assignable  under  the  law  of 
California.  (Decided  by  the  Supreme  Court  of  California, 
in  the  case  of  Larue  vs.  Groezinger,  which  decision  is 
printed  in  Volume  24  of  the  Pacific  Reporter,  page  42.) 

Section  1296.—  ASSIGNMENT  WITHOUT  CON- 
SENT.— Since  a  party  cannot  release  himself  from  an  obliga- 
tion without  the  consent  of  the  other  party,  it  is  only  the 
benefit  of  a  contract  which  can  be  assigned.  Thus,  a 
contractor  for  the  erection  of  a  building  (if  not  prohibited 
by  the  terms  of  the  contract),  may  assign  his  contract  to 
another  contractor;  and  if  his  assignee  goes  on  and  com- 
pletes the  contract,  he  may  recover  the  price  from  the  owner; 
but  the  original  contractor,  his  assignor,  will  still  be  liable 
on  the  contract,  unless  the  owner  consents  to  hold  responsible 
only  the  assignee.  (Decided  by  the  Supreme  Court  of 
California,  in  the  case  of  Anderson  vs.  De  Urioste,  which 
decision  is  printed  in  Volume  31  of  the  Pacific  Reporter, 
page  266.) 

Civil  Code,  Section  1457. 


1008  BUSINESS   LAWS   FOR  BUSINESS   MEN. 

Section  1297.— VERBAL  OR  WRITTEN  ASSIGN- 
MENTS.— An  assignment  of  a  written  contract  must  be  in 
writing. 

An  open  account,  or  debt,  not  evidenced  by  a  contract  in 
writing,  may  be  assigned  verbally. 

An  ordinary  contract  may  be  assigned  by  writing  on  the 
back  of  the  contract,  or  by  a  more  formal  and  separate 
paper,  at  the  option  of  the  parties. 

Section  1298.— TIME  OF  ASSIGNMENT.— It  is  im- 
material when  the  assignment  is  made.  An  indebtedness 
due  for  services  may  be  assigned  either  before  or  after  the 
services  are  completed,  and  it  will  be  a  good  assignment. 
(Decided  by  the  District  Court  of  Appeals,  in  the  case 
of  Union  Collection  Co.  vs.  National  Fertilizer  Co.,  which 
decision  is  printed  in  Volume  82  of  the  Pacific  Reporter, 
page  1129.) 

Section  1299.— ASSIGNMENT  OF  WIFE'S  EARN- 
INGS.— A  wife's  earnings  may  be  her  separate  property, 
by  agreement  with  her  husband,  or  because  of  her  living 
separate  from  him ;  and  where  this  is  so,  she  may  assign 
her  claim  for  wages.  (Decided  by  the  District  Court  of 
Appeals,  in  the  case  of  Greve  vs.  Echo  Oil  Co.,  which  de- 
cision is  printed  in  Volume  96  of  the  Pacific  Reporter,  page 
904.) 

Section  1300.— ASSIGNMENT  OF  WAGES.— An  as- 
signment of  wages  or  salary  to  be  earned,  under  an  existing 
employment,  may  be  made,  and  will  be  valid  if  made  in  good 
faith  and  for  a  valuable  consideration.  The  assignment 
will  be  good,  although  the  assignor  works  from  day  to 
day,  and  is  hired  for  no  specified  time,  or  may  work  by 
the  piece,  and  his  wages  per  month  vary,  and  he  may  be 
discharged  at  any  time.  (Decided  by  the  District  Court  of 
Appeals,  in  the  case  of  Cox  vs.  Hughes,  which  decision  is 
printed  in  Volume  102  of  the  Pacific  Reporter,  page  956.) 


ASSIGNMENT   OF    CONTRACTS.  1009 

Section  1301.— ORDER  DRAWN  ON  DEBTOR.— An 

order  drawn  by  a  creditor  on  his  debtor,  for  the  whole 
amount  of  the  indebtedness,  operates  as  an  equitable  assign- 
ment of  the  debt  to  the  payee,  and  a  verbal  acceptance  of 
the  order  by  the  debtor  is  valid.  (Decided  by  the  Supreme 
Court  of  California,  in  the  case  of  Joyce  vs.  Wing  Yet  Lung, 
which  decision  is  printed  in  Volume  25  of  the  Pacific  Re- 
porter, page  545.) 

Section  1302.— NON-NEGOTIABLE  CONTRACTS.— 

A  non-negotiable  written  contract  for  the  payment  of  money 
or  personal  property  may  be  transferred  by  indorsement,  in 
like  manner  with  negotiable  instruments.  Such  indorsement 
shall  transfer  all  the  rights  of  the  assignor  under  the  instru- 
ment to  the  assignee,  subject  to  all  equities  and  defenses  exist- 
ing in  favor  of  the  maker  at  the  time  of  the  indorsement. 
Civil  Code,  Section  1459. 

Section   1303.— ASSIGNMENT  BY  CORPORATION. 

— The  secretary  and  general  manager  of  a  corporation  may 
assign  accounts,  under  a  general  authorization,  the  adoption 
of  a  special  resolution  authorizing  it  being  unnecessary. 
(Decided  by  the  Supreme  Court  of  California,  in  the  case  of 
Fuller  vs.  Arnold,  which  decision  is  printed  in  Volume  33 
of  the  Pacific  Reporter,  page  445.) 

Section  1304.— DAMAGES  FOR  TORT.— A  claim  for 
damages  for  tort,  as,  for  libel,  or  slander,  or  personal  injuries 
by  reason  of  accident,  cannot  be  assigned.  In  order  to  be 
an  assignable  claim,  it  must  be  one  which  is  founded  upon 
a  contract. 

Section  1305.— FORM  OF  ASSIGNMENT  OF  CON- 
TRACT.— The  following  is  a  form  of  assignment,  to  be 
annexed  to  a  written  contract.  If  the  contract  itself  is 
acknowledged,  the  assignment  should  be  acknowledged. 

Know  all  Men  by  these  Presents :    That  we 

and ,  named  in  the  annexed  instrument, 

in  consideration  of  the  sum  of dollars,  gold 


1010  BUSINESS   LAWS   FOR  BUSINESS   MEN. 

coin  of  the  United  States,  to  us  in  hand  paid  by 

and ,  of  the  City  and  County  of 

San  Francisco,  and  State  of  California,  the  receipt  whereof 
is    hereby    acknowledged,    do,    by    these    presents,    sell    and 

transfer,   to   the   said and , 

their  heirs  and  assigns,  the  said  instrument,  and  all  our 
right,  title,  and  interest  in  and  to  the  same,  authorizing  them 
in  our  names,  or  otherwise,  but  at  their  own  cost,  charge, 
and  expense,  to  enforce  the  same  according  to  the  tenor 
thereof,  and  to  take  all  measures  which  may  be  necessary 
for  the  recovery  of  the  within  instrument. 


Section  1306.— FORM  OF  INDORSED  ASSIGN- 
MENT.— The  following  is  a  form  of  assignment  to  be 
indorsed  on  the  back  of  a  contract: 

For  Value  Received,  I  do  hereby  transfer  and  assign,  to 

,  his  heirs  and  assigns  forever, 

all  my  right,  title,  and  interests,  in,  to,  and  under  the  within 
instrument. 


Section  1307.— FORM  OF  ASSIGNMENT  OF  DEBT 
DUE. — The  following  is  a  form  of  assignment  of  debt  due: 

Know  all  Men  by  these  Presents :    That  'I, , 

of ,  for  and  in  consideration  of  the  sum 

of dollars,  to  me  paid  by , 

of ,  the  receipt  whereof  is  hereby 

acknowledged,    have    sold,    and    by    these    presents    do    sell, 

assign,  transfer,  and  set  over,  unto  the  said , 

a  certain  debt  due  me  from ,  amounting 

to  the  sum  of dollars,   for  goods  sold  and 

delivered    (or,   work,   labor,   and   services),   with   full   power 
to  sue  for,  collect,  and  discharge,  or  sell  and  assign  the  same. 

And  I  hereby  covenant,  that  the  said  sum  of 

dollars  is  justly  due  as  aforesaid. 


Section  1308.— FORM  OF  ASSIGNMENT  OF  AC- 
COUNT.— The  following  is  a  form  of  assignment  of  an 
account,  which  may  be  indorsed  on  the  back  of  the  bill: 


ASSIGNMENT   OF   CONTRACTS.  1011 

For  Value  Received,  I  hereby  sell  and  assign  to 

,  the  within  account,  which  is  justly  due  from  the 

within  named ,  and  I  hereby  authorize 

the  said to  collect  the  same. 


Section  1309.—  FORM  OF  ASSIGNMENT  OF 
LEASE. — For  a  form  of  assignment  of  lease,  see  the 
subject,   "Landlord  and  Tenant." 

Section  1310.— FORM  OF  ASSIGNMENT  OF  MORT- 
GAGE.— For  a  form  of  assignment  of  mortgage,  see  the  sub- 
ject "Mortgages." 

Section  1311.— FORM  OF  ASSIGNMENT  OF  CON- 
TRACT FOR  SALE  OF  REAL  ESTATE.— The  follow- 
ing is  a  form  of  assignment  of  a  contract  for  the  sale  of 
real  estate : 

Know  all  Men  by  these  Presents :  That  I, , 

for  and  in  consideration  of  the  sum  of dollars, 

gold  coin  of  the  United  States,  to  me  paid  by , 

do,  by  these  presents,  sell,  transfer,  assign  and  set  over  unto 

the   said ,   a   contract   for  the   sale 

of  certain  real  estate,  described  as  follows,  to-wit: 

(Description.) 

which  said  contract  was  made  and  executed  by 

to  the  said ,  and  bears  date  the 

day   of 191 . .,   to   have   and   to   hold   the   same 

unto  the   said ,   his   heirs,   executors, 

administrators,  and  assigns;  subject,  nevertheless,  to  the 
covenants,  conditions,  and  payments  therein  mentioned.     And 

I  hereby  fully  authorize  and  empower  the  said , 

upon  his  performance  of  the  said  covenants  and  conditions, 

to  demand  and  receive  of  the  said ,  the 

deed  covenanted  to  be  given  in  the  said  contract,  in  the 
same  manner,  to  all  intents  and  purposes,  as  I  myself  might 
or  could  do,  were  these  presents  not  executed. 


1012  BUSINESS   LAWS   FOR   BUSINESS   MEN. 

Guaranty  of  Accounts. 

Section  1312.— GUARANTY  DEFINED.— A  guaranty 
is  a  promise  to  answer  for  the  debt,  default,  or  miscarriage 
of  another  person. 

A  person  may  become  guarantor  even  without  the  knowl- 
edge or  consent  of  the  principal. 

Civil  Code,  Sections  2787,  2788. 

Section  1313.— CONSIDERATION.— Where  a  guar- 
anty is  entered  into  at  the  same  time  with  the  original 
obligation,  or  with  the  acceptance  of  the  latter  by  the  guar- 
antee, and  forms  with  that  obligation  a  part  of  the  con- 
sideration to  him,  no  other  consideration  need  exist.  In  all 
other  cases  there  must  be  a  consideration  distinct  from  that 
of  the  original  obligation. 

Civil  Code,  Section  2792. 

Section  1314.— GUARANTY  MUST  BE  IN  WRIT- 
ING.— A  guaranty  must  be  in  writing,  and  signed  by  the 
guarantor;  but  the  writing  need  not  express  a  consideration. 

There  are  some  cases  in  which  a  promise  is  made  to 
answer  for  the  obligation  of  another,  where  the  promise  is 
deemed  an  original  obligation  of  the  person  making  it,  and 
in  such  cases  the  promise  need  not  be  in  writing.  But 
in  ordinary  cases  of  guaranty  of  accounts,  where  one  person 
promises  to  answer  for  the  debt  of  another,  the  promise 
must  be  in   writing. 

Civil   Code,   Section  2793. 

Section  1315.— OFFER  TO  BECOME  GUARANTOR. 

— A  mere  offer  to  become  a  guarantor  is  not  binding,  until 
notice  of  its  acceptance  is  communicated  by  the  guarantee 
to  the  guarantor;  but  an  absolute  guaranty  is  binding  upon 
the  guarantor  without  notice  of  acceptance. 
Civil  Code,  Section  2795. 

Section  1316.— GUARANTY  THAT  AN  OBLIGA- 
TION IS  GOOD  OR  COLLECTABLE.— A  guaranty  to 


GUARANTY  OF   ACCOUNTS.  1013 

the  effect  that  an  obligation  is  good,  or  is  collectable,  im- 
ports that  the  debtor  is  solvent,  and  that  the  demand  is 
collectable  by  the  usual  legal  proceedings,  if  taken  with  reason- 
able diligence.  Such  a  guaranty  is  not  discharged  by  an  omis- 
sion to  take  proceedings  upon  the  principal  debt,  or  upon  any 
collateral  security  for  its  payment,  if  no  part  of  the  debt 
could  have  been  collected  thereby.  Where  there  is  such  a  guar- 
anty, the  removal  of  the  principal  from  the  state,  leaving 
no  property  therein  from  which  the  obligation  might  be 
satisfied,  is  equivalent  to  the  insolvency  of  the  principal  m 
its  effect  upon  the  rights  and  obligations  of  the  guarantor. 
Civil  Code,  Sections  2800,  2801,  2802. 

Section    1317.— LIABILITY    OF    GUARANTOR.— A 

guaranty  is  to  be  deemed  unconditional  unless  its  terms 
impart  some  condition  precedent  to  the  liability  of  the 
guarantor. 

A  guarantor  of  payment  of  an  account  is  liable  to  the 
guarantee  immediately  upon  the  default  of  the  principal,  and 
without  demand  or  notice.  Therefore,  if  the  debtor  fails 
to  pay  the  account  at  the  time  agreed  upon,  the  law  does  not 
require  the  creditor  to  notify  the  guarantor,  or  to  make  any 
demand  upon  him;  but  the  creditor  may  immediately  sue 
the  guarantor  for  the  debtor's  account. 
Civil  Code,  Sections  2806,  2807. 

Section  1318.— LIABILITY  UPON  GUARANTY  OF 
A  CONDITIONAL  OBLIGATION.— Where  one  guar- 
antees a  conditional  obligation,  his  liability  is  the  same  in 
extent  as  that  of  the  principal;  and  he  is  not  entitled  to 
notice  of  the  default  of  the  principal,  unless  he  is  unable  by 
reasonable  diligence  to  acquire  information  of  such  default, 
and  the  creditor  has  actual  notice  of  his  inability  to  acquire 
such  information. 

Civil  Code,  Section  2808, 

Section      1319.— CONTINUING        GUARANTY.— A 

guaranty  relating  to  a  future  liability  of  the  principal,  under 
successive  transactions,  which  either  continue  his  liability  or 


1014  BUSINESS   LAWS   FOR   BUSINESS   MEN. 

from  time  to  time  renew  it  after  it  has  been   satisfied,   is 
called  a  continuing-  guaranty. 

A  continuing  guaranty  may  be  revoked  at  any  time  by  the 
guarantor,  in  respect  to  future  transactions,  unless  there  is 
a  continuing  consideration  as  to  such  transaction  which  he 
does  not  renounce. 

Civil  Code,  Sections  2814,  2815. 

Section  1320.— EXONERATION  OF  GUARAN- 
TORS.— A  guarantor  is  exonerated,  except  so  far  as  he 
may  be  indemnified  by  the  principal,  if  by  any  act  of  the 
creditor,  without  the  consent  of  the  guarantor,  the  original 
obligation  of  the  principal  is  altered  in  any  respect,  or  the 
remedies  or  rights  of  the  creditor  against  the  principal,  in 
respect  thereto,  in  any  way  impaired  or  suspended.  A 
promise  by  a  creditor,  which  for  any  cause  is  void,  or  void- 
able by  him  at  his  option,  does  not  alter  the  obligation  or 
suspend  or  impair  the  remedy. 

The  acceptance,  by  a  creditor,  of  anything  in  partial  satis- 
faction of  an  obligation,  reduces  the  obligation  of  a  guaran- 
tor thereof,  is  in  the  same  measure  as  that  of  the  principal, 
but  does  not  otherwise  afliect  it. 

Mere  delay  on  the  part  of  a  creditor  to  proceed  against 
the  principal,  or  to  enforce  any  other  remedy,  does  not 
exonerate  a  guarantor. 

A  guarantor,  who  has  been  indemnified  by  the  principal, 
is  liable  to  the  creditor  to  the  extent  of  the  indemnity,  not- 
withstanding that  the  creditor,  without  the  assent  of  the 
guarantor,  may  have  modified  the  contract  or  released  the 
principal. 

Civil  Code,  Sections  2819,  2820,  2822,  2823,  2824. 

Section  1321.— DEATH  OF  GUARANTOR.— A  guar- 
anty for  future  advances  terminates,  when  the  guarantor 
dies,  and  the  guarantee  has  notice  of  his  death.  (Decided 
by  the  Supreme  Court  of  California,  in  the  case  of  Valentine 
vs.  Donohoe-Kelly  Banking  Co.,  which  decision  is  printed  in 
volume  65  of  the  Pacific  Reporter,  page  381.) 


GUARANTY   OF   ACCOUNTS.  1015 

Section  1322.— JUDGMENT  AGAINST  PRINCI- 
PAL.— Where  a  creditor  has  recovered  a  judgment  against 
the  principal  debtor,  which  remains  unsatisfied,  a  guarantor 
against  whom  judgment  is  recovered  on  his  guaranty  is,  on 
payment  thereof,  entitled  to  an  assignment  of  the  judgment 
against  the  principal.  (Decided  by  the  Supreme  Court  of 
California,  in  the  case  of  Clark  vs.  Chapman,  which  decision 
is  printed  in  volume  32  of  the  Pacific  Reporter,  page  812.) 

Section  1323.— GUARANTY    MUST    BE    CERTAIN. 

— The  writing  creating  a  guaranty  must  be  certain  and  ex- 
plicit, so  that  the  intention  to  guaranty  the  payment  can  be 
plainly  seen.  For  instance,  if  one  person  should  receive  a 
letter  from  another,  making  inquiry  regarding  the  financial 
standing  of  a  third  person,  and  should  answer,  "You  may 
rest  assured  that  you  will  get  your  pay  for  all  work  done," 
this  would  not  be  a  guaranty,  because  it  would  not  contain 
any  promise  to  stand  good  for  the  debts  of  that  person. 
The  letter  would  be  merely  an  expression  of  opinion.  To 
constitute  a  guaranty,  there  would  have  to  appear  in  it  some 
promise  to  answer  for  the  debt  or  default  of  another.  (De- 
cided by  the  Supreme  Court  of  California,  in  the  case  of 
Switzer  vs.  Baker,  which  decision  is  printed  in  volume  30 
of  the  Pacific  Reporter,  page  761.) 

Section  1324.— FORM  OF  GUARANTY  OF  AC- 
COUNT.— The  following  is  a  form  of  guaranty  of  account: 

San  Francisco,  Cal., 

191.... 

To  Jones  &  Smith, 

402  Market  Street, 

San  Francisco,  Cal 

Gentlemen:      I    hereby   guaranty    to   you   the    account    of 

Henry  Green,  for  goods  purchased  by  him,  or  for  work  and 

labor   performed   for   him,   during   the  term   of   six   months 

from  date  hereof  and  up  to  the  amount  of dollars. 


1016  BUSINESS   LAWS   FOR  BUSINESS   MEN. 

Powers   of  Attorney. 

Section  1325.— POWER  OF  ATTORNEY  MUST 
BE  IN  WRITING.— A  power  of  attorney  must  be  in 
writing,  and  subscribed  by  the  grantor,  or  his  agent.  If 
subscribed  by  an  agent  of  the  grantor,  the  agent's  authority 
to  sign  must  be  in  writing.  If  it  is  intended  to  be  recorded, 
it  must  be  acknowledged. 

Code  of  Civil  Procedure,  Section  1971. 

Section  1326.— MARRIED  WOMAN'S  POWER  OF 
ATTORNEY. — A  married  woman  may  make,  execute,  and 
revoke  powers  of  attorney  for  the  sale,  conveyance,  or  en- 
cumbrance of  her  real  or  personal  estate,  which  shall  have 
the  same  effect  as  if  she  were  unmarried,  and  may  be 
acknowledged  in  the  same  manner  as  a  grant  of  real  property. 
Civil  Code,  Section   1094. 

Section  1327.— SIGNATURE  OF  ATTORNEY  IN 
FACT. — When  an  attorney  in  .fact  executes  an  instrument 
transferring  an  estate  in  real  property,  he  must  subscribe  the 
name  of  his  principal  to  it,  and  his  own  name  as  attorney  in 
fact. 

Civil  Code,  Section  1095. 

Section  1328.— REVOCATION  OF  POWER  OF  AT- 
TORNEY.— No  instrument  containing  a  power  to  convey 
or  execute  instruments  affecting  real  property,  which  has 
been  recorded,  is  revoked  by  any  act  of  the  party  by  whom 
it  was  executed,  unless  the  instrument  containing  such  re- 
vocation is  also  acknowledged  or  proved,  certified  and  re- 
corded, in  the  same  office  in  which  the  instrument  containing 
the  power  was  recorded. 

Civil  Code,  Section  1216. 

Section  1329.— REVOCATION  OF  POWER  OF  AN 
AGENT. — Unless  the  power  of  an  agent  is  coupled  with  an 
interest  in  the  subject  of  the  agency,  it  is  terminated,  as  to 
every  person  having  notice  thereof,  by: 


POWERS   OF   ATTORNEY.  1017 

1.  Its  revocation  by  the  principal; 

2.  His  death;  or, 

3.  His  incapacity  to  contract. 

Civil  Code,  Section  2356. 

Section  1330.— POWER  OF  ATTORNEY  COUPLED 
WITH  AN  INTEREST.— Where  the  power  of  attorney 
covers  property  in  which  the  grantee  has  an  interest,  the 
power  is  not  revoked  by  the  death  of  the  principal. 

Section  1331.— FORM  OF  GENERAL  POWER  OF 
ATTORNEY. — The  following  is  a  form  of  general  power 
of  attorney: 

Know  all  Men  by  these  Presents : 

That   we,    and 

of  the  city  and  county  of  San  Francisco,  state  of  California, 
have  made,  constituted  and  appointed,  and  by  these  presents 

do  make,  constitute,  and  appoint ,  of 

said  city  and  county,  our  true  and  lawful  attorney  for  us 
and  in  our  names,  place,  and  stead,  and  for  our  use  and 
benefit,  to  ask,  demand,  sue  for,  recover,  collect  and  receive 
all  such  sums  of  money,  debts,  dues,  accounts,  legacies,  be- 
quests, interests,  dividends,  annuities  and  demands  whatso- 
ever as  are  now  or  shall  hereafter  become  due,  owing,  pay- 
able or  belonging  to  us,  and  have,  use  and  take  all  lawful 
ways  and  means  in  our  names  or  otherwise  for  the  recovery 
thereof,  by  attachm^ents,  arrests,  distress  or  otherwise,  and  to 
compromise  and  agree  for  the  same,  and  acquittances  or 
other  sufficient  discharges  for  the  same,  for  us,  and  in  our 
names,  to  make,  seal,  and  deliver;  to  bargain,  contract,  agree 
for,  purchase,  receive,  and  take  lands,  tenements,  heredita- 
ments, and  accept  the  seisin  and  possession  of  all  lands,  and 
all  deeds  and  other  assurances,  in  the  law  therefor,  and  to 
lease,  let,  demise,  bargain,  sell,  remise,  release,  convey,  mort- 
gage and  hypothecate  lands,  tenements  and  hereditaments, 
upon  such  terms  and  conditions,  and  under  such  covenants, 
as  he  shall  think  fit.  Also,  to  bargain  and  agree  for,  buy, 
sell,  mortgage,  hypothecate  and  in  any  and  every  way  and 
manner  deal  in  and  with  goods,  wares,  and  merchandise, 
chose  in  action  and  other  property  in  possession  or  in  action, 
and  to  make,  do,  and  transact  all  and  every  kind  of  business 
of  what  nature  or  kind  soever,  and  also  for  us  and  in  our 


1018  BUSINESS   LAWS   FOR  BUSINESS   MEN, 

names,  and  as  our  act  and  deed,  to  sign,  seal,  execute,  deliver 
and  acknowledge  such  deeds,  leases  and  assignment  of  leases, 
convenants,  indentures,  agreements,  mortgages,  hypotheca- 
tions, bottomries,  charter-parties,  bills  of  lading,  bills,  bonds, 
notes,  receipts,  evidences  of  debts,  releases  and  satisfaction 
of  mortgage,  judgments  and  other  debts,  and  such  other 
instruments  in  writing  of  whatever  kind  and  nature  as  may 
be  necessary  or  proper  in  the  premises. 

Giving  and  granting  unto  our  said  attorney  full  power  and 
authority  to  do  and  perform  all  and  every  act  and  thing 
whatsoever  requisite  and  necessary  to  be  done  in  and  about 
the  premises,  as  fully  to  all  intents  and  purposes  as  we  might 
or  could  do  if  personally  present,  with  full  power  of  substi- 
tution or  revocation,  hereby  ratifying  and  confirming  all  that 
our  said  attorney,  or  his  substitute  or  substitutes,  shall  law- 
fully do  or  cause  to  be  done  by  virtue  of  these  presents. 

In  witness  whereof  we  have  hereunto  set  our  hands  and 

seals  the day  of ,   191 .  . 

(Seal) 

(Seal) 

(Acknowledgment  in  usual  form.) 

Section  1332.— SPECIAL  POWER  OF  ATTORNEY. 

— The  following  is  a  form  of  special  power  of  attorney: 

Know  all  Men  by  these  Presents: 

That  I,  ,  of  the  county  of  Alameda, 

state  of  California,  have  made,  constituted,  and  appointed, 
and    by    these    presents    do    make,    constitute,    and    appoint 

of , 

my  true  and  lawful  attorney  for  me  and  in  my  name,  place, 
and  stead,  and  for  my  use,  to  ask,  demand,  sue  for,  collect, 
and  receive  all  such  sums  of  money  which  are  or  shall  be  due, 
owing,  payable,  and  belonging  to  me,  or  detained  from  me, 
in  any  manner  whatsoever,  by  any  person  or  persons  what- 
soever. 

Giving  and  granting  unto  my  said  attorney  full  power  and 
authority  in  and  about  the  premises;  and  to  use  all  due 
means,  course  and  process  in  the  law  for  the  full,  effectual, 
and  complete  execution  thereof,  and  in  my  name 
to  make,  execute  and  deliver  all  and  every  instrument  in 
writing  under  seal,  or  otherwise,  and  for  the  premises  to 
appear  and  my  person  to  represent  before  any  governor, 
judge,  officer,  and  minister  of  the  law  whatsoever,  and  in  any 
court  or  courts  of  judicature,  and  on  my  behalf,  to  prosecute 


POWERS   OF   ATTORNEY.  1019 

for  debt,  fraud  and  any  manner  of  claims  I  may  have 
against  any  person  or  persons,  and  to  answer,  defend,  and 
reply  unto  all  actions,  causes,  matters,  and  things  whatsoever 
relating  to  the  premises.  Also,  to  submit  any  matter  in 
dispute  respecting  the  premises  to  arbitration  or  reference. 
And  generally  to  say,  do,  act,  transact,  determine,  accom- 
plish and  finish  all  matters  and  things  whatsoever  relating 
to  the  premises,  as  fully,  amply,  and  effectually,  to  all  intents 
and  purposes,  as  I  might  or  could  do  if  personally  present, 
with  full  power  of  substitution  or  revocation,  hereby  ratify- 
ing, confirming,  and  holding  valid  all  that  my  said  attor- 
ney, or  his  substitute  or  substitutes,  shall  lawfully  do  or 
cause  to  be  done  by  virtue  of  these  presents. 

In  witness  whereof,  I  have  hereunto  set  my  hand  and  seal 
this day  of ,  191... 

(Acknowledgment  in  usual  form.) 

Section  1333.— COMMERCIAL  POWER  OF  AT- 
TORNEY, WITH  AUTHORITY  TO  SELL  REAL 
ESTATE. — Cowdery's  Book  of  Forms,  which  lawyers  use 
in  practice,  contains  a  form  of  commercial  power  of  attorney, 
also  giving  authority  to  sell  real  estate.  This  form  is  given 
below.     It  appears  to  have  been  carefully  prepared: 

Know  all  men  by  these  Presents: 

That  I, .' ,  of  the  County 

of  Santa  Clara,  State  of  California,  have  made,  constituted, 
and   appointed,   and   by   these   presents    do   make,    constitute 

and  appoint ,   of  the   County  of 

Alameda,  State  of  California,  my  true  and  lawful  attorney, 
for  me,  and  in  my  name,  and  on  my  behalf,  to  ask,  de- 
mand, recover  and  receive,  all  and  any  sum  or  sums  of 
money,  debts,  dues,  merchandise,  or  effects,  due,  payable, 
coming,  or  belonging,  or  which  may  at  any  time  be  due, 
payable,  or  belonging  to  me,  from  any  person  or  persons 
whatsoever;  to  sell  alL  or  any  part,  of  said  goods,  mer- 
chandise and  effects,  which  may  come  to  his  possession  or 
knowledge,  on  such  credit,  and  for  such  prices  as  he  may 
deem  meet;  to  purchase  any  goods,  merchandise,  specie, 
currency,  mining  or  other  kinds  of  stock  or  other  com- 
modities,   on    my    account    for    such    prices    and    to    such 


1020  BUSINESS   LAWS   FOR   BUSINESS   MEN. 

amount  as  he  may  deem  meet,  and  the  same  to  sell  again 
for  my  benefit  and  on  my  account,  for  any  prices  whatsoever, 
to  ship  or  transport  the  same,  or  any  part  thereof,  on  my 
behalf  and  account,  to  any  post  or  posts,  place  or  places, 
whatsoever,  in  any  vessel  or  vessels,  and  with  and  to  any 
person  or  persons  whatsoever,  and  there  barter,  exchange, 
and  dispose  of  the  same ;  to  insure  and  cause  insurance  to 
be  made,  of  any  such  goods,  merchandise,  specie  or  other 
commodities,  or  of  any  part  thereof,  at  such  premiums, 
and  for  such  risks  as  he  may  deem  meet;  to  accept  any  bill 
or  bills  of  exchange  or  orders,  make  and  execute  any  note 
or  notes  of  hand,  bond  or  bonds,  or  other  instruments  or 
contracts,  in  my  name,  and  on  my  account,  to  and  for  any 
amount  which  he  may  deem  meet  or  expedient;  to  sell, 
barter,  exchange,  or  dispose  of  any  real  estate  of  which 
I  am  now  seized  or  possessed  in  fee  simple,  or  for  any  less 
estate,  to  any  person  or  persons,  for  any  price,  or  in  any 
manner  whatsoever,  and  for  these  purposes  to  execute  and 
acknowledge  any  deed  or  deeds,  lease  or  leases,  or  other 
assurance  or  assurances,  with  general  covenants  of  warranty 
against  all  persons,  or  any  other  covenants  whatsoever,  as 
he  may  deem  expedient;  to  purchase  any  real  estate  on  my 
account,  in  fee  simple  or  otherwise,  at  any  price  of  any 
exchange  whatsoever,  and  for  these  purposes  to  receive, 
confirm,  make,  and  execute,  any  contracts,  deeds,  convey- 
ances, or  other  instruments  whatsoever;  to  settle  and  adjust 
all  partnership  accounts  and  demands,  and  all  other  accounts 
or  demands  now  subsisting,  or  which  may  hereafter  subsist 
between  me  and  any  person  or  persons  whatsdever,  and 
submit  the  same  to  and  decide  them  by  arbitration ;  to  com- 
pound for  any  debts,  dues,  or  demands  owing,  or  which  may 
hereafter  be  owing  to  me,  and  to  take  less  than  the  whole, 
or  otherwise  to  agree  for  the  same,  in  such  manner,  and  on 
such  terms  as  he,  in  his  discretion,  may  deem  proper;  and 
for  all  and  any  of  these  purposes,  to  make  and  execute  any 
releases,  compromises,  compositions,  agreements,  or  con- 
tracts, by  deed  or  otherwise,  in  his  opinion  necessary  and 
expedient  in  the  premises;  to  pay  and  discharge  all  debts 
and  demands  due  and  payable,  or  w^ich  may  hereafter  be- 
come due  and  payable  by  me  unto  any  person  or  persons 
whatsoever;  to  enter  into  any  lands  or  other  real  estate  to 
which  1  am  or  may  be  entitled,  and  to  recover  the  possession 
thereof,  and  damages  for  any  injury  done  thereto,  and  to 
distrain  for  rent  due  thereon,  and  also  to  commence  and 
prosecute   unto   final   judgment   and   execution,    any   suit   or 


POWERS   OF   ATTORNEY.  1021 

suits,  action  or  actions,  real,  personal,  or  mixed,  which  h* 
shall  deem  proper  for  the  recovery,  possession,  or  enjoyment 
of  any  matter  or  thing  which  is  or  which  may  hereafter 
be  due,  payable,  owing,  belonging,  accruing,  or  appertaining 
to  me,  for  or  by  reason  of  the  premises,  or  any  part  thereof, 
and,  in  any  such  suits  or  actions,  for  me  in  person,  or  by 
such  attorney  or  attorneys,  or  counsel,  he  may  deem  neces- 
sary or  proper  to  retain  or  employ  to  appear  and  plead,  be- 
fore any  courts  or  tribunals  having  jurisdiction  thereof,  and 
all  stipulations,  undertakings,  recognizances  and  other  re- 
quisites in  any  suits  or  actions,  and  any  question  arising  on 
the  same,  by  arbitration  or  other  compromise,  and  of  all  re- 
ceipts and  recoveries  in  the  premises,  due  acquittances  and 
discharges  to  execute  and  deliver,  and  generally  to  do  and 
perform  all  matters  and  things,  transact  all  business,  make, 
execute  and  acknowledge  all  contracts,  orders,  deeds,  mort- 
gages, satisfaction  of  mortgages,  leases  and  assignments  of 
the  same,  and  all  other  writing,  assurances,  and  instruments 
of  every  kind,  which  may  be  requisite  or  proper  to  effectuate 
all  or  any  of  the  premises,  or  any  other  matter  or  thing 
appertaining  or  belonging  to  me,  with  the  same  powers,  and 
to  all  intents  and  purposes,  with  the  same  validity  as  I  could, 
if  personally  present  (giving  and  granting  unto  my  said 
attorney,  full  power  to  substitute  one  or  more  attorneys 
under  him,  my  said  attorney,  in  or  concerning  the  premises, 
or  any  part  thereof,  and  the  same  at  his  pleasure  to  revoke)  ; 
and  hereby  ratifying  and  confirming  whatsoever  my  said 
attorney  (or,  his  substitute  or  substitutes)  shall  and  may  do, 
by  virtue  hereof,  in  the  premises. 

In  witness  whereof,  I  have  hereunto  set  my  hand  and  seal 

this day   of ,  'l91.  . 

(Seal.) 

(Acknowledgment  in  usual   form.)  'If4  > 


.Q 


University  of  California 

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